Many companies promote the fact that they hire from within as a way to entice top talent to apply for positions. Promoting from within has many advantages, including familiarity and motivation for workers. However, several disadvantages exist that limit the ability of companies to optimize those benefits.
When companies make internal promotion a focus in job searches, they may limit themselves from truly getting the most qualified applicant for an opening. While it may not be popular with employees, hiring top talent from other companies or outside the company may give you the best chance to assemble the most talented workplace. Some external prospects may not even apply for jobs in a company if it has a strong reputation of promoting from within.
One drawback of promoting from within is that employees may feel a sense of entitlement for promotions. If companies routinely promote from within without ample consideration of external prospects, current employees may feel like they are virtually guaranteed a promotion at some point without putting forth maximum effort in performing their current jobs.
Technical Skill Deficiency
Business consultant Walter Oelwein advises that when companies routinely promote from within they can put too much emphasis on growth into management positions. This can inhibit the ability of companies to develop top senior level technical talent. Employees that feel like the only way to grow within their organization is to look to management opportunities may not work to develop the technical skills necessary to deliver top performance in their jobs.
Another significant deficiency of a strong internal promotion system is that it can inhibit opportunities for innovation and change in thinking that often come with new ideas and fresh perspectives. When you hire managers from outside the company, you may get new approaches to management and new ideas on work processes that help prevent the company from getting stale and even becoming obsolete. This is especially important for organizations focused on innovation and new products.