Balancing Internal vs. External Hires: Is Recruiting 50% of Top Managers from Outside Too Much?

Recruitment of Top Managers: Internal vs. External

I want to know whether the recruitment of top managers up to 50% of sanctioned posts from outside, bypassing internal talent, is beneficial to the organization, or if it should be less than 25% to maintain a proper balance between internal and external managers. Please offer your comments.

Thank you,

Regards,
Dr. C V Ambilwade

There is no hard and fast rule regarding recruitment. It depends on the required competencies for the position and the competencies available within the in-house team. If the in-house employees comply with a minimum of even 75%, it is better to promote in-house individuals to get the work done rather than bringing in an outsider.

In these circumstances, there is no specific percentage that matters. The skill sets and competencies are the only factors that matter.

Thanks and regards,
Kameswarao

I agree 100% with what Mr. Kameswarao has said. However, I would like to put forth one additional benefit of hiring an outsider. Insiders get institutionalized to the organization's culture, and bringing change is at times difficult. On the contrary, outsiders bring dynamism.

Case Study: HP's New CEO

Take the case of HP's new CEO, Leo Apotheker. He worked at SAP. HP is an out-and-out hardware company, and their software revenue share is only 3%. Yet the board has found his candidature fitting. Now, how he competes with Dell, another major hardware player, remains to be seen.

Indian Context Example

In the Indian context, one of the prominent courier and logistic companies was turned around by a VP with an automotive background.

Ok...

Regards,
Dinesh V Divekar

As indicated by our colleagues, the hiring strategy varies from company to company. Generally, it is preferable to have some managers in top positions from external sources. This is because many times we observe that employees inside become resistant to change and start believing that whatever they do is the right way and refuse to adapt to changes.

In this context, it would be preferable to hire employees from external sources. However, while hiring, adequate care must be taken to ensure that the person hired from an external source is resourceful and has a positive attitude to convince people internally. He should not be abrasive but at the same time should not be submissive either.

He must change things that need improvement in the organization but should continue to adapt himself to the good things already prevalent in the organization. For this, he must have an open mind.

He must not be a person who seeks popularity but should be a person who works efficiently with the help of internal resources.

Regards,
M.V. Kannan

Considerations Before Appointing an Outsourced Top Management Team

Before appointing an outsourced top management team, you should think twice because outsiders may not be familiar with your organization's environment. They may not easily adjust to your unique work culture.

Dear Mr. Hiremath RV, I beg to differ with you when you suggest thinking twice before hiring the services of outsiders because they may not adjust to the environment.

Considerations for Recruitment

Two things are important here. One is that at the time of recruitment, you should be careful and assess whether the candidate could be amenable to the company's environment or not.

Secondly, the history of corporate decline shows that companies have failed miserably because of insiders as well.

Examples of Corporate Failures

Why did Lehman Brothers fail? Why did Enron fail? Why is Nokia's market share falling worldwide? Is it because of outsiders? No way!

Why are Yahoo! and Microsoft struggling while competing with Google? In fact, when Google entered the market in 1998, both these companies had nearly a decade of experience.

Ramalinga Raju's Satyam failed not because he lacked experience in running an IT company. In fact, the clique that surrounded him had been with him for almost two decades.

Experience vs. Innovation

In the Indian context, some of our communities have been in business for thousands of years. However, this extensive experience did not lead to the formation of a single multinational corporation like FedEx, HP, Dell, Microsoft, etc.

Lastly, Mr. Hiremath, please note that nothing is more deceptive in this world than the word "experience." Whether it will work or not is a sheer gamble.

Thanks,

Dinesh V Divekar

The most important criterion is competency and attitude. It could be an outsider or an insider who fits the bill. If one recruits outsiders at the middle management level and upwards, besides all the points mentioned above, the chances of insiders getting promoted are reduced (if we follow a fixed percentage for filling vacancies), which could be a major demotivator.

At the same time, promoting only insiders (and not recruiting outsiders) makes them take their career progression for granted, which of course is a sure-shot recipe for disaster. Insiders also tend to indulge in power games with greater intensity with the security that they will be in top management sooner or later.

The best approach would be to recruit outsiders at all levels, including juniors. Give importance to competency. When recruiting at the top level, give both insiders and outsiders an equal footing. In an interview for the post, let insiders and outsiders compete on the same scale.

As Mr. Divekar mentioned, 'experience' is a perception. Using it as a rigid scale of measure is like curbing the mind.

Thank you to all for expressing your opinions freely. To motivate the existing resources and achieve the organization's targets, it is essential to have a proper recruitment policy in place. Additionally, the cost of hiring candidates from the open market is very high. The organization can choose to promote internal, competent individuals with extensive experience at a low cost, while having to pay a full salary to candidates hired at higher positions from the open market. Furthermore, if a higher position is filled by an internal candidate, all employees within the ladder receive promotions, fostering a sense of satisfaction, loyalty, and motivation. Internal candidates are well-versed in the organization's culture, goals, and objectives, whereas outsiders require time to familiarize themselves with the working culture, rules, and regulations.

Ideal Ratio for Filling Managerial Positions

In my opinion, the ideal ratio for filling managerial positions should be 75% through promotions based on seniority and performance, 15% through recruitment from departmental employees with professional qualifications and strong work ethic, and 10% through direct recruitment from the open market. Do you think this would be a suitable combination? Your valuable comments are appreciated.

Thank you,

Yours sincerely,
Dr. C V Ambilwade