While it might occasionally be true that a great leader can lead anywhere, hard skills definitely matter. A 2015 study published in Industrial and Labor Relations Review found that having a highly competent boss -- one who excels at "ability to get the job done" and "employee development" -- has by far the largest positive influence on employee job satisfaction.
As the researchers write, "If your boss could do your job, you're more likely to be happy at work."
You're also more likely to be happy if your boss was promoted from within, rather than hired from the outside. A recent Joblist study showed that nearly 70 percent of respondents prefer to be managed by an internal hire, a seasoned company vet who "climbed the ranks," than an external hire.
Even if that person brings "proven talent" to the role.
Not only did respondents think hiring from within was the better path to growth, they also took outside hires personally: Thirty-five percent had quit, or at least considered quitting, when passed over for someone outside the organization.
But wait, there's more: Internal promotions led employees to report higher productivity, greater loyalty to the organization, and that they had a better relationship with their (internally hired) manager.
Internally hired leaders agree: They reported feeling more supported and respected by their teams, and more likely to describe their teams as high-performing. (Granted, which may have more to do with their tendency to embrace "this is how we do it around here" expectations than with objective, measurable outcomes.)
Keep in mind there were situations where respondents felt external hires made better sense. Like when an essential employee with specific, not internally replaceable, skills leaves the company.
Promotions Build Cultures
Or, although this wasn't included in the study, if you as the employer are unhappy with your company's culture.
Culture isn't what you say it is; culture is what you and your employees do. Bringing in people who embody the culture you hope to build may be the best way to effect long-term change.
But otherwise, you're likely to be more successful when you promote from within -- because if you get those promotions right, the effect on productivity, job satisfaction, and employee retention can be dramatic.
A 2018 survey of over 400,000 people across the U.S. found that when employees believe promotions are managed effectively, they are more than 2X as likely to give extra effort at work and to plan for having a long-term future with their company.
Plus, when employees believe promotions are managed effectively, they are more than 5X as likely to believe their leaders act with integrity.
At those companies, employee turnover rates are half that of other companies in the same industry. Productivity, innovation, and growth metrics outperform the competition. (For public companies, stock returns are almost 3X times the market average.)
So before you reflexively look outside your business to "bring in new talent," take a step back and look at the criteria you will use to make the promotion or hiring decision.
Instead of focusing on "qualifications," determine what the perfect person in the job will actually do.
If teamwork matters most, promote the best team player. If productivity matters most, promote your most effective employee. Getting the right things done -- whatever those outcomes may be for the open position -- matters most.
If you truly can't find that person within your organization, then feel free to look outside.
In that case, your employees will understand -- and will realize that your goal is always to find the best possible person for the job.
And because that person knows their stuff, and uses that knowledge to get things done, they will fit in just fine.
On the rare occasions that hiring from the outside, instead of promoting from within, actually makes sense.