Employing Externally vs. Promoting Internally

The case for employing externally

You need to consider both your need for staff to complete essential business tasks and your ability to pay them.

Your need for staff will depend on the nature of your business. Many entrepreneurs launch businesses solo at first, only hiring staff when they can no longer keep up with demand. For other businesses, such as a restaurant or manufacturer, a skilled team of staff is required before the first customer even walks through the door.

If you need staff before you’re generating revenue and you can’t afford to pay them a full salary, consider offering employees a share of the business or a profit-sharing agreement.

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The case for promoting internally

Promoting and demoting employees can have serious implications for staff morale, retention and productivity if not handled correctly. The key rule is always to ensure clear communication with all staff, so that they fully understand the reasons for your decisions.

Your aim should be for your staff to trust you to make fair, reasonable staffing decisions in the best interests of the business. That way, they’ll be more accepting of decisions that aren’t in their favour, and you’ll maintain good levels of job satisfaction and employee engagement.

If staff think that colleagues are being promoted ahead of them randomly or due to favouritism, or if they think a demotion is unfair or intended to punish them, they’re likely to lose motivation, become less productive and might begin to look elsewhere. In this, as with so many aspects of management, communication is key.

If you decide to go down this route then you could look at an employee incentive programmes. Like most things, employee incentive programmes work well if they’re well designed.

Do not underestimate the power of staff motivation on the productivity of your business. Happy, well-motivated staff work harder, are often more creative and are keen to accept greater responsibility for their work.

Effective incentive schemes therefore work on staff motivation. Offering a bonus payment or a prize, or even just an employee of the month certificate, can demonstrate to employees that you value their work. Fostering a positive competitive culture can be good for staff morale and for business.

However, it’s essential to ensure that employees view these schemes as fair. An incentive programme that’s perceived as being unfair or excluding certain staff may well have a negative impact on motivation and productivity.