Inside or outside — whom to hire?


Do you promote a known employee in your business or shake things up and go outside to hire for a key position?

In today’s competitive job market it may be tempting to select from an array of qualified candidates from the outside. But experts warn this can be risky and expensive.

At the Small Business & Technology Development Center, we advise business owners to carefully look at many factors when hiring from within or outside the company. Experts agree that promotion from within is a cheaper alternative, although hiring from outside works well for employers who want new ideas or expertise.

Scott Patchin, owner of The Tru Group, a talent management business, said many factors come into play.

“In a small business, loyalty matters. Developing and promoting your internal talent will show your loyalty to your people. Culture is created by the actions of the leaders and people. This single action will be a big step toward creating a culture of trust, performance and learning.”

Many human resources experts say the key word is “balance” when deciding to hire an insider or outsider. Balance is achieved through an emphasis on internal promotion with an eye toward the advantages of bringing in outside talent to contribute to an organization’s vitality.

Although new hires are not quick fixes, one of the most important reasons to recruit talent is for fresh ideas. New hires can bring energy, enthusiasm, integrity and self-confidence to an area such as a sales department. If hiring from the outside, business owners need to be flexible. The unknown person has their own vision, management style and methods of doing business. These will introduce new variables and dynamics to your corporate culture. This may or may not work for your business.

Besides cost savings, hiring from within is also a morale booster in a healthy organization. Key employees need to feel there are opportunities within your company to expand their skills, increase their responsibilities and grow professionally. Otherwise, they will look for opportunities elsewhere.

Most business owners recognize that employee turnover, even in a time of high unemployment, is expensive. If your small business has experienced a lot of turnover, it may be time to identify the root causes of this turnover. More turnover means more expenses due to lost productivity. According to nursing management statistics, the average turnover cost amounts to 25 percent of the employee’s total annual wage. Excessive turnover also puts extra stress on remaining employees.

Small business owners who want to keep employees need to find incentives, both monetary and non-monetary. Employees value increased compensation, flexible scheduling and a sustainable workload. You also will need to evaluate compensation rates on a continuing basis to make sure employees are receiving competitive wages.

Patchin, who is an executive coach and talent management expert, offers several pointers for keeping top-performing employees.

  • Tell them they are top-performing: A Gallup survey revealed the number one reason people leave their role is they don’t feel appreciated. This is an action any leader can take today and it costs nothing.
  • Give them your ear: A top habit I see in companies that retain key talent is a CEO that goes out into the business and listens to his/her people on a weekly basis. Your people see problems and opportunities before they hit your financials or a strategic SWOT analysis.
  • Team up with them: Your best people value being included and challenged. Invite them to team up with you or senior leaders on high-impact projects. They will feel special and you get to see them work up close. This will give you greater insights into their talents and an idea of what their development needs are.

Experts advise businesses to have a system in place to yield the right candidates for job vacancies. The right system doesn’t have to be the most expensive. Applicants need to be treated professionally, consistently, courteously and efficiently. Including staff and trusted advisors in the interviewing and decision-making process will improve your ability to hire the right person.

Jennifer Deamud is associate state director for the Michigan Small Business & Technology Development Center at Seidman College of Business, Grand Valley State University.

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