How many times have you seen a vacancy arise and an external hire is made, and it just doesn’t work out? Its more common than we think.

When it comes to filling a higher position within an organization, the decision to promote internally or seek external candidates is often a topic of debate. While external hires can bring fresh perspectives, there is a compelling case for promoting employees from within. By focusing on internal promotions, organizations can nurture a deep understanding of their culture, foster employee loyalty, enhance productivity, and ultimately drive long-term success.

In this article, I discuss the advantages of promoting from within and explore the significance of cultural understanding in making employees effective. I argue that every organisation should have strong internal talent process as the benefits far outweigh the drawbacks.

If we stay with the definition that culture is “how we do things around here” —  a crucial aspect of maintaining a strong organizational culture (if its working) is ensuring that employees understand and embody its values and mission. By promoting from within, organizations can capitalize on the social capital that existing employees possess. Internal candidates are already immersed in the organization's culture, familiar with its values, and aware of its operational nuances. This reduces the time required for onboarding, enhances integration, and minimizes potential disruptions – they are up and running much quicker.

Promoting employees from within sends a powerful message to your people: dedication and hard work are recognized and rewarded. Studies conducted by Wharton Business School, show that internal promotions lead to higher levels of employee satisfaction, engagement, and loyalty. Employees who see a clear career path within the organization are motivated to excel, stay committed, and contribute to the company's growth. This elevated sense of loyalty and morale can lead to increased productivity and a more positive work environment. It superpowers engagement and discretionary effort. This is when your people become a competitive advantage.

External hires often require a significant investment of time and resources for recruitment, screening, and onboarding. By promoting from within, organizations can bypass these extensive processes and significantly reduce associated costs. Internal candidates already possess a wealth of institutional knowledge, reducing the learning curve and enabling them to quickly adapt to their new roles. Additionally, studies have shown that external hires take longer to reach their full productivity potential compared to internal promotions, further emphasizing the time-saving benefits. A quicker time to competence will have a significant impact on the bottom line in many roles. If many of the skills required for the role can be taught – have that learning mapped into your talent process so people are future ready.

Employee turnover can be costly and disruptive for organizations. According to research by the Center for American Progress, the average cost of replacing an employee is approximately 20% of their annual salary. Promoting from within can work at some level to mitigate this risk by providing employees with opportunities for growth and advancement, thereby increasing their commitment to the organization. Another added benefit is internal promotions ensure continuity and stability within teams, as existing employees already possess established working relationships and knowledge of the organization's processes.

First adopted by the military in the world wars - succession planning is a critical aspect of organizational strategy. By consistently promoting from within where feasible, organizations can identify and prepare high-potential employees for future leadership roles. This approach allows for a smooth transition of knowledge and responsibilities when senior positions become vacant. A survey conducted by Deloitte found that 86% of companies with a formal succession plan promoted employees from within, highlighting the effectiveness of this approach.

While external hires may bring valuable perspectives and experiences, promoting employees from within an organization offers numerous advantages. Cultivating cultural understanding, fostering loyalty and morale, saving time and resources, enhancing organizational stability, and improving succession planning are just a few of the benefits of a focused Talent process.

The takeout of today? Think of yourself as the Head of Talent Supply Chain. Support your organisations future by having a robust talent process in place.  By nurturing and developing existing talent, organizations can tap into their employees' deep understanding of the company's culture and values, leading to increased effectiveness and long-term success. This will ensure your businesses leverage their most valuable asset – their people.

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Dominic Keogh-Peters

Brand Contributor

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Dominic Keogh-Peters, Group CHRO of Galadari Brothers, is a CIPD Fellow, author, and HR thought leader with global experience, recognized for driving transformation and developing future HR talent across regions.