By Ryan Ayers

As a small business owner, you know that every hire is crucial to your success. Your employees work hard while often wearing many hats, and you need to be able to trust them completely. While a bad hire might not make or break your business, it could have a profound impact on your company’s success. As you grow, you’ll need to start delegating more tasks—and potentially create new management levels within your organization. Even if your new leadership role will only involve overseeing a few people, the quality of that management will make a big difference in your team’s morale and productivity. Choosing from among your existing employees makes the most sense in many cases: they’ve paid their dues and you already trust them. But are your employees management material? Are they ready to step into this new role? Here are some things to look for.

Watch Engagement Levels

Employee engagement is a hot topic in the business world these days, and for good reason. Engagement levels overall are fairly low—only about 33% of Americans feel engaged at work, costing businesses hundreds of billions of dollars per year. Your most engaged employees might ask the most questions, submit the most ideas, and actually seem committed to the success of the business, rather than just collecting a paycheck. You want someone with this curiosity and drive to improve, as management will shape your team over time. A disengaged leader will shape disengaged employees.

Emphasize Emotional Intelligence

Emotional intelligence has emerged as one of the most important traits of successful leaders, and it’s something you should look for when evaluating leadership potential. Though it can be difficult to articulate and quantify, emotional intelligence refers to the ability of people to detect the emotions of others and self-regulate their own emotions. People with high emotional intelligence levels are generally excellent communicators, able to work well in a team environment, and empathetic. Emotionally intelligent people make great leaders because they are willing to help others, make real connections and relationships, and handle stressful situations without letting emotion take over.

Personal Responsibility

Managers need to have a higher level of personal responsibility than your average employee. They need to be trustworthy and willing to own up to their own mistakes when they make them. They also need to take responsibility for their team and ensure that they are maintaining a safe workplace, free from physical danger and toxic behavior. They need to have the courage and personal responsibility to address issues like employees who abuse alcohol and drugs. These problems are both a productivity issue and a safety issue—alcohol abuse resulted in a 2.7x increase in injury-related absences. Managers need to have the courage and responsibility to discuss problems with employees before they become a threat to the team and the company.

Sincere Passion

Not every job requires passion. If you’re just mopping floors and collecting a paycheck, it’s difficult to feel passionate, and it’s unfair for employers to expect passion. However, a potential leader in your organization should be passionate about making your business a success, and about providing the best service possible. Leaders don’t inspire others when they’re not feeling inspired themselves, so it’s important to choose someone with passion and drive to fill your management roles.

The Role of Experience

In the past, the person with the most seniority was often the obvious choice for promotion to management. As we move into a new world of leadership, however, choosing the right candidate is more complex. Experience is helpful, but only if the employee also displays other qualities that make for a good leader. Additionally, generational differences can play a role—in one survey, those polled believed that different generations had different strengths. Seventy-three percent believed that Baby Boomers were the hardest workers, 53% believed that Gen Xers were the best at building relationships, and 78% thought Millennials were the best with technology. Depending on the role, these generational strengths might end up informing some of your hiring decisions. It’s better to choose someone based on their individual strengths, rather than simple seniority or experience.

Hiring From Within

If you are fortunate enough to have employees with leadership potential, you now have to approach them to see if they are interested in the position. Should they accept, you now need to tactfully break the news to the rest of the team. We’re all human, and it’s a little disappointing to be passed over for a promotion, no matter who you are. Being honest and transparent, while outlining paths for others to grow within the company will help inspire trust and promote good morale during this transition. While it is generally easier to hire your management team internally, you may have to look outside your company if none of your employees are a good fit or simply don’t want to take on a leadership role. Just remember—not everyone wants to be a leader, and not everyone should.

Ryan Ayers has consulted a number of Fortune 500 companies within multiple industries including information technology and big data. After earning his MBA in 2010, Ayers also began working with start-up companies and aspiring entrepreneurs, with a keen focus on data collection and analysis. You can find more from Ryan on Twitter at @TheBizTechGuru.