It seems timely to ask the question of how employers can best build a winning organization, since the past couple of week’s have witnessed the National Hockey League’s annual draft for 18+ year olds and the window opening for free agent signing of veteran players with expired contracts having taken place. Many organizations struggle with whether to build their winning organization from within (by hiring and developing new talent) or by signing proven veteran talent from the marketplace. The reality is that like the National Hockey League, organizations can and should employ both means, when the situation calls for this.
Below are some thoughts on when to hire proven talent, and when to build from within, and some pros and cons for each approach.
When to hire from the outside for other than entry level positions?
1. When an organization lacks a set of knowledge, skills, and experience, where such need is time-sensitive, and driven by a new or changed business opportunity/focus, or a change in competitive market conditions.
2. When an organization is exposed to ongoing risk, without the means to mitigate this through internal resources, and where such risks cannot effectively be managed for the long-term through external partnerships.
3. When an organization loses a critical skill set and knowledge base, for which no internal trained back-up exists.
4. When there is a sudden and unanticipated surge in business volumes requiring a high level of expertise, where such increased volumes are expected to continue.
When to hire at entry level and promote from within?
5. In all instances except for 1. through 4. above. Effectively, when an organization wishes to select, groom, and grow for the long-term, in a cost-effective manner, the human capital of the organization.
Pros & Cons for Hiring Proven Talent (via free agency).
Pros:
1. Can hit the ground running so to speak in terms of capabilities.
2. Provides potential upgrade in terms of skill levels in the organization.
3. Brings broad industry/cross industry best practices knowledge to the organization.
4. Can act as a catalyst for desired/necessary cultural change within the organization.
5. Can address time-sensitive need (e.g. 1-4 above.)
Cons:
1. Usually comes at a much higher cost than if developed internally.
2. Usually involves search-related expenses (e.g. web/ad/search firm)
3. Can have unintended negative consequences, if a poor fit; if not as advertised.
4. Can create challenges for culture and core values of organization (e.g. if culture is one of “promotion from within”; “pay equity”).
Pros & Cons For Hiring At Entry Level (via the draft).
Pros:
1.Provides opportunity to inculcate in Company culture and core values at outset of career.
2. Usually hired through lowest cost search efforts.
3. Usually is highly motivated to contribute and learn.
4. Usually is compensated less highly than someone experienced in role, with lower benefits costs as well.
5. Usually has much longer career horizon with your firm, if invested in from learning and career perspective.
Cons:
1. Requires investment to train them.
2. Requires effective people management to support them in development and career growth.
3. Not all new hires may have what it takes (although hiring risks can be mitigated through having effective recruiting and on-boarding process).
The reality is that most organizations address talent needs through a combination of free agency and the draft. Be careful though in terms of when and how you use both, that you are acting with transparency and in respect of your stated core values. By articulating and clearly communicating your philosophy and processes for acquiring and managing talent, and by training leaders to respect and effectively live by these, you will ensure that you have the best of both new and experienced talent, and a winning combination for your organization.