There is a war going on in business, and its a bloody one. For years, decades now, each side has been suffering massive casualties, and there is seemingly no end in sight...
Its not Good Guys vs Bad Guys...
The war is being waged over the argument whether to grow internal talents and promote from within, or hire outside, experienced project managers to fill PM vacancies.
We wont lie to you; both sides have their merits. Yet, if you search online on the topic we guarantee you will find more literature, studies, and blog opinions supporting internal support and promotion for PM positions rather than external recruitment.
What this all boils down to is time/cost vs performance. Every company seeks to achieve the most using the least. Recently, companies are catching wind of the advantages of promoting from within. In 2012 Polycom hired only 16% of their executive positions from within, and in 2014 their internal promotion had risen to 42%.
Well save you a bit of time, and quickly explain why it is a much more savvy business decision to build talent from within your organization, and later transform them into your next generation of project managers, rather than externally sourcing talent.
1. Outside hires simply cost more to employ
According to a study performed by the Saratoga institute, outside hired talent costs a company 1.7 times more than hiring talent from within to perform the same duties. Everyone wants to save on costs, and hiring internal talent simply saves the company money on salary expectation. External project managers can also generate a bidding war between competing companies, which internally grown staff cannot.
2. Outside hires not only cost more, but also do less
This may sound a bit counterintuitive, being that you likely hired an outside project manager with experience, attention to detail, charisma, etc. However, according to study buy the Wharton School at University of Pennsylvania, an outside hire will not only be paid over 18% more than an internal hire, but they typically have substantially lower performance marks on reviews.
3. Growing internal talent saves an organization onboarding/training time
Sometimes it may be attractive to hire an outside project manager with loads of experience and is seemingly perfect for the job. However, consider the amount of company time it takes to take on outside talent. How long will onboarding take them? Even if they have worked in on projects at other companies similar to the projects your company conducts, every company is different.
Your internal staff are already familiar with standard operating procedures, know your expectations, codes of conduct, and even if seemingly trivial, they even know where the filing cabinet is and how to operate the copy and fax machines. It all adds up to time, money, and headaches.
Hiring from within saves your company precious time when filling a project manager vacancy. While onboarding and training a new externally-hired project manager can take months until they are familiarized with your expectations and their responsibilities in their new role, an internally grown talent will be capable of handling their new role and responsibilities in a matter of weeks.
4. Attracting external project managers costs your company money on advertising/recruiting
Think about it: how much do you need to spend on sponsoring ads for your company online that your company is looking for a new PM? Its rather costly. When you train and grow your in-house talent to fill the next vacancy, you spend $0 on advertising, saving you potentially hundreds if not thousands of ad dollars.
Even in the best case scenario, say, you put out a single $50 ad and find prospective project managers, that is still $50 your company could have spent elsewhere.
5. Growing internal talent saves you time by eliminating interviews & deliberation
If a company is looking to hire an outside project manager, is their first interviewee going to be so fantastic that the company immediately takes down all of their vacancy ads, and hires them right on the spot?
No, this is not Hollywood.
Any company hiring for a position from an external talent pool will be conducting several, or dozens, or sometimes 100+ interviews before the HR department begins to deliberate over who is the most qualified candidate. Interviews, screening, and eventual hiring are costly. Losing talent is however even more extremely costly.
Buy investing in grooming your in-house talent to be project managers from the start, not only will your employees learn greater skills, but you save time on conducting time-intensive, and the following deliberation process.
6. Promoting internal talent reduces turnover
As attractive as hiring some superstar project manager may seem, it is over twice the risk concerning turnover than using your internal talent. Externally hired PMs are 61% more likely to be fired from their position versus only 25% for internally promoted project managers. Why is that?
One of the factors in favor of internal talent promotion is that you already know their strengths and weaknesses. This is a huge advantage over an external talent who, for example, may have an impressive resume and nailed the interview, but then it turns out they have a wicked temper that impacts the office dynamic.
You cannot put a price tag on familiarity with your staff. Because you are aware of both their talents and deficiencies, you know exactly what to target when you begin growing their project management skills.
7. Internal talent growth and promotions increase team morale
Put yourself in your lower-level staffs shoes for a minute:
How would you feel if there was an open PM position that your colleague Bob was qualified for, and the powers that be instead brought in a new project manager?
Now, how would you feel if you saw Bob, with whom you had been working with for years, became your next project manager. Well, if Bob can do it, why cant you?
If your team sees that loyalty, dedication, and of course hard work pay off, they will value their commitment to your company, and even be eager to stick around during the (inevitable) tough times.
If you begin grooming your lower-level staff from the get-go to eventually fill the shoes of a project manager, they will be engaged in their work, and feel a sense of pride that their boss truly cares about their success. Engaged employees with a higher level of workplace morale not only work harder, but have a lower turnover rate.
Have we made our case?
So, who is winning the war, internal talent growth or hiring new, external talent for your next project management vacancy? Hopefully you now understand the advantages of grooming potential management talent internally rather that looking outside for a new addition to your team.
Keep operations and promotions in-house. Your employees will be motivated to work hard, less willing to jump ship to another company, and your cost savings will be enormous. Internal talent growth allows you to gain intimate knowledge of your staffs strengths and weaknesses, professionally and personally, which you can never grasp with a new hire unless they work out for you.
We advise against taking the risks associated with outside recruiting, and suggest you keep your PM selection from in-house, trained staff.