Startups often make headlines when they hire big names to fill management positions. It’s conventional wisdom that you “go for the gusto” when it comes to hiring vice presidents or C-Suite executives – you hire a recruiter and pay top-dollar for an established name.
But at AppLovin, we’ve found that promoting from within rather than hiring from the outside often yields great results. Of course, there are always exceptions to the rule, but here’s why I often prefer to cultivate people internally and advance them when the time is right.
1. Motivated employees work harder
We prefer to promote based on merit as opposed to relying on dated formal review cycles that don’t align with our employees’ major accomplishments and goals.
When people can be promoted at any time, it keeps them motivated and adds incentive for them to do their best year-round, as opposed to burning the midnight oil the month before their performance evaluation.
Outside hires can sap the motivation for mid-level and junior-level talent to work harder and move up the ladder. When you promote from within, your employees know that the sky’s the limit, so they always work hard and deliver more for your company. In my experience, this “sky’s the limit” approach creates an atmosphere of optimism that has a positive effect on everyone.
2. Opportunity, happy people = higher retention
When you promote from within, you also save money and boost morale by increasing your retention rate.
Twenty-nine percent of workers cite lack of career opportunity as the key factor that makes them think about leaving, and it’s certainly true that any perception of a “revolving door” can contribute to instability and make people think about finding a new job. But both in terms of the financial and cultural health of your company, you want to build a nice community where people can picture themselves for the long haul.
When employees know they are the first to be considered for a more senior role, they become more aligned in striving for overall company growth over a significant period of time. This approach enriches the corporate culture and helps everyone feel like they’re working toward a common goal.
Hiring through recruiters is also remarkably expensive. One study found that the cost of recruiting and training a middle manager can cost between six and nine months of the candidate’s salary. And it only gets pricier as you go up the ladder.
Employees that make six figures or more can often cost twice their annual salary to recruit.
3. Internal hires adapt better to new roles
We all know how outside hires can sometimes struggle to adapt, and we’ve all known people who landed their “dream job” only to find out that it’s not what they expected.
When you bring in somebody new, they don’t necessarily know the culture and won’t know the company’s best practices from the bottom up, and unfortunately that can sometimes spell dissatisfaction or outright failure.
True enough, one of the advantages to bringing in someone from the outside is that they can offer a fresh point-of-view. But that can be a double-edged sword: while outside perspectives are crucial for a company to prevent tunnel vision, differing management styles can create a serious culture clash and harm employee morale.
When you promote from within, you bring up someone who embodies the DNA of the company, and you avoid the friction of ramping up someone from the outside.
Promoting from within also shows how the company is growing and leveraging that growth into opportunity for its current employees. It’s an act of faith that gives everyone a greater sense of stability both financially and emotionally.
Sometimes you do need to look outside the company in order to find someone with the skills you need, but if you can promote from within, you should.
When you pursue headline-chasing or “silver-bullet” hires, it’s likely you’re not just failing to cultivate insiders who could do the job beautifully and be role models for other employees. It’s good practice to slow down before you call a recruiter and think through the potential of someone you already have on board.
This article was originally posted here on Entrepreneur.com.