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Promote From Within or Look to the Outside: Part One

How corporate finance employers deal with the common problem of a key employee leaving and the challenge of finding a replacement.

November 1, 2007
Sponsored by Spherion Professional Services
by Brendan Courtney, senior vice president, Professional Services Group

No matter how large your company may be, all employers in the corporate finance world deal with a common problem at one time or another: a key employee leaves and you’re stuck with the challenge of finding a replacement.

In order to build an effective workforce for the long haul, it’s important to address this inevitable challenge and think carefully about how you will try to reduce the cost of employee turnover on your business. Will you look within the company for the best candidate to replace the departed employee or will you go outside the company for external help to recruit and hire the ideal replacement?

With this article, we kick off a two-part series addressing the challenging dilemma of whether to promote from within or look to the outside when a position must be filled. As we will see, the answer is not yes/no; rather, it is situational, based on a variety of considerations.

In this article, we will specifically examine the value of promoting from within. Next month, we will explore the benefits of looking to the outside and offer some practical suggestions for how to navigate the decision-making process that leads you to the right decision each time.

Promoting From Within

Corporate finance employers should make it a regular practice to review their organizational charts and evaluate their employees to assess their qualifications for moving up in the company. By conducting these periodic evaluations irrespective of current hiring needs, you’re more likely to have an objective take on where your most promising employees reside within the organization.

When a key employee departs and a specific hiring need arises, don’t make the mistake of panicking and immediately turning to outside help to find the replacement as soon as possible. When this happens, existing employees often become frustrated, disgruntled or even angry because they’ve been overlooked for the vacant position. This obviously affects their attitude and performance in the short run, but in the long run it could also have a negative impact on their sense of loyalty to the company and result in even more unwanted resignations.

Instead, consult your organizational chart and talent assessments to see if you can identify a good internal candidate for replacing the departed employee. Promoting from within the organization is perhaps the single best way to retain key talent, improve workforce morale and encourage employees to perform at their highest levels. Quite simply, the secret to motivating employees to deliver superior performance is to give them a chance to not just do their jobs, but also to take on new responsibilities and climb to higher levels of responsibility within the organization.

A simple HR process might be something like this:

  1. Determine the job specifications of the newly-vacant position and decide what experience and qualifications are needed to fill this job.
  2. Speak with existing employees who seem to emerge from the talent-assessment review and share the job requirements with them.
  3. Ask the qualified employees if they feel they possess the skills required for the open position and explore their interest in the job.
  4. Determine the training that would be required to teach the internal candidates the skills they would need to develop in the new position.
  5. Determine the salary increase that would be appropriate if the internal candidate was given the promotion to the new position.

It’s important for employers to remember that their employees want to believe they are valued and that their best interests are being considered as the workforce is managed for optimal effectiveness. As important as money is, it’s just as important to recognize and reward your employees with the opportunity to advance in their careers; promoting from within sends that message.

Next month, we’ll examine the option of looking to the outside to fill a vacant position in your organization and offer some practical guidance on how to walk through these decisions each time they arise.

For more information visit Spherion Professional Services.

Brendan A.J. Courtney, senior vice president and group executive, Professional Services Group, Spherion Corporation. Brendan Courtney serves as senior vice president and group executive of professional services for Spherion Corporation (NYSE:SFN).