Factors When Deciding Internal vs. External Hiring

Building a great team is one of the most difficult leadership tasks there is. So many factors go into it and the resulting group is what will largely make or break your entire operation. One of the most contentious, and risky moves comes when it’s time to expand your workforce. If you need to hire new people–great! That means you’re doing something right. But the balance between hiring externally and promoting internally can be one of the most difficult choices you’ll ever face.

Unfortunately, there are no easy answers when it comes to hiring externally vs. internally. Each instance is different, but a thoughtful approach informs the best choices.

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If you’re still having a hard time deciding, ask yourself these questions to guide you and your company through this pivotal decision.

What are the position’s demands?

While weighing your outside/inside options, never lose sight of the end goal: making your company work efficiently and productively. Many outside hires are brought in because they offer unique skills that can’t be easily cultivated within your existing organization. Think about what your existing team is capable of right now, and what you can teach them.

There’s a chance you’re looking to expand into a new area that they aren’t experienced in, or develop a novel product. If this new position is one unlike most of your other jobs, you’ll probably find the best results externally.

What can you afford?

While you always want to build the best team possible, never forget that cost-effectiveness is a primary goal. Research shows that external hires nearly always are paid more and stick around for a shorter period of time than those promoted from within. If you’ve got the cash to throw at a rockstar from your competition, that’s great! If shareholders are watching your books with a magnifying glass, it’s probably best to look inward for your next big move. Money and time are your two most valuable resources, and you generally will never have both in abundance. Take your relative levels of each into consideration.

How will this affect your existing workers?

Before shopping for new groceries, take a look at what’s already in your pantry. A smaller team, especially one that’s been together for a long time, may not react well to an outsider no matter what they bring to the table. Cohesion is an important part of team work, and any new addition will at best disrupt an existing balance: best case scenario is only that the shake-up doesn’t last long. Morale being important, current employees can also be prone to exiting if they feel you aren’t offering them growth opportunities. When hiring externally, you’re not just adding a name to the payroll, you’re adding a new face to the everyday life of your whole group. It’s best to consider how your other employees may react if you bring on someone new as opposed to promoting one of them.

How much time do you have?

This may be a special role, designed to accomplish time-sensitive tasks. If you’re looking to get a big project done in a hurry, external hires are generally be the best way to expedite it. A great new hire can bring a ready made set of skills that would take time to grow within your current workforce. There’s no disruption of your existing team’s work either, since this new hire can do jobs that none of them would have been able to. Your existing workers can keep on their current path while the new hire handles the most time-crunching tasks. For a rapidly growing company, this carries huge benefit.

How much risk are you willing to take on?

The last point I want to make is the most crucial, and ties together every aspect mentioned above. What it all comes down to, what much of entrepreneurship comes down to, really, is your appetite for risk. There are hazards inherent to every personnel change, and many choose to mitigate this risk by prioritizing a flashy resume. Bringing in a new employee with a big name attached to them (a prestigious MBA, or a previous tenure at a household-name firm) is a sort of insurance policy. If they turn out to be the wrong fit, you can throw up your hands: “Well, he went to Harvard, how was I supposed to know it wouldn’t work out?” In the end, you’ll want to choose the candidate who is the best fit. That means evaluating every factor (including their credentials) to decide what the right move for your company will be.

You’ll need to weigh all the information at hand, and you don’t need to do that alone. Talk it over with knowledgeable advisers, but always trust yourself. Take these five factors into account while you make your choice. In the end, much of great management boils down to having the good sense to let the right decision present itself. What’s best for your company is, as always, up to you.

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