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An Executive Recruiter's Guide To Attracting The Best People By Promoting From Within

BY: MICHAEL STERN October 16, 2000

Executives often have no idea of the true nature and potential of the people who work for them or other parts of their company. Many organizations are sloppy about alerting their staff to new job openings within the company, and there's rarely any motivation,or incentive, to check out the home team first. It's hard to admit you don't know your own people very well, and tough to get to know them in a short period of time. Usually it's easier to look outside, where your ignorance won't be held against you.

I'm reminded of one high-tech firm that was looking for a vice-president of marketing. We kind of liked one person who was already on staff, but our client assured us that she was too junior for the position. Soon after, that employee accepted a job offer from our client's direct competitor, as a senior vice-president of marketing. Last time I looked, she was doing a bang-up job. And why not? She had lots of motivation.

Prejudice

Many internal candidates are disenfranchised, like Ben in the opening example, because of a long list of assumptions, biases and sometimes even grudges maintained by others in the company, often over a remarkably long period of time. As they say, familiarity breeds contempt.

I've seen many long-time employees ruled out as promotion prospects because of some trivial incident or misunderstanding, often something that took place years ago. Perhaps you remember the time a potential candidate arrived late for some cross-departmental committee meeting, or maybe the grapevine whispers that she screwed up a project two years ago last February. Do you have anywhere near a full assessment of this candidate or her potential? No. But do you then move on to look at other people, assuming she just isn't up to the job? Probably.

Insiders have a disadvantage that candidates from outside don't face: years of teamwork, togetherness and getting on people's nerves. One screwup or an idle piece of gossip can be held against them for years. In truth, people coming from outside the company are sometimes no better than your insiders. What they do have is a clean slate. Their own minor foul-ups just happen to be unknown to you.

Office politics

Sometimes internal mistrust can discourage mobility within an organization. If you lure Sylvia away from marketing, for instance, will they retaliate by snatching your best support person? No one is happy to lose a valued employee with potential. Will your hire jeopardize two departments' ability to get along? Nagging issues such as these can sorely test a company?s commitment to developing its people to the fullest.

This is why succession-planning schemes rarely work well in larger organizations. And bonuses are frequently based largely on the performance of one's own department or division. Why would a manager willingly help transfer a highly capable employee to another department, however important it might seem to the company as a whole?

Fear

What if you make a mistake and you hire someone who proves supremely bad at his or her new job? If the candidate came from outside, it's really not your fault. When you hire an external candidate, everyone knows it's always a bit of a gamble. In-depth interviews and reference checks, while extremely useful if done well, will tell you only so much about a person.

But what if the person is an inside candidate, and you were warned by one of your colleagues that promoting this person was probably a bad idea? Your judgment could come into question. In the case cited in the opening of this story, our hypothetical executive had been duly warned about Ben. It takes uncommon courage to press on and promote him under these circumstances, knowing that if anything goes wrong, that senior vice-president will now be able to tell everyone, "I warned him...."

Of course, there's a lot to be said for hiring from outside, if it's done for the right reasons. New blood is essential in a business. In the long run, however, companies must aim for a mix between hiring from outside and promoting from within. In my mind, that mix should be about 50-50. You have to bring in new ideas from outside, but you also have to be mindful of the damage you're doing if you're not giving internal candidates a fair crack at new assignments.

In fact, here's another Stern rule of thumb: hire from outside only when the outside candidate is a significantly better prospect than your best internal candidate. Not just a little bit better (which is the situation I set out in my opening example). Much better. In my experience, it's not that tough. A rigorous search of the marketplace will frequently uncover a number of external candidates who are superior to the internal ones by a wide margin. But not always.

These things are hard to quantify, but I tell my clients that if the outside candidate is not at least 30% better than an internal candidate, they should do the right thing and promote from within. Some of my clients are surprised that I suggest setting the bar so high. They're accustomed to hiring the best candidate, not judging how much one is significantly better than another.

Why this big gap? Because of the risks you run, and the message you send, when you go outside.

Reason No. 1

Your staff needs to know you are sincere about helping them advance. Whenever you hire from outside, you're signaling that no one inside was good enough. If it's a highly technical appointment or a new senior position, the fallout may be minimal. But if you have several employees who considered themselves ready for the job, hiring from outside could pose a problem. Today's knowledge-based, customer-driven economy depends on motivated employees giving their all. Overlooking their potential to move up in the organization and their natural desire to take on new challenges is a huge demotivator.

