The business is growing and lead positions are opening up. During this expansion, hiring managers face a common dilemma – promote from within the organization or search outside the organization. Each option has their advantages and disadvantages. Employees already in the organization will fit in your culture and will be able to successfully transition to the new role with ease because they are familiar with the people and processes. However, a candidate from within will likely have limited to no management and leadership positions. On the other hand, external candidates may have advanced management skills but they will be unfamiliar with your culture and operations.

How do you know who the right individual for this, recently created, lead role is? As a small business owner with little experience in employee advancement, it’s honestly hard to pinpoint. According to research done by Gallup, companies fail to make the right person manager 82 percent of the time. Let’s discuss the pertinent details to take into consideration in order to assist in making the right decision.

Develop Criteria

When considering filling the managerial role, you should develop important criteria for the position. The criteria can help you decide whether there is a candidate internally or if you need to search externally to fill the role.

As a start for developing your criteria, ask current employees about their preferred qualities and characteristics in a manager. This way, when you finally make a decision, there is confidence that the new position holder will be a leader with a managerial style that the employees agree with.

Next, expectations should be defined for the specific role. Ask yourself, “What will the responsibilities be? What skills should the candidate possess?” Candidates should understand the title and job inside and out. If they are a current employee, it would be someone who consistently completes their job tasks on time and exceed their goals. If hiring externally, look for evidence that they have done their research on the company, its values, and their prospected role.

Check out this Forbes article that covers research and advice regarding competencies to keep an eye out for in potential candidates.

Promoting Internally

Promoting from within is a smart way to grow your business and invest in your employees. Companies with a solid business culture and the right talent are the most successful at internal hiring and promotion.

Benefits of promoting internally

By promoting internally retention and performance are increased. Employees who are promoted are more likely to succeed in the role and remain with the organization. Aside from that, promoting inside the company is much more cost effective. Funds aren’t being spent on recruiting such as job postings, employment agencies, and pre-employment screenings.

In addition, this process becomes much less time consuming as the hiring manager already has an established relationship with the existing employees. The learning curve is also shortened when promoting from within.

Tracy Julian, VP of marketing at Guided Choice explains, “It’s much more beneficial for me [to promote from within] because my employees already understand the company culture and role requirements, in turn, making the training process quicker.”

Employee and company morale is another thing affected by this decision. Employees see how the organization rewards high-performance, causing a buzz of inspiration throughout the workplace. This, in turn, inspires dedication and loyalty from the employees.

Hiring risks are also mitigated when you hire internally because the employee taking the position is a known quantity.

What to look for in current employees

Are there employees in the organization who are ready to take on an advanced role? How do you know which employees to consider for promotion? Look for employees who not only fit the job requirements but also demonstrate the following leadership qualities:

Strong initiative and drive to improve:

  • Proactively voices opinions on solutions to help company growth
  • Solicits feedback from managers and peers for personal improvement
  • Provides aid to peers
  • Innovative
  • Constantly searches for ways to better the company
  • Adaptable to change

High engagement:

  • Comes in early or stays late to make sure work gets done
  • Attends industry events and conferences to further knowledge
  • Seeks out career advancement opportunities
  • Mentors and trains fellow employees to help them improve
  • Collaborates with team members at all levels

Respect for company culture:

  • Attends company events
  • Follows dress code
  • Organizes team outings
  • Volunteers for small office roles such as assigning clean-up duties, ordering food if it’s catered, keeping coffee stocked, etc.

Hiring Externally

Companies consider hiring externally for a number of reasons. First and foremost, if they don’t believe any current employee is ready for a promotion. However, sometimes a company is ready for a change. External hires can provide the company with new perspectives and innovative ideas to support the company’s growth.

Benefits of hiring externally

There is a much broader talent pool to choose from when hiring externally which increases the chances of finding the right person for the job. Outside prospects may possess skills, knowledge, experience, and expertise that your current employees may not. Along with that, hiring candidates from a competitor or with other industry strategies can be beneficial in improving business processes or products.

Sacha Ferrandi, CEO/Founder of Source Capital, states, “In my experience, hiring outside of the company can also motivate current employees to perform at a higher level in order to achieve the next promotion opportunity. There is also less chance for there to be resentment within your current team members.”

Things to consider

More expensive:

  • Candidates from outside the organization command higher salaries than internal candidates. For example, as stated in this Career Builder article, on average, recruited senior accountants are paid roughly $69,500 while staff accountants are paid $57,200.
  • External hires have lower success and retention rates rather than internal employees
  • Costs related to recruiting, hiring and training


  • The recruitment process for hiring a lead role can be a long one
  • Time to review resumes and interview candidates
  • Pre-employment screenings and reference check – check out this infographic, by TransUnion’s ShareAble for Hires, to help quickly create a screening policy that works.
  • Training and onboarding

Not the Right Fit:

  • Cannot really know a person from one or two interviews
  • Doesn’t adapt well to company culture
  • Not a team-player

Wrap up

Only you can decide whether to promote from within or hire externally for an open role. All things being equal, most managers will be more inclined to promote from within.  Promoting internally benefits your company, brand, and employees — not to mention promoting from within is less expensive than hiring external candidates.  However, you need to evaluate what’s best for the company.


Haku Kapule
Haku Kapule

Haku Kapule is a contributing editor at 365 Business Tips, a new blog that prides itself on presenting the best advice and practices for small and medium-sized businesses everywhere. He’s passionate about finding and offering useful tips to small business owners. He is an expert in digital PR and marketing strategy and has assisted with the increase of digital presence and customer support for small and large companies alike.