You've got a hard choice: Promote an excellent employee or bring in a better fit from the outside. If you decide to pass over your existing talent for a promotion (which sometimes is best for your business), you should be ready to do some serious damage control to keep the peace. 

"It would be wonderful if the company could offer some sort of incentive to keep [the runner-up] around,” Stan Kimer, president of Total Engagement Consulting told Knowledge@Wharton in a recent post. “That could be a really super dynamic, but it's not that common."

Keeping a wounded employee on board requires a careful mix of comforting and coaching skills. Here are a few steps you can take to make it through this delicate situation. Managed carefully, you can move past an employee’s hurt feelings with your company’s top talent still intact.

Be honest. Easier said than done, obviously. If the employee didn’t get the gig he was hoping for, odds are there’s a reason. Discuss the experience and skill set the position required, and (as much as possible) why you promoted the person you did. But keep things positive, focusing more on attributes an employee can develop than skills or qualities he lacks.

Reassure your employee that he/she is valued, wanted, and important to your company. This is a crucial step in pulling someone back from the urge to jump ship. Give him a brief evaluation of his strengths in his current position, and discuss a plan for how to grow and improve. Feeling valued is a key indicator of job performance, according to a survey by the American Psychological Association.

Most importantly, discuss other possibilities for advancement. No one wants to feel like they’re in a dead-end job, and that feeling will be all the more acute after losing out on a promotion. By helping your employee refocus on a different, more attainable possibility for moving up the ladder, you’ll assuage some of the disappointment and refocus his energy on a new goal.