Promoting from Within
One of the many benefits of employee development is that it will give you a good candidate to fill a vacancy. Whether it's a transfer into a department in which the employee has cross-trained or a promotion, you will have someone capable of taking on the new job. Surveys show that opportunities for advancement ranks up there with pay and benefits to most employees. Promote internally whenever you can and your employee retention rates will peak.
Before promoting an employee from within, find out what the jobposting requirements are in your state. You may be required to advertise the position to the public and give both internal and external candidates the opportunity to apply before making an offer. If this is the case, all qualified candidates should be interviewed and considered equally.
To help prepare a current employee for future promotions, assign additional responsibilities to him as you feel he is ready. Make sure that you don't violate any FLSA regulations in the process. Also, ask him to assist with big projects. For instance, a rising managerial candidate can help prepare the monthly profit-and-loss statement or annual budget.
Not all companies are in a position to offer growth and advancement because the company may be too small. Simple things like adding new responsibility and changing a person's title along with a pay raise can do the trick. Some people are very motivated by taking their careers to the next level; do what you can to give them that feeling of accomplishment.