The Benefits and Challenges of Internal Promotions

When there are structural gaps within your team, do you hire externally or internally? When your team has grown and new roles are required, do you look within your existing team or look for someone new?

Internal promotion is the process of utilizing an existing employee to fill a new or vacant job/role within the organization. Growth opportunities and promotions are key motivating factors for many people. Similarly, the lack of progress is a key factor for job dissatisfaction and resignations. A CareerAddict 2018 survey ranked “no progression” as the number one reason employees quit, over low pay and not getting a well-deserved raise.

A large percentage of employees feel that they are often undervalued and overlooked, with managers preferring to hire externally. In the Deloitte 2019 Global Human Capital Trends survey, 57% of respondents said it was easier to find a new job in a different organization than their current one.

There are many pertinent reasons to hire externally; the person has a fresh perspective, is unencumbered by office politics or history, and brings new energy and drive. All of these are great for driving change within your team; however, there are advantages of using internal promotions to drive success. Let’s discuss them in detail.

Benefits

Increase in employee engagement and retention rates

Career advancement is crucial for keeping employees engaged and reducing attrition rates. Employees feel valued and trust that the organization is invested in their professional growth. Also, according to SHRM, 40% of millennials expect job promotion every one to two years, with 32% actively seeking a promotion. The non-availability of advancement opportunities in an organization may negatively affect retention rates. According to Zavvy, 34% of employees who left previous positions did so because of a lack of opportunities for career development.

Saves time and money

There are additional costs to hiring externally that we often overlook, including the cost of recruiting, training, onboarding, decreased productivity, and cultural acclimatation. It could take up to 2 months to hire externally, with existing employees being stretched to cover those duties by sacrificing their time and productivity

The company also pays more to bring onboard a new external hire than to utilize an internal promotion. According to University of Pennsylvania Wharton School Professor Matthew Bidwell, external hires in the investment industry earn 18%-20% more than existing employees promoted to similar positions.

Culture fit, short ramp up time

Internal candidates understand the company culture, have great internal relationships, retain organizational knowledge, and consistently hit the ground running in their new roles faster than new hires. According to Jobvite, 30% of job seekers have left a job within the first 90 days of starting. 75% of those respondents explained that the day-to-day role wasn’t what they expected and the company culture as reasons for leaving.

Improved performance and roductivity

What made someone a star in one organization does not directly relate to high performance in another organization. This is largely due to company culture and norms, and differing structures and performance management methodologies.

A study by the University of Pennsylvania showed that for the first two years, workers promoted into a role have better performance than those hired for the roles, and they have lower voluntary and involuntary exits.

Challenges

Let’s also go over some challenges that I’ve come across with the employees that are internally promoted.

Skill gaps

This is very evident when the new role is higher than the previous role. Most internal promotions will require additional training and development to handle leadership and/or management responsibilities.

Resistance from team members

I’ve seen this numerous times where a previous colleague has become a subordinate and the new leader struggles with the backlash. Mentorship is a great way to assist the new leader in navigating this challenge.

Mentality shift

This is another difficult transition for team members. Before they used to complain about the actions of their managers, and now they are the ones being complained about. Also, the information/data made available is wider and broader, so adjusting to a new mindset can be difficult. Regular check-ins with your new hire will assist in helping him/her navigate successfully through this.

As I benefited greatly from internal promotions early in my career, I’m a strong believer and implementer of internal promotions. We should endeavor to not be blockers for
internal promotions, but instead spearhead it throughout our organizations wherever possible. There are many benefits that will impact your organization positively and ensure continued business success.