Although recruiting may bring to mind LinkedIn and classified ads, internal sources—in other words, current employees or “hiring from within”—are often the best source of candidates. For example, Cisco Systems uses its proprietary Talent Connection program to seek qualified internal Cisco employees who may not be actively seeking jobs. 40

Filling open positions with inside candidates has several advantages. First, there is really no substitute for already knowing a candidate’s strengths and weaknesses. Current employees may also be more committed to the company. Morale and engagement may rise if employees see their colleagues promoted for loyalty and competence. And inside candidates should require less orientation and (perhaps) training than outsiders.

There are other advantages. External hires tend to come in at higher salaries than do those promoted internally, and some apparent “stars” hired from outside may turn out to have excelled more because of the company they came from than from their own skills.

One executive recruiter argues that internal candidates are always better than external ones unless the internal candidates simply can’t pass muster. One study concluded that firms that hired their CEOs from inside rather than outside performed better. On the other hand, some firms—particularly those facing challenges, such as McDonald’s—have done very well by bringing in outside managers. 41

Hiring from within can also backfire. Inbreeding is a problem if new perspectives are required. The process of posting openings and getting inside applicants can also be a waste of time because often the department manager already knows whom he or she wants to hire. Rejected inside applicants may become discontented; telling them why you rejected them and what remedial actions they might take is crucial.

There are some practical rules to use in determining whether to go outside or promote from within. If you need specific skills that aren’t available in your company, or have to embark on a tough turnaround, or face a situation in which your current succession planning or skills inventory systems are inadequate, it may be best to look outside. But if your company is thriving and you have the skills you need internally, and have a unique and strong company culture, then look within. 42