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Promoting Within Produces A Lot of Cents

6 Dec 2017 4:13 PM | Anonymous

A common theme I repeatedly hear from CEO’s across various industries and locations is they want to promote from within, however ‘We have a lack of qualified internal candidates’.

Although there are times when you need to bring in outside expertise for a new venture, it should not be the norm.  Spending vast amounts of money to recruit and employ outside talent to fill middle and upper management positions is not necessary and can be costly.

What are you doing to develop a pool of qualified candidates?  Why do you advocate that the company ‘promotes within’ when you employ from outside?

Cons of Outsourcing – outsourcing can create an undesirable snowball effect on the bottom-line, moral and culture.

  • Management and Executive Recruiting Fees
  • Learning curve for the new candidate to get up to speed
  • 57% of Executives said it took 6 months or longer to reach full impact in their new role. Source: Egon Zehnder
  • Resistance and resentment from the team until trust is established
  • Your promise to ‘Promote from Within’ is viewed by the employees as another false promise from the C-Suite leaders
  • A poor recruit can be very costly
  • Top talent leaves the company in search of development and promotion
  • Turnover is costly and has a negative effect on morale
  • Training, shadowing or simply getting up to speed on the basics alone requires the time of several team members, managers, directors and company resources.

Internal hires retain organizational knowledge and get up to speed in their new roles more quickly than external hires. “Hiring internally also increases engagement. And folks tend to refer others more frequently when their own career has grown within the organization,” Sonsino says. “We’ve seen that pretty consistently.”

Internal candidates have a strong knowledge of your culture, processes and procedures.  They also have many relationships throughout the organization.

There is great value in knowing the intangibles, including a candidate’s integrity, how a candidate can assess and integrate into a new position, have they mastered their emotional intelligence, will they fit in with the culture and how effectively he or she builds healthy relationships with new co-workers and assemble the social capital necessary to get things done.

External recruiters generally rely too heavily on education, past job experience and previous job titles when recruiting rather than gauging whether such candidates will actually be able to perform in a specific position or within the culture into which they’re being hired

Groysberg states, “A lot of my research looks at what happens to stars when they join [new] companies.”  “The stories are not great. Many of them underperform because what makes them successful are the companies that they used to work for. … Everybody likes to hire from Goldman Sachs, but the reality is that Goldman Sachs is a very firm-specific place.”

The late human capital pioneer and Nobel Prize-winning economist Gary Becker used the term “firm-specific” to distinguish between general skills (e.g., writing great reports on investment opportunities in the retail industry) and the unique skills required to thrive in an individual organization (e.g., how to use a home-grown information system). Groysberg’s research proposes that the more company-specific the mandatory skills are, the more difficult it is for external hires—even superstars—to reproduce their prior levels of performance.

Although you cannot fix the problem overnight, you can start turning that big ship around today!   If you are using outsourced recruiters ensure they have your companies best business in mind.  Do your research to find one of the many excellent recruiters out there who will be willing to take the time to learn about your company, culture and skills required.  

One last tip: Hiring or filling a position is not the end of the journey, it is the beginning of the process.

References:  1) Harvard Business School professor Boris Groysberg’s book Chasing Stars: The Myth of Talent and the Portability of Performance (Prince­ton University Press, 2010) contains comprehensive research on external vs. internal hiring. “It’s not whether you build or buy, it’s figuring out under what conditions you build or buy,” he maintains.  2) https://www.egonzehnder.com/us/

Do not miss next week’s Blog on Succession Planning.  We will guide you through the steps to creating a pool of internal superstars. 



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