It’s plain to see some of the main benefits of this practice. But one major reason it’s better does not concern the candidate being reviewed, but everyone else around him or her.

Surprisingly, hiring internally has a positive effect on everyone else, aside from the candidate.

Modern businesses utilize only the best methods of assessing potential candidates. One such method is 360 degree feedback. A candidate is assessed by gaining a comprehensive picture of their capacity for the role by gaining insights from all around. From the candidate’s lateral counterparts to people above and below the candidate’s position.

360-degree feedback surveys people all around the candidate for their:

-Perceived strengths and weaknesses

-Performance appraisals

-Professional opinions

It’s a holistic method of assessing internal candidates that you simply can’t do when recruiting externally. Hiring from the outside, you’ll be limited to past experience and the provided references.

When recruiting externally, a new investment in talent is made. Onboarding an external hire means matching preferred salary, which is almost always higher than your standard. Not to mention the time and resources recruitment and screening take.

When recruiting internally, what a company does is invest further in existing talent. Internal hires have limited pay grade increases, and cannot as easily put a premium on their experience as external hires.

Furthermore, as you open higher positions to existing employees, you increase retention. Each employee that leaves translates to costly severance packages and an opening that you’ll need to fill. And you fill it via equally costly external recruitment costs, salary negotiations, and onboarding.

Try and perform a survey of your workforce to find the top five or so reasons they would stay in a company. Salary will only be the second or third item in their list. Employees seek stability and prioritize either career growth or work-life balance over money.

When recruiting externally, you disrupt – even momentarily and only slightly – the existing dynamics of the workforce. The culture needs to be readjusted and productivity may be affected. Luckily, unless you made a mistake and hired a jerk, morale shouldn’t fluctuate too badly.

When hiring internally, employees see their colleagues advance rightfully. They observe that they have direction: a well-defined career path and active investments in their growth. The top reasons they’ll stay. Best of all, a promotion within a harmonious workforce boosts morale, making the environment more productive.

Finally, recruiting externally is a telltale sign of employee problems in your company.

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