The 60/40 Rule

Why the right mix of internal promotions and external hires matters

Are you familiar with the 60/40 rule? Most organizations are not, or if they are, they simply don’t follow it!  So what exactly is the 60/40 rule? The 60/40 rule means that 60% of your leadership should be made up of internal promotions, those who have come up through the ranks within your organization, and 40% of leadership roles should be filled with external hires. Best practices have shown that when filling leadership roles, all organizations should keep the 60/40 rule in mind.

Why is this mix so important?

Finding the right combination of internal promotions and external hires can keep a company from becoming stale.  At many companies, a high turnover rate can mean little fostering of company culture or passing down of institutional knowledge.  Conversely, when companies favor promoting from within and experience little turnover, this can create an environment of little change and limited introduction of new ideas, leaving the organization stagnant.

Internal candidates retain invaluable organizational knowledge and can often transition into new roles within an organization with greater ease than an external hire.  Hiring externally can also mean greater costs for an organization.  However, those external hires are critical for organizations in terms of bringing in fresh ideas and perspectives that keep an organization thriving.  Considering external candidates also opens up a much broader candidate base.

So how do you know when to promote from within and when to hire externally?

While a healthy mix of internal and external hires is important, cultural fit is key.  For every role, the most important consideration is which candidate is the best culture fit for the organization and will have longer term success.  Internal candidates are often at an advantage when it comes to culture as they have a built in understanding of a company’s culture, core values, and have established relationships.

In addition to looking at an external candidate’s background, considering how quickly they can integrate into the organizational culture is important.  Are they a culture fit?  How quickly will they be able to build relationships and work within the organizational network to get things done?

There are many more considerations than just culture.  The nature of the role and current state of the company must also be examined.  Do you have an internal pool of candidates that you would consider for the role you’re trying to fill? Are you entering a new market? Changing strategy? These could all be situations where an external hire is more appropriate.

The most important thing to consider is that your leadership should be made up of both internal and external hires, and each role should be considered individually.  Maintaining that 60/40 balance allows you to maintain a rich company culture, while also bringing in new ideas to keep the company current and forward thinking.