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When Salesforce laid off 1,000 employees in February, CEO Mark Benioff insisted that the company would hire around 2,000 new workers before the end of the year. His argument for hiring versus retaining and retraining people was that the company needed staff with a different set of skills.
Hearing that, it was hard not to wonder why some of the exiting employees weren't being given the opportunity to learn these new skills. After all, weren't any upper-level managers familiar with Robert Townsend's 50% rule? Widely taught in business schools, it states that companies should prioritize hiring current employees with proven track records and a desire for the job, even if they only possess 50% of the open position's required qualifications.
Halfway There Employees Can Match 'Perfect' Hires
The 50% rule wasn't written specifically within the context of layoffs. It was designed to encourage managers to lean in on employee growth and internal mobility.
"Try to find somebody inside the company with a record of success … and with an appetite for the job. If he [the proper pronoun at the time] looks like 50% of what you need, give him the job. In six months, he'll have grown the other 50% and everybody will be satisfied," wrote Townsend in business bestseller, "Up the Organization: How to Stop the Corporation from Stifling People and Strangling Profits."
While Townsend wrote his advice more than 50 years ago, a renewed call is asking employers to consider hiring existing employees rather than bringing in talent from the outside. Not only that, but to consider hiring workers who meet only part of the job requirements and to support them as they gain the know-how that they are missing.
"Nobody has all of the skills. Things are changing too quickly. What they (employers) need is someone who has a hunger to learn and a team who will mentor, teach and promote them," said Ruth Gotian, chief learning officer and associate professor of education in anesthesiology at Weill Cornell Medicine. Gotian has also authored two highly respected books: "The Financial Times Guide to Mentoring: A Complete Guide to Effective Mentoring" and "The Success Factor: Developing the Mindset and Skillset for Peak Business Performance."
Promise Over Proficiency
Gartner recently conducted a survey showing that 48% of 190 surveyed HR leaders agreed that the demand for new skills is evolving faster than existing talent structures and processes can support. The research firm's findings are striking: employees hired based on promise are 1.9 times more likely to perform effectively than those hired purely for proficiency.
"Many organizations are transforming their capabilities so rapidly that they can't acquire all the skills they need — the talent either doesn't exist or is too expensive," said Meaghan Kelly, a director in Gartner's HR practice. "This puts more pressure on organizations to build skills internally, but unfortunately, most organizations are not building skills fast enough to fill critical roles."
With the predicted shortage of workers and rapidly evolving changes in the way work is done, experts almost unanimously agree that employers can't afford to wait until a worker meets all of the requirements of a position before they are considered for a new role. Yet despite this urgency, only 28% of employees reported that their organization places importance on building on promise — what Gartner defines as "a willingness and ability to learn new skills from a minimum foundation."
Open Up the Candidate Pool
Hiring managers might initially be skeptical of this approach, not only because the promising employee will initially be less productive than a proficient worker, but also because they will need support and training from the manager, thereby increasing the manager's workload.
Part of the challenge lies in identifying employees with promise in the first place. According to Gartner's October 2024 survey, 51% of managers agreed that they ask recruiters to only focus on recruiting employees with all desired skills when recruiting internally.
This narrow approach to recruitment significantly shrinks the pool of potential candidates. Rather than seeking employees who check every box, organizations would be better served by defining simple, foundational role requirements that open the door to a wider group of candidates.
"You can't ask a manager to do it all," said Kelly, adding that chances are good that they are already at the edge of burnout. She recommended building a skills-based support network that includes the manager, someone from learning and development, a subject matter expert and a mentor, or whatever network members make sense for your organization.
According to Gartner research, this shared support solution nearly doubles the impact on skill-building compared to the traditional one-on-one approach.
The Monetary Incentive
The numbers tell a compelling story about the costs of external hiring. Research suggests that replacing a salaried employee costs businesses anywhere from six to nine months of the departing employee's salary. For an employee earning $60,000 annually, that translates to $30,000 to $45,000 in recruiting and training expenses alone.
These costs encompass every step of the external hiring process: advertising positions, sourcing candidates, conducting interviews and background checks, and finally onboarding the new hire. The expense climbs each day a position remains vacant, with some roles taking months to fill. Meanwhile, existing employees must stretch to cover additional duties, which impacts their own productivity.
The financial burden doesn't end once an external candidate is hired. External hires typically command 18%-20% higher salaries than internal promotions, yet their performance evaluations during the first two years are often worse than those of promoted employees.
This performance gap exists because external hires typically need about two years to fully understand their new company's culture and processes — knowledge that internal employees already possess.
Recruit vs. Retrain Comparisons to Buy vs. Build
The recruit (external candidates) versus retrain decision is akin to buy versus build, said Elizabeth Crofoot, senior economist and principal researcher, Lightcast. "Where is the highest ROI?" she asked.
The answer lies in focusing on which skills are needed, which skills need to be grown, versus which skills are the most expensive to acquire.
Worth noting too is that current employees are known commodities who fit into the company culture, are familiar with its business and understand how work gets done.
"Retraining is almost always the best bet," Crofoot said.
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Next comes "finding within the 'four walls' (inside the company) where you can get the biggest bang for the buck," added Crofoot. This could involve identifying prospects by leveraging people analytics, skills, profile mining or similar. Other areas to explore include talent marketplaces, talent pools, specific ladder and lattice positions and more.
The Employee Perspective
Of course, what the worker wants matters as well. Are they interested in taking on a reach position? How can they determine "what's next" and what skills will be needed to be successful, said Gotian.
The evidence is clear: in an era of rapid skill evolution and talent shortages, companies that invest in their existing workforce through strategic retraining programs position themselves for greater success than those who continuously recruit from the outside. The 50% rule may be decades old, but its wisdom has never been more relevant.
Editor's Note: Read more about the value of developing internal talent:
- From Ladders to Lattice: How Careers Can Engage and Retain Employees — Outdated career management practices and career ladders no longer suffice in our dynamic work environments. Career lattices offer an alternative.
- Develop AI Talent Internally With T-Shaped Engineers — Why the best AI teams start with the talent you already have.
- How to Get Started With an Internal Talent Marketplace — Internal talent marketplaces can help alleviate skills shortages, as well as improve employee engagement. Here's how to navigate the landscape.
