People Management

The Power of Internal Promotion

Jun 25, 2024 | By Saranne Durham
Group of employees celebrating the internal promotion of their colleague

Internal promotion takes place when a company chooses to promote someone already working for them into a vacant position. This is instead of hiring someone new to the company. While there can be shortcomings to internal promotion, most times the advantages outweigh them. 

What are the Company Benefits of Internal Promotion?

There are many examples of people advancing their careers through job hopping. However, evidence shows that employees value a company within which they can advance. Moreover, research says that employees seek to be valued by the company that they work for. An internal promotion has been shown to signal this.  

From a company’s perspective, being seen to value and being valued by employees advantages them. This is because higher rates and longer retention of staff lead to greater success. Additionally, these are the companies that are usually better future-proofed and therefore more viable in the long run. 

3 Results of Internal Promotion for an Employee:

  1. Changes in responsibilities, duties, or tasks. 
  2. New job title.  
  3. Possible salary increase. 

Types of Internal Promotion

There are three types of internal promotions; horizontal, vertical, and dry promotions. A horizontal promotion results in someone having a pay increase and a new title, but not no additional responsibilities. Vertical promotions are more typically regarded as true promotions since they involve career advancement. This usually also means a change in role, a new job title and an increase in salary. When a company increases or changes an employee’s responsibilities, without any benefits, this is known as a dry promotion. 

5 Advantages of Promoting Internally

1. Cost Reduction

Internal hiring tends to be cheaper than hiring someone new. Recruiting and onboarding new employees is costly from both an HR and management perspective. This is due to it being a time-arduous process that could also require paid advertising. It can also result in long periods where a position is vacant. Once an external candidate is offered a job, they often negotiate things like relocation costs or a signing bonus. These and other additional expenses increase the overall cost of external versus internal hiring.

2. Experienced Employees

Someone who already works at a company has existing institutional knowledge. Furthermore, they are more likely to have a working knowledge of a position if they’re being promoted to it. Consequently, there is a reduction in time-to-productivity

3. Morale Improvement

Retention of experienced staff has strong ties to morale. One of the ways management can boost company morale is to reward existing workers by advancing their careers internally. Boosting morale often also has the advantage of improving and building a healthy company culture. This has been linked to longer-term retention of staff.

4. Highly Skilled Workforce

Providing employees with opportunities to upskill and advance their careers internally constantly increases the skillset within a company. Continually investing in the development of one individual’s career, as opposed to starting over with a new employee, maximises the effectiveness and efficiency of existing resources. This can increase overall productivity and help to retain as well as decrease HR costs.

5. Improved Customer Satisfaction

Research shows that employee satisfaction is key to customer satisfaction and retaining more profitable customers. It has also been shown that longer-term employees make fewer customer-related errors than newly hired ones. Thus, retaining employees through internal promotion can positively impact customer experiences and thereby a company’s bottom line.

What are the Drawbacks of Internal Promotion

Promoting from inside a company can yield disadvantages. If the process isn’t regarded as fair, it can negatively impact the cohesion and synergy within a company. Hiring externally usually brings fresh perspectives and new ideas. Conversely, internal hiring can result in the same issues being perpetuated and challenges remaining unresolved. Lastly, when someone is promoted, it creates an additional job that needs to be filled.  

How do You Succeed with an Internal Promotion Approach?

Knowing if a candidate is the most suitable to fill a position can be tricky. It has the added pressure that human capital can directly impact the company’s long-run viability and profit margins. Furthermore, the result of internal promotion or employing externally needs to be mutually beneficial to all parties.  

An organisation’s success is largely dependent on how proficient management and HR are at recruiting and retaining top talent. There are various factors when it comes to successfully promoting internally.  

  • Ahead of Promoting: There are structures which should be in place to better enable successful internal promotion. For example, good job descriptions and regular performance reviews, career path planning and skills development programmes, and employee grievance and conflict resolution policies. 
  • During Promoting: Two of the most important things to consider are the fairness of the promotion process and how it could be perceived by fellow workers. 
  • After Promoting: Once someone is promoted, their new functions and responsibilities need to be clearly outlined. Thereafter, if necessary, upskilling should be planned. They should be provided with support from management, for example, through regularly scheduled interactions. It is also a good idea to debrief fellow colleagues to prevent resentment or unhappiness from taking root. 

Explore the practices of recruitment and promotion or learn more about motivating employees to ensure a teams’ success with these SACAP Global micro-credentials.

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