As recruiters we spend a lot of time on talent attraction, looking at ways we can encourage the best and the brightest to come and work for us. Each new role has a hiring manager brief and we usually have a plan to advertise, share or post details to encourage applications, not to mention sourcers and no doubt some well- briefed third party suppliers to also help cast the net wide. The search often starts with the belief that we must bring someone in from outside, acquire someone else's talent who can be operational immediately.
Changes are happening though. In my recent blog on the future of recruitment, I referenced a 'talent tipping point' where we are already connected to nearly everyone we could need, and part of that wider pool will include people who are already working for us. I've also written about internal mobility, and the fact that whilst many companies see it as important, many still hire externally.
In the latter post, I mentioned research showing that only 7% of businesses hire senior managers internally, although in the UK over half of our companies recruit at least 30% of roles through internal mobility. Similary in the US, the 2014 CareerXRoads report on Sources of Hire showed 41% of roles being filled from within the business. Clearly hiring internally is an important, though sometimes overlooked, recruitment route.
A 2012 study in the US looked at 6 years of employee data from financial services and publishing and found the following trends about external hires compared to internal transfers
- External hires get paid more than internal transfers
- External hires receive lower performance reviews in their first 2 years
- External hires are 61% more likely to be fired and 21% more likely to resign
- External hires are likely to have a better education and more experience
- Employers underestimate the time it takes for an external to get up to speed
There are clearly advantages and disadvantages for both promoting from within and for hiring externally and we mustn't forget that either route can send out an important signal about our brand and culture - no external candidate wants to go through the process and then find that they have lost out to someone internal, whilst the people you already have in the company can get frustrated if they feel overlooked.
Operationally we deal with many recruiting issues and pain points, and it could be that a decision to hire either internally or externally will be based on whether it can ease some of them. Let's look at a few...
Advantages of Internal Recruiting
A regular recruiter complaint is the high volume of applications - with each one needing to be assessed, screened and acknowledged. Clearly an internally advertised role will attract a much smaller number, with less information to search as more will be known about each potential candidate.
Time and Cost-per-hire
Internal candidates have no obvious attraction costs attached and the process of hiring should be faster, however company protocol may dictate that they can't move until a replacement is in place, although this should still be quicker than waiting for someone external to resign and work a notice period.
An internal hire is already familiar with company processes and structures and will probably also already know some of their team, whilst the research referenced earlier found that we usually underestimate how long it will take externals to get up to speed. They could also find some unexpected surprises once they start the onboarding process, after all if something is going to go wrong with a new hire it's likely to be within the first 3 months.
If something is going to go wrong with a new hire, it's likely to be within the first 3 months.
Culture and Loyalty
An incumbent already understands and embodies the culture (and probably wouldn't be considered if they didn't) whilst an internal promotion also lifts morale as other employees see career opportunities within the organisation. It can give them a reason to stay, believing that they too will get a chance.
Advantages of External Recruiting
Maybe we need some fresh thinking in our team? An external hire can bring new insights from a different industry or size of company. They may have a perspective that our internals won't have, as they are too close to our core processes and structure.
Wider Talent Pool
Our available talent pool is wider than we may think so maybe we should reach out to the networks of other employees, alumni, customers and partners to make sure the we are hiring the best fit. This also helps increase the number on the shortlist in case the hiring manager wants a 'comparison'.
Adaptable and agile workplaces usually require a diverse range of employees. In addition to age, gender, ethnicity and disability we need diverse personality types, thinking styles and education backgrounds too. External hiring may be the only way to reap the benefits of a truly diverse team.
External hiring may be the only way to reap the benefits of a truly diverse team.
Only one internal employee can get the role that you are filling but several may have relevant experience, resulting in feelings of discontent and disengagement amongst those who are unsuccessful. An external hire can negate this, provided it's the right person… you don't want to unite the dissatisfaction of the employees who think they should have had a shot at the role.
It's a delicate balance. For all the anecdotal and statistical evidence supporting either internal promotion or external recruiting there will always be CEOs who started on the shop floor and others who had a series of company changes and career moves on their way up.
Whatever the source of our new hire the keys to getting it right will be ensuring visibility of all the talent available for consideration, having a robust recruitment and assessment process, and acknowledging that it takes time for anyone to settle into a new role.
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