Recruitment is a challenge faced by all businesses, and it’s not one that every company handles well. From finding the right talent to hiring them into the role, the process requires care, attention, investment, and skill. in this story
If managed well, recruitment serves as a key tool in shaping the workplace and ensuring that the business is moving toward its goals efficiently. And by striking a balance between internal recruitment and external recruitment, a company can evolve quickly in a changing business landscape, all while sustaining its culture, retaining valuable experienced staff, and attracting new talent.
The so-called “great resignation” means that it’s important now more than ever to understand how to recruit employees intelligently and in a way that suits the needs of your company. Turnover is skyrocketing, fueled by any number of factors, including employee burnout, as well as workers choosing early retirement in search of a better work-life balance following the global pandemic.
Couple these circumstances with a new generation entering the workforce, armed with a set of expectations and demands about how and where work gets done, and it’s clear that there’s a need for companies to take a closer look at how they hire new staff.
In this article, we focus on the differences between hiring internally versus hiring externally, the pros and cons of both options, and the methods and channels used to recruit talent from inside and outside your existing workforce. Notice: JavaScript is required for this content.
Hiring new employees is one of the most important responsibilities for any organization. Bringing in the right talent can take your company to new heights, while a bad hire can set you back. When a position opens up, you have two options – hire from within your existing team or recruit externally. Both internal and external hiring come with unique advantages and disadvantages. In this article, we’ll dive into the key pros and cons of each approach to help you determine the best hiring strategy for your specific needs.
An Overview of Internal and External Hiring
Let’s start with a quick refresher on what internal and external hiring mean:
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Internal hiring refers to filling open positions by promoting or transferring current employees rather than recruiting externally.
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External hiring means recruiting and selecting candidates from outside your organization to fill open positions.
Many companies use a mix of both approaches, depending on the situation However, it’s helpful to understand the distinct benefits and downsides of each hiring method.
The Potential Advantages of Internal Hiring
Hiring from within your existing team can offer several benefits:
1. It’s faster and cheaper
You can avoid many expenses associated with external hiring, such as job board fees, headhunters, recruiting events, advertising costs, and compensation for recruiters. Interviews, reference checks, and onboarding also take less time with internal candidates. According to one estimate, it costs on average 50-60% less to fill a position internally versus externally.
2. Internal hires require less training
Promoting from within means you’re selecting people who already understand your company’s culture and how things operate. They can hit the ground running with less ramp-up time compared to external hires who need to learn your systems, processes, and norms from scratch.
3. It boosts engagement and retention
Promoting from within shows employees there are career growth opportunities at your organization. This enhances engagement and incentivizes top performers to stay long term instead of looking elsewhere to advance their career.
4. It leverages familiarity
Since you already work with internal candidates, you have more insight into their competencies, work ethic, strengths, weaknesses, and fit. The interview process is focused more on their readiness for the new role than evaluating culture fit.
5. Internal hires mesh better culturally
In addition to saving time getting acquainted, internal hires integrate faster into the social fabric of your company. They likely have built rapport and trust with coworkers during their tenure.
6. There’s less risk
According to one study, external hires are 61% more likely to be terminated than internal workers in the same role. This suggests internal candidates tend to be more successful hires since you have more data points to assess their competency and potential.
The Potential Disadvantages of Internal Recruiting
However, there are also some potential downsides to filling open roles predominantly through internal mobility:
1. You miss out on fresh ideas and new skills
Hiring from within limits the diversity of perspectives and backgrounds on your team. External recruits bring knowledge your current staff lacks – whether it’s emerging industry practices, new technology expertise, or innovations from other companies.
2. Internal hires may lack ambition
While familiarity breeds comfort, it can also lead to complacency. Long-tenured employees who switch roles may struggle to learn new skills or approach problems differently. Externally recruited managers often bring more radical thinking.
3. It can stifle change and growth
If you promote primarily from within, your company’s culture may become insular and resistant to change. Injecting external hires at key levels shakes things up in a constructive way.
4. Too few opportunities for advancement causes frustration
When employees see outsiders brought in for management roles they wanted, it kills morale. But with limited positions, you can’t promote everyone.
5. It encourages “groupthink”
If everyone in leadership progressed their career internally, they are likely to share the same perspectives and blind spots. This creates an echo chamber versus diverse views that spark innovation.
6. Nepotism concerns arise
Repeatedly filling openings internally may be perceived as preferential treatment, especially if the selection process lacks transparency. Even if favoritism isn’t at play, it can damage team cohesion and performance.
