Internal Environment

The internal factors selected for this discussion concern staffing managerial positions with personnel from within the firm as well as from the outside, determining the responsibility for staffing and recognizing the need for top management support in overcoming resistance to change.

Promotion from within:
Originally, promotion from within implied that workers proceeded into frontline supervisory positions and then upward through the organizational structure. Thus, a firm was pictured as receiving a flow of non-managerial employees from which future managers emerged. As used to be said in the railroad industry. When a president retires or dies, we hire a new office worker.

As long as the matter is considered in general terms, there is little doubt that employees overwhelmingly favour a policy of promotion from within. The banning of outsiders places limits on competition for positions and gives employees an established monopoly on managerial openings. Employees then doubt the wisdom of the policy, however when they are confronted with a specific case of selection of one of their own for promotion. The difficulty becomes most evident when a general manager is being selected from among the sales, production, finance, or engineering managers. Top managers are often inclined to choose the easy way and avoid problems by selecting an outsider.

Promoting from within the enterprise not only has positive values relating to morale, employees’ long run commitment to the company, and the firm’s reputation but also permits taking advantage of the presence of potentially fine managers among the firm’s employees. However, even though these positive but un-measurable values are important, executives should not be blind to the dangers of either overemphasizing this source or relying on it exclusively.

A danger presented by a policy of exclusively promoting from within is that it may lead to the selection of persons for promotion who have, perhaps, only imitated their superiors. This is not necessarily a fault, especially if only the best methods, routines and viewpoints are cultivated, but this is likely to be an unapproachable ideal. The fact is that enterprises often need people from the outside to introduce new ideas and practices. Consequently, there is a good reason to avoid a policy of exclusive promotion from within.
On the other hand, a policy of promotion from within may be quite suitable for very large companies.  Nevertheless, large business and non-business organizations usually have so many qualified people that promotion from within actually approaches a condition similar to an open competition policy. Even in these large companies, however, it may be necessary to go outside, as General Motors did when it hired a university professor as vice president to head its environmental control staff.

Policy of Open Competition
Managers must decide whether the benefits of a policy of promotion from within outweigh the policy’s shortcomings. There are clear cut reasons for implementing the principle of open competition by opening vacant positions to the best qualified persons available, whether inside or outside the enterprise. It gives the firm, in the final analysis, the opportunity to secure the services of the best suited candidates. It counters the shortcomings of a policy of exclusive promotion from within permits a firm to adopt the best techniques in recruiting managers and motivates the complacent heir apparent. To exchange these advantages for the morale advantages attributed to internal promotion would appear questionable.

A policy of open competition is a better and more honest means of ensuring managerial competence in comparison to an obligatory from within. However, it does put the managers who use it under a special obligation. If morale is to be protected in applying an open competition policy, the enterprise must have fair and objective methods of appraising and selecting its people. It should also do everything possible to help people develop so that they can qualify for promotions.

When these requirements are met, it would be expected that every manager making an appointment to a vacancy or a new position would have made available a roster of qualified candidates within the entire enterprise. If people know that their qualifications are being considered, if they have been fairly appraised and have been given opportunities for development, they are far less likely to feel a sense of injustice if an opening goes to an outsider. Other things being equal, present employees should be able to compete with outsiders. If a person has the ability for a position he or she has the considerable advantage of knowing the enterprise and its personnel, history, problems, policies, and objectives. For the superior candidate, the policy of open competition should be a challenge and not a hindrance to advancement.

While responsibility for staffing should rest with every manager at every level, the ultimate responsibility is with the chief executive officer and the policy-making group of top executives. They have the duty of developing a policy, assigning its execution, to subordinates and ensuring its proper application. Policy considerations, for example include decisions about the development of a staffing program, the desirability of promoting from within or securing managers from the outside, the sources for candidates, the selection procedure to follow, the kind of appraisal program to use, the nature of manager  and development and the promotion and retirement policies to follow.