When a new position opens up, does your company promote from within or bring in a new person from the outside? As it turns out, there are numerous benefits to investing in your people rather than onboarding a new hire. Here's a hint: It may impact payroll management.
First of all, hiring from the outside takes time and money. Hiring anyone is a time consuming process, but the more experience you're looking for, the longer it takes. As CareerBuilder pointed out, even after you find the perfect fit, there's always a chance the candidate will find a better option, and you will need to start the search over again. After you do fill the role, it will take longer to bring the new person up to speed than it would if you hired internally, and the work of the whole team is likely to suffer for a while.
According to research from The University of Pennsylvania Wharton School of Business, external hires are generally paid 18-20 percent more than internal hires and perform worse on performance evaluations than their peers for the first two years on the job. During this time, they are also far more likely to move on to a different company.
It seems clear that promoting from within is often a better approach than heading to the job board and bringing in someone new. However, taking this approach requires investment early on. Staff need to be aware of potential for promotion down the line. When hiring managers see leadership potential in employees, it's important to let them know. To prepare a leadership pipeline, organizations may need to invest in better training and professional development programs. The bonus is that this approach is likely to increase retention overall.
Hiring internally isn't always an option, but it should always be a consideration. In the end, businesses that invest in their people are more successful.