Internal promotion or hiring new people from outside both have pros and cons to consider.
Internal promotion would lift motivation of both the promoted employee and other unselected workers to perform or work harder to show their true potential in order to get recognize Whereas, by hiring new people from the outside, psychologically, the existing employees would feel threatened by the new comer. Although new people from outside the company may inject new ideas, innovations to the company, the cons are too much to bear. As the existing employees may feel undervalued by the organization, and led to discipline problem, disloyalty and negative productivity.
Internal promotion can also save resources (money, time and human resources) in conducting the staffing process by only recruiting from the inside of the organization. Hiring new people from the outside of the organization is an exhausting process, as the staffing process have to start from recruiting, which will cost a lot of money to be used on advertising to attract people. Panels of interviewer will need to be set up to help the selection process, and normally, the people applying for the job from outside the organization outnumbered the number of interviewers, usually, one interviewer have to make session after sessions of interviews. Moreover, the result of selection is uncertain, as we don’t know who will apply for the job, and did they really are who they said they are on the paper. In terms of performance and all, they are unpredictable since the organization may not held the copy of performance appraisal of the new employee, or worse, the new employee hired from outside of the organisation does not have any working experience.
The process of internal promotion is much simpler to undergone compared to hiring new people from outside. The organization keep its own organization chart, the number of posts which has been filled and yet to be filled are complete in hand. It is much easier for the manager to select and shift people from the inside, as he knew best who fits the job. And the existing employees keep their performance record to the organization. Hiring new people from the outside should be the last resort every manager should take if finding no right candidate (from inside the organization) to fill the post. Although recruiting from the outside can help boost up human capital, but a positive marginal productivity is not a guaranteed.
Some may say, by hiring people from outside the organization could help injecting new inspiration to the organization, as outsider see the organization at a different angle than the existing employees, hence, people from outside could bring fresh ideas and creativity to help the organization to evolve and catch up with the developing industry. But, what is more important to an organization: New ideas and creativity or the employees who know the organization best? Considering the stability of the organization in its daily operation, promoting employees from inside the organization would certainly accelerate its development. Inspiration and creativity can be obtain by sending the existing employees to advancement camp, brainstorming session and so on.
In terms of training and orientation, the existing employee only have to go through basic job-related training and not compulsory for induction, as they've worked with the organization for some time and should know the background and objectives well enough compared to new people from outside the organization. This would help save a lot of money and unnecessary drop of production as employees who are on training are not able to produce. Hiring new people from outside the organization needs a lot of training, start from the basic – induction to the job-related training.
Via analysis of position vacancies, the supply of internal human capital should be evaluate before a manager decide on the hiring method (to hire from inside or outside of the organization). If the internal supply of human capital is low, the shortage occurred, and the best alternative for hiring would surely be by external recruit / hiring from outside of the organisation. Surplus of labor would happen if the manager tends to hire new people from the outside, whilst the internal supply of human capital is sufficient to fill the job vacancies. In conclusion, internal promotion should be applied before any manager consider to hiring new people from the outside,taking into consideration that the number of employee is sufficient to fill in the vacancy. If there are really no qualified candidates from within, then the last resort is to hire people from the outside. This situation is always faced by the manager usually when hiring experts or professionals.