Innovation

How to Develop Internal Talent

Studies and anecdotes alike suggest it's better to promote from within. What one entrepreneur did to build up her own employees

Written by Alexandra Bosanac

In 2005, PJ Ferguson, founder and president of Burlington, Ont. staffing agency ABL Employment, was looking to step back from the day-to-day running of her company. “If you’re too busy working in the business, you’re not working on the business,” she says.

But Ferguson couldn’t picture any of her current employees being able to fill the role of a regional manager—at least not immediately. So she got to work building a pipeline of management-material candidates.

It’s a process that has greatly benefited her company. ABL Employment took the #171 spot on the 2015 PROFIT 500 Ranking of Canada’s Fastest-Growing Companies. Ferguson and co-founder Jill Dee Ferguson also placed #20 on the 2015 PROFIT/Chatelaine W100 Ranking of Canada’s Top Female Entrepreneurs.

It’s a tempting option for companies—particularly small ones that might feel constrained or have limited options due to their size—to look outside for talent, but the strategy has drawbacks that deserve careful consideration. “People come in with baggage,” says Ferguson, explaining that they arrive with their own ideas on how to “handle other employees and other clients.” A new employee’s long-held ideas can also have a contagion effect on your established employees.

Ferguson’s observations are backed up by research. A case study published in Harvard Business Review in 2004 found that “A players” imported from other firms rarely perform as well as in their new digs.

“Stars are unusually slow to adopt fresh approaches to work, primarily because of their past successes, and they are unwilling to fit easily into organizations,” the report says. “They become more amenable to change only when they realize that their performance is slipping. By that time, they have developed reputations that are hard to change.”

Hiring from the outside also hurts morale and engagement among current employees—it sends a signal that they’re unlikely to advance upwards. After developing her own internal training program, Ferguson notes that employee retention is better than ever.

Here’s how Ferguson says you can develop talent organically.

Define your company’s culture

Management candidates need to be aligned to your company’s mission. For ABL Employment, that means someone who regularly checks in with themselves about the company’s guiding principles: “Are you treating people well, are you expressing care and concern for the individual, whether it’s your peer, your client or your assignment employee?” asks Ferguson. “Are you adhering to the ethics of the profession and your own ethics as a human being?”

To define your own company culture, she advises entrepreneurs to look within. “Look inside yourself, look inside the value proposition that you offer your customers and your employees,” she says. “Because you will find the hints of the culture in that.”

She suggests an exercise: tell yourself your own story. “When you tell your story to yourself, you will understand far more about your culture and the culture of your company than you realize, than you know,” she explains.

Do it yourself, but don’t look for yourself

One of the biggest realizations Ferguson has made is that bosses need to promote people that are not carbon copies of themselves. “When you’re looking at hiring a key manager, make sure you hire someone that complements you,” she says.

Smaller firms can’t afford to make a bad hire, especially for positions of leadership. “We don’t fire a cannonball, but rather a bullet, to see that our aim is true,” Ferguson says, explaining her company’s philosophy. That is, if you personally oversee employees’ training, you can gauge with more certainty how they’ll perform with added responsibilities.

Feed the pipeline

Internal promotions open up vacant spots lower down in your organization. In order to continuously feed your talent pipeline, Ferguson suggests considering entry-level candidates who may be short on specific skills but who are a good cultural fit. If you’re going to make employee development a top priority, then you should be open-minded about where you look.

In the service industry, she says, “the skills needed are customer service and creative problem solving. [Those skills] can be developed in many industries.” So she doesn’t simply hire from other staffing firms, but casts a wide net.

MORE ON EMPLOYEE TRAINING AND SUCCESSION:

Do you prefer to promote from within or hire from outside? Why? What are you doing to develop internal talent? Let us know by commenting below.

Originally appeared on PROFITguide.com