4. When I have an opening, should I promote from within or look outside the company?

There's no right answer. "By hiring from within, you demonstrate to employees that they can move up within your company and can shorten transition time," says Spencer Lee of Robert Half Technology. "By hiring external candidates, you bring a different perspective to the organization."

Your tactics may depend, in part, on organizational culture. "There are some great companies that only hire at the entry level. It creates a very strong culture because they only promote from within. That creates strong loyalty," says Berry. "On the flip side, I think you lose [out on] new ideas."

The real problem today is that most CIOs don't have the option. "They haven't done a lot of staff development," says Forrester's Bright. "So they're at the mercy of the market." That costs IT more than just dollars and cents. Consider a company that has five enterprise architects but needs five more and has no one ready to move into the role. "They may not have any trouble finding someone outside and paying a 20 percent premium for them. But that means the people you have inside, who may be more talented, are now being paid less," says Foote. "You end up with all kinds of internal issues. It kills CIOs."

It's a tough balancing act. "Even if there is no 'obvious candidate' inside the company, I try and see if we can shape someone," says Behenna. "If I have nobody, then I put the requirements out. There are times when a fresh injection of talent can make a huge leap in productivity or direction."

When a position is awarded, be transparent about how the decision was made (without violating any privacy concerns). That's because a big concern for today's IT professional is his career path. As IT staffing needs have shifted, career paths have become fuzzier. Smart CIOs will attempt to make career progression less of a mystery and work with employees on individual career development plans. IT workers are more likely to walk out because they see no opportunities for advancement than for any other reason, according to Hudson Highland Group's "2005 Retention Initiatives Report".