In a nutshell, skills stagnation, limited diversity, and resistance to change are potential risks if your workforce lacks enough external infusion.
Key Pros of External Recruiting
Now let’s examine some of the biggest advantages of recruiting externally:
1. You access a larger talent pool
Looking outside significantly expands your options. Instead of being limited to current employees, you can select the very best candidates on the broader market.
2. It enables you to acquire specialized skills
Need to rapidly develop expertise in a new technology? Externally recruiting is the fastest way to gain those specialized skills that don’t exist internally.
3. External hires inject new ideas and challenge assumptions
Outsiders ask “why do you do it that way?” bringing a beginner’s mind that can spur innovation and improvements. They also import best practices from other companies.
4. Diversity gets a boost
Hiring externally creates more age, gender, ethnic, ability, and cultural diversity within your organization – leading to better decision making.
5. You can scale faster during growth periods
When your company enters a period of rapid expansion, external hiring gives you the bandwidth to staff up quickly versus trying to “stretch” current employees.
6. It doesn’t sideline ambitious employees
Adding external hires at senior levels still provides advancement opportunities through the increased number of mid-level positions that open up as a result.
In short, external recruiting gives you flexibility, injection of new ideas and skills, and diversity.
Potential Cons of External Hiring
However, recruiting externally also comes with some tradeoffs to consider:
1. It costs more
From job boards to agency fees, background checks, and compensation premiums, external hiring has more hard costs. Onboarding and training time also reduce productivity initially.
2. Cultural assimilation takes longer
Externals don’t inherently grasp your company’s unwritten rules of behavior and norms. More investment is required to integrate outsiders fully.
3. Lack of context can cause missteps
Without understanding the “why” behind processes and policies, external hires may make changes that seem logical but conflict with the culture or needs.
4. Higher risk of turnover
Research shows external hires have nearly double the turnover rate during their first two years compared to internal workers in the same role. The learning curve and weaker cultural bonds increase quit risk.
5. Internal team resistance
Long-tenured staff may resent externals brought in as their new boss. Preexisting relationships enable faster trust building with internal selections.
6. Less performance predictability
Despite the interview process, you have little evidence of how well externals will truly perform in your unique environment. Internals have a track record.
Tips for Striking the Right Internal vs External Hiring Balance
As we’ve explored, both internal mobility and external recruitment have pros and cons. In most cases, a blended approach works best. Here are some suggestions for achieving the ideal balance:
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Don’t default to external – Many employers undervalue the benefits of internal hiring, but don’t overlook your team’s untapped potential.
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Design transparent internal application processes – Create visibility and fairness in internal mobility to reduce perceptions of favoritism.
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Define strategic external hiring needs – Target specialized skills gaps unable to be filled internally. Have a rationale for external recruiting.
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Set diversity goals – Seek external hires who increase diversity and bridge intersectionality gaps in your workforce.
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Factor in team morale – Be selective with external recruiting at senior levels to avoid sinking engagement and retention.
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Onboard thoughtfully – Invest up front in assimilating external hires through structured onboarding, training, and mentor pairings.
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Collect feedback – Survey teams on the effectiveness of current internal vs external hiring practices and balance. Iterate based on findings.
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Re-evaluate regularly – As your company’s needs change, so should your recruiting strategy. Take a fresh look at least annually.
The ideal internal vs external split depends on your company’s skills gaps, growth rate, culture, and more. Continually assessing your balance and being intentional will help maximize hiring success.
Key Takeaways on Internal vs External Hiring
To recap, here are some of the most important takeaways on navigating recruitment channels:
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Internal hiring offers advantages like lower costs, better cultural integration, and reduced risk. But you may miss out on new ideas and specialized skills.
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External recruiting provides fresh perspectives, expansive talent access, and diversity. But it costs more and poses higher turnover risk.
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There’s no universal right ratio. As
Pros and cons of recruiting internally
Hiring from within the company allows you to avoid many of the most common costs involved in recruitment, such as job board fees, marketing the role at events, processing applications, paying agencies, interviewing candidates, and running background checks. External recruits typically need some training to come up to speed too, and also come with other potential pitfalls. Their current employer has the power to entice them to stay with a counteroffer, or they can demand higher salaries or even turn the role down at the last hurdle, which results in sending an employer back to square one.
