There are five good reasons why you might want to consider hiring an internal candidate. First, it sets a precedent and second, it's good for morale. Employees are often very pleased when they see that "one of their own" has been promoted to a management-level position. And when morale goes up, productivity most often follows, especially when the employees like or respect the newly promoted individual.

Third, employees often believe that "If it can happen to that person, it can happen to me, too!" So other employees see an internal promotion as a tangible, credible and attainable goal for themselves. Any motivational psychologist will tell you that creating or maintaining clear and higher-level goals, and striving for increased productivity and visibility, are important sources of motivation. And again, with increased motivation you get increased productivity, and that often leads to increased employee satisfaction.

Fourth, an internal candidate is most likely already familiar with the functional aspects of their new job. This person knows the corporate culture, the procedures, policies, processes, employees, and internal and external customers associated with the job. They know the ins and outs--the "how things get done around here"--of the job. So this person can generally hit the ground running. Hiring an internal candidate clearly decreases--or erases--the usual amount of time spent advertising a position, interviewing, selecting, training and waiting for the new hire to get up to speed with the new job and its environment.

A final reason to hire from within is that the current employee is already a "known quantity" to both managers and nonmanagers. Both groups know the employee's strengths and limitations in terms of technical skills, abilities, knowledge bases, and professional personality.

When it comes to hiring a management-level position, however, there are also five good reasons why you ought to consider hiring an external candidate.

First, while the internal candidate may be technically proficient or even technically superior, their managerial competencies may not exist, may not be apparent or may not have yet been proven. An external candidate will come with these qualities already intact. What happens when internal candidates get erroneously selected goes something like this: When selecting internally, you commit an error known as the "halo effect"; that is, you see an employee doing something correct (their job) and, erroneously or without proof, assume that the employee can succeed in another task or level, in this case, a managerial position. However, the managerial position requires a different--and often more challenging--skill-set that the employee may not possess. What they possess is superior technical skills, but technical and managerial competencies are definitely quite different.

The second reason for hiring an external candidate is that this person comes with proven managerial expertise, or else you wouldn't be considering them for the job. While these candidates may not be familiar with your company's culture, they are familiar with and experienced in the usual procedures, policies, processes and legwork associated with being a manager. Hiring someone who already knows the managerial ropes is a clear plus in the column of the experienced managerial candidate vs. the inexperienced one.

Third, your external candidates already have management skills--that's the main reason you're considering them for the job at your company. They already know how to motivate, how to lead, what can be delegated, what tasks deserve close attention, what issues to avoid, and how best to work with the crucial people--interactions that demand so much of a manager's time.

On the other hand, in woefully too many cases, an internally promoted employee doesn't receive the management training they need before starting in their new management position. So they fail to perform optimally in a position for which they weren't qualified to begin with.

Another reason to consider hiring from the outside is that external candidates don't bring along any negative baggage regarding your company. Internal candidates may be affected by situations from the past in which they didn't perform well, shirked responsibilities or angered some co-workers. Now a manager, this person could conceivably have difficulty managing his former peers and justifying his past performance. An external candidate would have no such problems.

Finally, external candidates usually bring new energy, ideas, enthusiasm and perspectives to the job. They most likely have experience doing things differently at other companies, so they can bring a fresh perspective to their job with your firm. Internal candidates, on the other hand, while being a "known quantity" to you, may not have the exposure to other organizations, products or services that your business needs to thrive and grow.

So just what should you do when hiring a new manager? How do you decide just who to hire? Address the following issues to gain the clarity you need to decide what would be best for your business: