Should You Hire Management or Promote From Within? As your business grows, you'll be faced with the "make or buy" decision.
By Doug and Polly White Edited by Dan Bova
Opinions expressed by Entrepreneur contributors are their own.
Most business owners want their companies to grow. However, if your business continues to expand and you hire additional employees, at some point you will need to add a layer of management between you and the primary workers. This is one of the toughest transitions for business owners, because adding management in your organization means transferring some of the power to those managers. It means giving up a measure of control, and that can be difficult for the small-business owner who has been in charge of everything since the beginning.
We are often asked if small-business owners should promote from within and how to know if the employee is ready for management responsibilities. Let's tackle the first part of this question. We call this the "make or buy" decision. In other words, should you hire employees with potential and then mentor, coach and invest in them so that when a management position becomes available in your organization, you have an employee ready to step in? Alternatively, do you go outside of your organization and buy the talent you need?
Related: 4 Considerations When Determining the Best Leadership Structure for Your Business
Frankly, we are big fans of promoting from within. It has many benefits:
- You know these employees -- their strengths and weaknesses.
- The employees know your company and its culture.
- Promoting from the ranks can increase morale and decrease turnover within the organization as employees see the rewards of hard work, dedication and loyalty.
The downside to this philosophy is that you must start this process well in advance of the need. No one is born knowing how to manage employees. This is a learned skill. It takes time to create a manager.
As to the second part of the question, we wish we could give a simple formula for determining when an employee is ready to manage others, but it does not exist. However, there are ways to increase their success rate.
Opportunities to manage -- before becoming a manager
A pet products company we worked with put a high-potential employee in charge of a task force. She had the opportunity to lead a group and practice management skills.
Related: How to Develop Your Management Style and Assemble the Best Team
Coaching
The same company provided this high-potential employee with an executive coach who helped her to develop specific management and interpersonal skills.
Feedback
The high-potential employee received feedback from the coach, her manager and the members of the task force. This candid feedback helped her to further develop and refine her skills.
Develop a professional network
The organization encouraged the high-potential employee to network with other young professionals within their industry and in their community. The employee was able to take advantage of learning and professional development experiences, further enhancing her skills.
The process was not quick. The organization invested in this employee's development for more than a year, exposing her to various experiences. In the end, the business had an employee who was ready and excited to step into a management role.
It comes down to the "make or buy" decision. If you need a manager right away, you can buy talent. However, well-trained, experienced managers are expensive. In contrast, developing your own managers by investing in high-potential employees has many benefits. That development time is often worth the rewards.
Related: Should You Always Promote From Within Your Company?