Reason No. 2

When you hire someone you don't know, you're taking a risk. Yes, you can reduce your risk by in-depth interviewing and checking references extensively. At Michael Stern Associates, we do at least six reference checks before we recommend hiring a candidate. But few companies take that much care; the urgent gets in the way of the important. As a result, you risk much more when you hire an outsider - as opposed to an employee within the organization whose capabilities and performance are a matter of record.

Plus, when an appointment fizzles, it's not always a question of competence. Sometimes the problem can be stunningly trivial. I recently spoke to an executive who quit an otherwise perfect job because his daily commute proved much harder than he'd expected. Promoting from within reduces the risk of such surprises.

Reason No. 3

When a company is known to strongly favor hiring from outside, employees get the message. I know. I'm a headhunter. Our firm calls senior managers and executives every day to ask them to consider a new opportunity. And people in some organizations are notorious for being very open to outside offers - especially when they work in companies where upward mobility seems to be limited.

I've seen the other side of the coin, too: working for a client company that has a reputation for always hiring from outside. A pot of gold for a headhunter, you say? Not exactly. It's not easy to recruit people into these companies if candidates get wind of the limited opportunities for promotion.

Recognizing and promoting internal talent is smart business. But don't take it too far. I once spoke to a potential client who believed in always hiring from within. "If I have to hire from outside," he said, "I feel like I'm doing something wrong." A noble sentiment, but one I think is very naïve. By all means, develop and encourage your employees, but remember that everyone benefits from new ideas and fresh perspectives. If you restrict yourself to a narrow talent pool, you won't be getting the best people in every job. Not only will that hold your company back - your own best people may decide they need to move on just so they can work with a higher class of colleague.

And never feel bound by fear of employees - reactions when you really want to hire an outsider. In my experience, your staff wants to know that they have a chance at landing these advancement opportunities; they don't have to win every one. Just knowing they were seriously considered for a job can be a motivating experience.

I remember talking to one company executive who had been a candidate in a search we conducted for his firm. His employer hired an outside candidate, to his obvious disappointment. Six months later, I was surprised to get a call from the passed-over candidate, who just felt he had to tell me how things had turned out. The new guy was doing a much better job than anyone had expected, he said, and he personally was learning from him every day. His conclusion: "I thought the company made the wrong decision at the time, but he's been fabulous. In retrospect, I can see why the company chose him over me."

Which is exactly why your outside hires have to be head and shoulders above your inside candidates. When an outside hire works this well, it's good for everyone: the company and its staff. Employees feel they had a fair shot at the opportunity, so they respect management, plus they learn to appreciate the contribution that talented outsiders can make.

Done properly, hiring a terrific outsider can be a big win for any organization. But how do you know for sure that going outside is your best bet? You need to ensure that all inside candidates are given a fair hearing. Analyze what job needs to be done. What are the actual qualifications needed for success, and what type of person will be best able to do the job?

Before you start recruiting, rigorously assess your internal candidates. Right now, the assessment process is probably a variation of, "What about Mark?" Pause. "Nahhh." Get over it. You should formally assess your internal candidates, based on what they have done for you, and what they are capable of doing. Don't pigeonhole people by what they've done in the past; your production manager might really be better suited for sales. Put them through the same interview process as your outside candidates, and listen to them as closely as you would if you were interviewing someone from the competition.

And remember: unless you're the CEO, this cuts two ways. If your organization encourages internal development, your own career prospects will be enhanced. Again, however, proving yourself against tough outside competition requires a more rigorous approach to career building than you're probably used to employing.

Think things out before announcing that you expect to be considered for a new posting that has opened up in your company. Figure out what your selling proposition is, and develop a plan of action. You need to be prepared to lay out exactly why you think you're able to do this job. Ideally, you should step forward only if you have some new perspective on what it will take to succeed in this position: ideas on how to tackle the job and on solving problems that no one else has been able to resolve. In the end, after all, it's not about you. How will your appointment help move the company forward?

One final tip: never assume that you deserve the job because you've been there a long time and you're next in line. That's old-world thinking - the kind of thinking that encourages companies to hire from outside. Then, not only do you lose out, but the company also misses the opportunity to tap into the unexplored talents of its own people.