Hiring challenges: Why firms should look at promoting employees, optimize talent

There’s a lot to be said for promoting internally and even more importantly building a structure and the right processes enable the growth of internal talent.

Lester Dmello August 05, 2017 16:07:19 IST
Hiring challenges: Why firms should look at promoting employees, optimize talent

Employees are a company’s greatest assets. You can have the soundest business plan, the most robust processes, the most far-reaching vision and the most carefully crafted strategy. But without employees to keep the wheels of your business turning, your organisation will stagnate.

Of course, a business needs the right people to be successful. But hiring the right people is challenging at the best of times. Who are the right people? Are they the most accomplished, those with the most impressive CVs? Or are they those who might fit best with your distinctive corporate culture?

The challenge is all the more marked today, especially in the hospitality industry, which is currently grappling with finding quality talent.

It’s one thing having the luxury of choice, having lots of ‘right people’ to choose from for a position. But it’s quite another when there just isn’t a big enough prospective talent pool to dip into.

So, what’s the solution? The key is to strike the right balance between hiring fresh talent and promote internally.

I go back to my opening point. Employees are a company’s greatest assets. Employees who are part of the organisation are already a proven bunch. So why not move them up the ladder?

Hiring challenges Why firms should look at promoting employees optimize talent


Not only does promoting internally lessen the problem of the dearth of talent, but it can benefit your business in the long-term.

For one thing, promoting internally can bring down your costs of doing business, especially when you’re facing a shortage of external talent. According to a 2012 study by Matthew Bidwell of the University of Pennsylvania’s Wharton School, companies paid external hires 18-20 percent more than they would have done to internal hires for moving up to the same role.

Bidwell’s study analysed data from 5,300 employees working at the investment banking unit of a US bank in various positions over a six-year period, supplemented by additional data from another investment bank and a publishing company. And while that’s a whole different kettle of fish compared to the hospitality space, its findings still largely hold true.

Moreover, Bidwell’s study went on to find that external hires scored lower on performance reviews in their first two years on the job and were more likely to be let go or leave of their own volition than employees promoted internally.

So effectively companies that chose to hire externally, paid more to do so only to then have to let those hires go after at most two years in the role. So much for a return on investment.

The fact is that external hires find it difficult to get up to speed quickly. It’s not that they’ve suddenly lost their mojo. They’re still good at what they do, what you hired them to do. But where they thrived in the culture of the company they worked at before, they may struggle to fit in to what is inevitably a whole new environment.

Companies, when hiring externally, often underestimate the impact of this ‘change of cultures’… which brings me to my next point in favour of promoting internally – incumbent employees are already aligned with a company’s corporate values.

They know how things are done, who they can approach to get them done. They already fit the mould of the company’s distinctive corporate culture. There is no ‘settling-in’ period, or if there is it’s relatively short, and they are able to adapt to their new responsibilities quickly, hit the ground running and deliver results immediately.

But perhaps the greatest benefit of promoting internally, one that cannot be emphasised enough, is the galvanizing effect it has on the rest of the employees.

Knowing that their hard work will be rewarded with a promotion makes them even more productive. Moreover, it gives them something to work towards and breeds loyalty. Employees who can rise only so far before being locked out of higher positions by external hires will never fully buy into a company’s vision.

In such a scenario, employee motivation dips, churn increases and retention becomes a big problem. After all, there’s nothing worse for a company than employees who are dispirited and on the lookout for the next exit.

There’s a lot to be said for promoting internally and even more importantly building a structure and the right processes enable the growth of internal talent. Sure, external recruits can inject a fresh perspective into your business, a perspective that could prove crucial in key moments that any company has to inevitably face – such as charting the next stage of growth, or successfully navigating a crisis.

But so long as your business is chugging along just fine, your people are delivering the results and the company is successful, why fix what isn’t broken?

(The author is General Manager (Human Resources ) of  Keys Hotels, Berggruen Hotel)

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