Internal Promotion v.s. Hiring Managers

This article by Rose Penhasi was originally published in Hebrew in the Startup for Startup blog as part of the Month of Management. You can find the original article here. 

As company leaders, we often grapple with the decision of whether to promote employees from within the organization or hire managers externally. Both internal promotion and external recruitment are essential strategies for building a strong management team. The right choice depends on the specific circumstances of each organization, considering factors such as company size, professional needs, existing skills, and costs. A balanced approach that combines internal employee development with targeted external hiring, when necessary, will ensure the organization's long-term success.

Personally, I always favor promoting employees from within. This strategy nurtures and empowers talented employees within the organization and gives others a sense of professional growth opportunities. However, over the years, I’ve realized that internal promotions don’t always succeed, and sometimes it's worth considering hiring an external manager. When should this happen, and how should we prepare?

When to Consider Promoting an Internal Employee and How to Identify Suitable Candidates:

• Excellent Interpersonal Skills: To me, being a manager is primarily about having excellent interpersonal skills with team members, empowering employees, and helping retain them in the organization over time. Therefore, this is the first criterion we evaluate in our organization. We've found that standout employees in the company have exceptional interpersonal skills. Often, they become prominent due to their strong relationships with customers and the inspiration they provide to their colleagues.
• Professionalism, but Not Only: Professionalism is important, but in management, it is complemented by a broader organizational vision. Employees who take initiative, ask questions, investigate, and show curiosity about the company's future and plans are more likely to excel in managerial roles.
• Objectivity and Boundary Setting: Setting boundaries is crucial for maintaining relationships and enhancing employee trust in management. Employees who are objective and avoid organizational politics can become fantastic managers. I drew this inspiration from my first manager at a large high-tech company. She avoided involving me in politics or crises, was always objective, and promoted positive actions.
• "Nice" Employees Aren't Necessarily Better Managers: Managing people is complex, and setting boundaries is essential. (But that’s a topic for another column...)

When to Consider Hiring an External Manager:

• Company Growth and Changing Needs: A CEO of a 10-employee company is not necessarily suited to be the CEO of a 100-employee company. The operation and mindset are different, so it’s important to recognize that growth can exhaust the potential of senior staff within the organization.
• Lack of Suitable Soft Skills in the Existing Team: As mentioned, a manager needs excellent interpersonal skills and the ability to set boundaries.
• Specialized Professional Knowledge: Launching a new department or product that is not closely related to the company’s existing activities may require recruiting suitable professionals (e.g., a service company developing a technological product and needing to hire programmers for the first time).
• High Training Costs for Internal Promotions: Most employees promoted to managerial positions lack previous experience in their new roles. It’s important to consider the training costs involved and try to estimate them.

In both recruitment and promotion scenarios, I recommend investing in training and making your organization a learning environment. It’s important to remember that we can never make 100% correct decisions. Good managers learn from mistakes and continuously improve.