It’s an accepted Marketing rule of thumb that it costs four times as much to land a new customer than to get a current customer to buy more. The same concept is likely true for hiring. It probably costs more to hire from outside rather than promote from within. Consider, you already know your current employees so you don’t have to spend advertising dollars to reach them. You also already have direct, experience-based knowledge of their work ethic, attitude and cultural fit so you don’t need to invest as many staff-hours in vetting them. Plus, there’s an added advantage for hiring from the inside, i.e., you demonstrate to all current employees that good work is rewarded with job advancements which can very effectively motivate everyone to work harder. So, given all of this – and the fact that most companies are complaining of a talent shortage – why don’t more of them hire from within?
The answer is that most companies do not follow best practices for recognising talent period – whether it’s inside or outside the company. For example, companies tend to place too much emphasis on a candidate’s current position and technical skills. But research proves that measuring aptitude via cognitive ability and personality assessments is a far more accurate predictor of performance in a given role. And just as job interviews can be biased depending on the manager doing the interview, manager recommendations on which internal candidates are ready for advancement are also far from objective. They’re likely to be based more on internal friendships and politics rather than readiness for the role.
How can your company do it better? Here are four tips for identifying talent from within:
1 – Apply proven assessment science
Trusting your instincts is hardly objective and has a predictive accuracy somewhere around zero. Cognitive ability and personality tests, on the other hand, are proven to have the highest predictive accuracy for determining future performance for a given role – higher than trying to predict based on interviews or performance in a current role.
2 – Examine the data
Many companies analyse customer data to try to identify sales opportunities. But you can also analyse employee data to identify promotion opportunities. In fact, HR analytics has evolved considerably in recent years and produced numerous tools to help you do it. Do a little data mining and you might the numbers reveal some surprising traits that all your top performers tend to have in common, and that might point the way to your next generation of top performers.
3 – Emphasise leadership ability
Promoting someone from within to a higher position often entails their having to take on more managerial or executive capabilities. If they worked solely as an individual contributor, this is something they may have never done. However, the key competencies required to lead are well-known and can be accurately measured via leadership-specific personality and cognitive assessments.
4 – Start early
Even if you have great systems in place to identify the raw talent within your organisation, it takes time and training to unlock their full potential. Plus, as they say, it can be hard to teach an old dog new tricks. Older employees are likely to be more set in their ways and resistant to the change required to take on new responsibilities.
We can’t say that if you apply these principles, you won’t ever have to hire from outside again, but you certainly will improve your ability to promote from within!