Internal recruitment lets you speed past all of the most time-consuming stages of the recruiting process. Your new hire is potentially somebody you already know and have worked with before, so you’re aware of their experience and ability to take on the role—and you know that they’re a good fit for your company’s culture. This means you can spend less time marketing the vacancy on job boards, trawling through countless résumés, and interviewing any more candidates than you need to.
- The employee already knows the ropes
Hiring from within your own ranks means your new recruit should already be familiar with your company’s workflow, tools, teams, and processes. This is especially true if they’re being promoted into the new role, and even more so if they’ve worked directly under the person they’re replacing. With this hands-on experience and familiarity comes less training, a drastically shorter onboarding time, and virtually no dip in overall productivity, as the hire would likely hit the ground running on day one.
The chance to rise through the ranks of a company is one of the most important factors when it comes to employee satisfaction and retention. When a worker sees external recruits repeatedly hired into roles above theirs, they’ll begin to feel they don’t have a future within the organization and look elsewhere for opportunities to further their career. However, internal recruitment is a kind of progression that not only helps to boost morale but also serves as an attractive feature for external hires too.
- You limit your talent pool
There’s an entire world of potential candidates out there, and by choosing to focus on hiring internally you might be overlooking applicants who are better suited to the role. External recruits can have skills and talents your existing teams are lacking or knowledge and experience that would benefit the company as a whole. When you restrict your job recruitment process to your own backyard, you might be missing out on an opportunity to add valuable new assets to your organization.
- You instantly create another vacancy
Hire an employee from within your own company and—just like magic—you’ve created a brand-new vacancy to worry about. This is less of a problem if your employee is moving through the ranks of the organization. The training cost and time expense of recruiting an external hire into a newly vacated lower- or entry-level position are more than made up for by the experience the internal recruit can bring to their more senior role.
- You risk stagnating your company culture
Over a longer period, a policy of hiring primarily from within can leave a company feeling stuck in a time warp. Bringing in fresh talent from time to time can shake up a stagnating corporate culture, introduce original ideas, and challenge old ways of thinking. External recruits bring with them all of the insight, knowledge, and perspective of previous roles, which they can then use to motivate and inspire their new colleagues.
The basics of recruitment
Every company has to recruit. No matter how large or small the team, and no matter whether the business is growing or shrinking, it’s inevitable that staff will leave, departments will expand, and employees will be promoted, all causing new vacancies to appear.
How a company approaches employee recruitment depends on the specifics of the company in question, as well as external factors such as the business climate, the state of the industry, local competition, the economy, and physical proximity to talent hot spots such as universities and technology hubs.
Recruitment is one of the best opportunities a company has to fill any skill gaps by hiring new workers with knowledge of the latest tools, software, and techniques available in their industry. It’s also an opportunity for existing employees to be promoted within the company, thereby allowing them to build on their experience and succeed in reaching their own career goals.
The business of sourcing job candidates has exploded in recent years too, with hiring managers able to cast the net wide or refine their search to hyper-targeted areas of the labor market to find candidates with the exact skills they want and need. Tools such as application tracking systems enable large companies to automate and streamline the job recruitment process, freeing up HR teams and hiring managers to engage with promising candidates in a more meaningful way.
No matter how a company approaches recruitment, the fundamental ideas remain the same. The role needs to be thoroughly analyzed and understood by the employer; the job description needs to be well composed and should reach as many qualified potential candidates as possible; and the process should always align with a company’s values of fairness and equity.
Internal vs External Recruitment: Some Advantages and Disadvantages – Dr. Jim Collins
What are the pros and cons of external hiring?
As with hiring internally, there are cons to external hiring. Let’s go through a few of the downsides. External candidates will need a longer training period than an internal candidate who is coming from within your workforce. Take into consideration the increased level of risk when bringing on external candidates.
Should you hire internal or external employees?
Internal hires retain organizational knowledge and get up to speed in their new roles more quickly than external hires. “Hiring internally also increases engagement. And folks tend to refer others more frequently when their own career has grown within the organization,” Sonsino says. “We’ve seen that pretty consistently.”
Is internal recruitment better than external recruitment?
In this article, we’ll help you understand the benefits, costs, and challenges of both internal and external recruitment and provide some best practices. Internal recruitment is an often overlooked but highly beneficial recruitment practice. Getting down to the euros and cents, an internal recruitment process has its advantages.
What are the pros and cons of hiring internally?
Here are some pros of hiring internally: Because hiring internally doesn’t require the company to advertise the open position or spend an extensive amount of time interviewing candidates, this practice can reduce hiring costs.
