With the war for talent raging on, an increasing number of companies are turning to internal recruitment to identify talent sources. When used effectively, internal recruiting can provide many benefits to an organization including reducing costs and training requirements. Plus your "new hire" will already be familiar with your company and culture. Seems like an easy choice, right? But there is a downside to going internal. When you stop hiring externally you reduce the diversity and innovation being brought into the organization. New people see things with fresh eyes that those already in the role or team might be overlooking. With pros and cons to both ways of hiring, what's a hiring manager to do when a new role becomes available? And how do you tell which type of recruitment will better suit your needs?
The cost of recruitment
From online job posting and social networking to career fairs, companies use a wide range of options to attract candidates. Sourcing for talent is one of the more time consuming and costly aspects of recruitment. Glassdoor estimates that it costs US employers around $4,000 on average per hire, and takes up to 24 days to place a worker. Whether a candidate is sourced internally or externally, there are certain costs that come with each choice.
For example, internal candidates are already working for the company (or may be a contractor for the company) so they have proven their value and loyalty. Any costs associated with their original hire have been earned back through their work. The internal candidate is also familiar with the culture and fits in well with other employees. Management can vouch for internal candidates based on their performance. However, there can be costs like referral bonuses, promotions, shifting of resources, and paying internal recruiters to manage this process.
External candidates come from outside the organization and they can come with more risk and higher costs, depending on how the company manages things. Advertising and running career fairs can be costly, as are the administrative costs associated with external sourcing. Time to find, interview, screen, and conduct background checks on candidates can stack up, as can offering generous starting salaries and benefits.
Neither option is going to be a magic bullet 100% of the time. Successful recruitment, however, depends on a hiring manager or recruiting being able to identify what skills or traits would be better for a particular role and knowing the best place to find that candidate.
Why would a company choose internal or external recruitment?
There are some situations where an internal hire makes more sense than seeking an outside candidate, including:
- The need for an immediate candidate to replace someone leaving (no time for recruitment campaign)
- A proven employee who is ready for promotion, but may need additional training
- Lack of availability of a candidate with highly specialized skills and background
- A department or division being split up or dissolved with re-assignment of talent
- Readily available contractor who is accepted into the culture and needs a permanent job
Very often, time is the factor that dictates if someone is recruited from inside the organization versus without. If there is very little time to replace someone or to create a position that is vital to the organization, internal recruitment pulls from the available talent that the company already has.
External recruitment is used in the following cases:
- If there is time to properly source, screen, and interview external candidates
- During peak hiring seasons or hiring large numbers of employees in groups
- When a new department is being formed or expanded and new talent is needed
- As part of an employee referral program to bring in colleagues to boost skills
- When there are no available required skill sets existing with current employees
What are the pros and cons of using internal or external recruitment?
Just as there are with any hiring strategy, there can be pros and cons of using either method.
Pros and Cons of External Recruitment
External recruitment has many positives, including bringing fresh perspectives and new skills into the workplace. It also increases diversity and injects teams with new energy. However, according to David Johnson, who contributes to Recruiter.com, a potential downfall of only hiring external candidates to fill roles is that it, “fosters ill feelings among internal candidates who might have done better in the role.” Existing employees may feel passed over for promotions or that they are not getting the support to advance in their careers.
Pros and Cons of Internal Recruitment
Internal recruitment can be positive as it rewards employees for their loyalty and dedication to honing new skills at work. It can also get someone out of a slump and grow their career in a new direction. But, internal recruitment has some problems when it eliminates hiring external candidates, which reduces diversity and innovation. Just because someone is successful in one role doesn’t mean they will be successful in the new role. Lastly, one department may feel like its best employee is being poached by another, which can set up tensions in the organization.
Consider all these factors before hiring internally or externally. Each role has specific requirements and choosing the best candidate to fill it is important to the success of your business. Taking the time to step back and understand the role and the requirements can help you decide if it's a better idea to look within your organization or without. Great candidates can be found both ways when you know what you're looking for.