Auto Dealers: Should you promote managers internally or hire from outside?

Published September 15, 2021

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Top-performing dealerships often have two common attributes: strong managers and low employee turnover. These features may be interrelated. According to research conducted by Gallup, half of employees who left their jobs said they did so to “get away from their manager.”

Your dealership’s success hinges on hiring a strong general manager and strong department managers for new and used vehicle sales, parts and service, and finance and insurance (F&I). There are two main approaches you can take when hiring managers: Bring them in from the outside or promote existing employees into management positions. Carefully weigh the pros and cons of each avenue before deciding which is better for your dealership.

Promoting from within

Promoting existing employees is generally less expensive than hiring from the outside. You’ll save the costs that go into hiring and recruiting, such as advertising on job boards, websites and in print. Promoting internally also could speed up the hiring process; it’s usually faster and easier to identify and interview existing employees than to recruit outside candidates.

Promoting existing employees also can help boost employee morale and improve retention. One reason some employees leave their jobs is because they don’t see opportunities for advancement. Employees may be less likely to feel this way if they see other insiders promoted to manager slots.

Another benefit is the level of familiarity you have with your existing employees. You probably already have a feel for their strengths, weaknesses, personality and performance capabilities. So, promoting internally can sometimes be less risky than bringing in outsiders.

However, promoting existing employees to managers isn’t risk-free. Some employees simply aren’t cut out to be managers. For example, a star salesperson might thrive when selling cars but flounder when asked to manage other salespeople. Plus, there can be resentment on the part of employees who weren’t promoted and now must report to someone who used to be their peer.

Hiring from the outside

When hiring managers from outside your dealership, you’ll have access to a much larger pool of candidates. Another potential upside is the opportunity to obtain fresh perspectives and innovative ideas for improving business operations. This is especially important for your general manager, since he or she may be able to implement new ideas that can help revitalize all areas of your dealership.

Outside managers also may bring new skills and experience to the role that can lead to more efficient processes and improved financial performance. And recruiting outsiders may eliminate the possibility of resentment among employees who were passed over for a promotion, as well as unhealthy competition that can result from employees vying against each other for a position.

On the flip side, there are limitations to how much you can know about outside candidates. For example, the resumé of an outside candidate for the F&I department manager position might look impressive and he or she might ace the interview, but the individual’s personality might not mesh with your corporate culture. This can result in conflicts and morale problems that spread throughout your dealership. Or, the person’s actual skill level might not match up to what was presented on the written page.

Be flexible

The circumstances surrounding a managerial position could help determine whether it’s better to hire from within or recruit from the outside. Therefore, it pays to be flexible and choose the optimal approach depending on the situation. For more information, reach out to Emily Possidento, MCM HR Solutions Group Principal, at