Employee Promotion Policy: What Employers Should Consider

Having a formal employee promotion policy in place can help dramatically enhance your recruitment and retention success rates. Prospective employees who see that advancement is valued within your organization may want to learn more, while existing employees may be more likely to stay with a company that actively seeks to promote from within.

In the heated competition for talent, every business should consider having an established employee promotion policy. Rather than leave things to chance or hope the "right" person happens to be in place when a key job opens, HR and senior management should decide ahead of time exactly how to approach the issue of hiring from within or outside the company.

An internal candidate already knows the culture, internal partners, and services, products, and technology already in place at the business.

The case for promoting from within

Rob Sanders, Paychex HR consultant, asserts that in most cases, an employer should first look within the organization for non-entry level positions.

"You can't overestimate the advantage someone who is already an employee of the company has by knowing the culture, the internal partners, and the services, products, and technology already in place," he says.

A quick glance at some of the potential advantages of promoting from within illustrates other key advantages:

• Perhaps the internal candidate has clearly demonstrated value, knowledge, and experience.
• Perhaps this candidate is already familiar with organizational structure and culture so that little or no orientation time is needed for these matters.
• Hiring from within can have value in terms of marketing the company as an "employer of choice."
• An internal promotion can save significant amounts of time and money, especially compared to the expenses incurred from advertising job openings, training a new hire, and additional costs.

For businesses that select this approach, there's often a corresponding commitment to building a "culture of development." In such an environment, management and HR frequently raise development-related opportunities in internal newsletters, meetings, and elsewhere. They may also:

• Actively search out individuals who demonstrate leadership qualities in their current positions.
• Offer them a chance to broaden their skills (in anticipation of possible new job opportunities).
• Provide the tools needed for employees to grow and to willingly take on new tasks.
• Commit to posting job openings internally before reaching out to the larger job market.

How do employers best determine when the right time comes to hire from within?

"They should use the same determining factors as they would with any hiring scenario," Sanders says. "Who is the best fit for what is desired of someone in the role being hired for? What business factors have created a need for this opportunity? Is the business need based on current expertise and personnel we already have, or will this require special expertise/skills we need to bring in?"

What about hiring from outside?

At the same time, businesses can't overlook the benefits of hiring outside the company:

• A newly created position sometimes requires skills that internal candidates may not possess.
• Outside hires can bring a fresh perspective and sometimes a radically different skill set to an organization.
• Hiring an external candidate can help eliminate the potential conflict among several internal candidates vying for the single open position.
• Relying solely on internal candidates for promotion can foster a stagnant workplace with few new ideas coming in.

Sometimes, businesses discover that promoting an individual from an internal position to a managerial role can pose some difficulties. What makes a person good at their job may not necessarily lend itself to proven managerial skills. If a situation like this arises, the newly promoted individual, and the people they now supervise, can become frustrated, and new conflicts can occur. This situation might be avoided by hiring an outside person with proven managerial skills or conducting the appropriate interview process on internal candidates.

What makes a person good at their job may not necessarily lend itself to proven managerial skills.

The debate at the senior executive level

The stakes can be even higher at the senior-management level. Executives are essential to driving growth, innovation, and productivity within your company and must, of course, be selected with great care. What are the pros and cons of promoting from within or hiring from outside?

Some considerations remain the same. An outside executive may bring a new way of looking at the company, the industry, and the marketplace at large — at times, a sorely needed attribute in a culture that has focused inward for too long. They may have skills and experience that are unmatched within the organization, and their professional network can open the door to new revenue-generating opportunities as well.

On the other hand, promoting from within can bypass issues related to the "wrong" cultural fit or disruption in team dynamics, both of which can prove costly for a company’s intent on moving ahead as quickly as possible. Also, a person who's been with the organization for some time is more likely to grasp the high-level strategic vision already established for the future, and can instinctively adapt his or her talents to advance that vision.

Finally, as with hiring at other levels, when you promote from within, you demonstrate appreciation for your employees' hard work and loyalty. This can be extremely effective as an ongoing resource in the struggle to retain your top performers and may prevent a mass defection of talent.

So, what's the best employee promotion policy? That will depend on your company. You will want to evaluate the pros and cons of each strategy to determine what is needed at the time. As openings occur, you may want to look first within the company for the right person but keep your options open for locating someone from the outside when needed.

Individuals seeking a promotion should be given the opportunity to develop their leadership skills. Consider first placing them in charge of a visible, short-term project.

Implementing a formal employee promotion policy

A consistent and universally available process for internal applicants to follow should exist at a business, Sanders says.

"However, a strong organization will have already provided developmental opportunities for employees identified for possible future promotions, whether they be lateral or managerial in nature. The mechanics of this process need to be established based on the specific needs of a particular organization," he says.

Here are some key elements to consider for your employee promotion policy:

Career development: As a starting point, career development should be made a priority on a company-wide basis. According to Robin Reilly, senior HR generalist at Paychex, managers at every level must be strong, supportive motivators, with the necessary skills to mentor their staff and help bring them to the next level.

To help ensure career development is prioritized, performance evaluations may include specific criteria assessing current managers on how well they develop their staff. If needed, training can be offered to help new managers develop their leadership skills.

Shadowing success: Tanya Johnson, Paychex HR consultant, recommends allowing employees who are preparing for promotion to shadow a staff member with higher-level responsibilities. Johnson believes the employee looking for career advancement may discover best practices by observing how "the individual manages their workload, sets priorities, and schedules out their day." Shadowing can also give an employee a glimpse of the expectations of those working at a higher level.

Training at every level: Training can be one of the best ways to offer opportunities for employees to add to their skills and improve their chance for a promotion. As Johnson notes, "Not all trainings have to be expensive. There are a number of online trainings and webinars available at either low cost or completely free." She suggests that classes focused on topics such as time and task management, presentation skills, effective negotiation, and leadership may be resourceful tools for those looking to progress into managerial roles.

Place an employee in charge: Individuals seeking a promotion should be given the opportunity to develop their leadership skills. Sanders suggests placing the candidate in charge of a visible, short-term project, ideally six months or less in duration. Mentors can be assigned to provide guidance, but not supervisory direction.

"When in-house opportunities are scarce, consider connecting the individual with an external volunteer organization in need of leadership skills," Sanders suggests. "With ongoing communication between the outside organization and a company contact, leadership performance can be evaluated and feedback provided prior to in-house promotion."

Here are some additional steps to consider incorporating into your policy:

Identify steps needed to move up. A formal succession planning process uses documented criteria to identify the steps required to progress into a higher position. When a succession plan is properly implemented, employees can be rated consistently on metrics that align with the company's goals and business strategies. Managers can compare candidates for promotion based on the criteria identified and determine which employees currently have the skills to progress. During formal performance evaluations, managers can also use the succession plan's advancement criteria to provide feedback to those looking to progress to a higher position.

By giving managers a way to communicate which skills are needed to advance, employees may better understand where they should focus their time spent on career development.

Build a mentorship program. Designated mentors can be an important part of the employee succession planning process. Developing a one-on-one relationship with a higher-level staff member gives employees the opportunity to ask specific questions about career advancement. The mentor's higher level of experience may allow them to guide staff members with leadership potential and encourage the development of crucial skills needed to progress.

Boosting leadership from within

Tione Torrens, Paychex HR consultant, shares these considerations for small business owners who want to help develop their existing talent:

• Career goals should be a regular part of ongoing conversations between managers and their team members. Employees who express an interest in management should work with their managers on a realistic career development plan.
• A comprehensive career development plan may include opportunities to meet and learn from other leaders in the organization. Also, consider building in opportunities for employees to take the lead on small projects. Establishing regular communication during these projects to discuss struggles and successes can help build employees' confidence.
• In smaller organizations where career advancement may not be readily available, creating a sense of "leadership without a title" can help eager employees stay engaged and contribute at a higher level.
• At a management level, managers should consistently meet to discuss up-and-coming leaders within their organization. Such succession planning meetings can give managers the opportunity to discover talent that they may not work with on a regular basis.

Ideally, when an employer brings on a new hire, this person should be considered a potential leader from day one. Implementing the policies listed here may help give structure and meaning to career advancement, which may demonstrate, to both job-seekers and existing employees, that you are serious about promoting from within, whenever the opportunity is right.