This article was updated on July 25, 2018.

Your organization's hiring mix, defined as decisions on internal promotion versus external hires, can have a clear impact on employee experience at midsized organizations. The ADP Research Institute® 2015 Midsized Business Owners Study found that talent management is a key human capital management (HCM) concern. Only 16 percent of owners surveyed are "completely confident" in their tools to retain and grow talent, while just 15 percent are totally satisfied with their recruitment tool kit.

The Society for Human Resource Management found that hiring decisions affect employee morale. Not only are employees more engaged when they are at an organization where internal promotions are big, they're more likely to refer their friends, as well. Talent satisfaction alone, however, can't be the only factor midsized HR leaders should consider when evaluating their approach to hiring.

How Is Your Mix Affecting Employee Experience?

Naturally, internal promotions will improve employee happiness, but they may also have a net positive effect on your organization. Employee engagement consultants, Tembo Status, indicate that internal hires outperform their externally hired counterparts and are more likely to continue to grow within an organization.

Some employers put a focus on internal promotion in their hiring mix to initiate learning among self-starters and encourage internal employee progression. Internal promotions aren't always a silver bullet for employee engagement, however. If your midsized business is in dire need of a fresh perspective, outside hires may be able to come in and discover deficiencies you could be overlooking. Additionally, just because an employee is talented in their role, doesn't necessarily mean they will also have the skill set to effectively lead others.

At midsized organizations, a potential hire's fit for a role can't be underestimated. While internal promotion is generally a positive influence on employee experience, HR leaders must balance that goal with a pragmatic understanding of their culture and outcome-driven business strategy.

Do Your Employees Understand the Hiring Process?

"Honesty and communication" are key factors in employee engagement, according to Training Magazine. Regardless of how your hiring patterns currently stack up against your goals, HR leaders must work to make paths to promotion clear for their existing talent. A lack of growth prospects are often one of the main reasons that employees voluntarily leave their jobs or suffer disengagement.

According to Fortune, Advantage Answering Plus was named a top 50 midsized employer because of their promotion track transparency. Once staffers have finished 10 basic training requirements, they're then invited to begin formal managerial training. By establishing a formal process for professional development, including learning and development requirements, you can drive retention and promote engagement.

Does Your Hiring Mix Need Some Hacking?

If your organization is forced to look outside more often than not, it could be a clear indicator that your training and development efforts need some rehab. Not only do external hires tend to cost 18 to 20 percent more, reports Inc.com, they're more likely to lack the organizational and cultural knowledge factors to succeed.

On the other hand, organizations should be honest about the times when internal hires have not been the best choice. In many cases, failed internal promotions could point to poor tools for talent management or a lack of transparency. Without effective methods for tracking employee performance and knowledge, you may fail to develop effective succession management techniques.

Are internal promotions always the best choice for engagement and retention at midsized organizations? Sometimes, but not always. HR leaders must balance organizational needs against available talent, transparency and other factors when making hiring decisions. While data indicates that internal hires may be less expensive and outperform their externally sourced counterparts, they will still need the right tools and technologies to support their transition.

Tags: Recruiting and Hiring Employee Engagement and Productivity Turnover and Retention Midsize Business Research & Insights Articles HR