In this blog post, we will look at the difference between internal and external recruitment, and help you decide which option is best to source the talent for your vacancy.
The success and failure of a business come down to the knowledge, abilities, and experience of those dedicated to the company- our employees.
Arguably, your employees are the most valuable asset to your organisation. A recruiter has enormous pressure on them to make the right hire.
Where to source the right employees?
When it’s time to recruit new talent, recruiters can either internally or externally source candidates.
Is it worth looking outside of your company for this new, fresh talent? Or is it better to fill the position from within with people already accustomed to your company culture and who have loyalty to the company?
What is internal recruitment?
Internal recruitment is where hiring managers look within their workforce for the most suitable talent to fill a new role.
Companies who typically do this either have a culture of internal promotion in place, a unique culture which takes some getting used to, or they may have the ideal candidate that the role would suit perfectly already in the company.
How to hire internally?
Hiring internally is much easier than external hiring.
There are no laws that oblige recruiters to advertise a job. But hiring internally is a much more informal process which can be advertised via company-wide email or a posting in the staff room.
The internal hiring is done simply by transferring the employee from one role to another, either horizontally across the organisation to another department, or promoting up into a more senior role.
Internal hiring can be processed via a transfer, promotion and even reemployment of former employees.
What is external recruitment?
External recruitment is when a hiring manager looks outside of their workforce to fill a vacancy.
Recruiters will do this when a new set of skills, knowledge, experience or traits are needed to succeed in the role.
The process of hiring externally is much more formal, there are many more steps to include and also higher risks of hiring unsuitable candidates. However, while the decision making for external candidates is tougher, the need for fresh talent and new innovation often far exceeds these risks.
Reasons for hiring internally
The effort and costs of training and introducing a new person to an organisation is lengthy and costly. Some organisations may decide to only hire internally based on the ease and familiarity of sliding existing employees into a new role. This is especially true if the employee has particular organisational knowledge that is difficult to obtain in a short time with an external hire.
2. Already have a candidate in mind
Some roles seem ready made for some people. Many organisations who need to create a new position may make it with already having a candidate in mind. There is no need for a large candidate pool if there is no intention to hire someone else.
However, some industries require a position to be inclusive in opportunity so by internally hiring only, organisations can meet this requirement while keeping the time and costs low.
3. Fast hiring
Some new vacancies need to be filled fast! Hiring internally allows a new position to be filled quickly without going through the long and drawn out process of hiring externally.
.4. Promotion Culture
It’s important to many companies that loyalty and a career building opportunity is vital in their company culture.
Difference between internal and external recruitment
The major difference between internal and external recruitment is deciding whether you already have the necessary talent for your new vacancy already employed within your organisation, or if you need to look outside the organisation for the skills, qualifications, abilities and experience necessary.
To help you decide whether your recruitment strategy for your new vacancy should be to hire internally or externally we’ve made a list of the advantages and disadvantages of both.
Internal recruitment advantages
Internal hiring is extremely cost-effective, especially compared to all the different costs associated with external hiring such as training, orientation and job advertising costs.
Quick hiring process
Internal hiring has an extremely quick hiring process, with little time spent filling the new role. A stark contrast with external recruitment which can take multiple weeks!
As your employees are already familiar with company processes and procedures there will be less time spent on getting them up to speed, even if from another department.
Known skills and strengths
The skills, strengths, personality and traits are already known to recruiters with internal hires. There is very little risk of an internal candidate being unfit for the new role as they are well known and their performance in their new role can be predicted with accuracy. A recruiter can rely on existing talent to perform their new role well.
Fosters motivation, trust and loyalty
Internal hiring is great for nourishing and fostering trust and loyalty with employees. It’s also a great motivation for employees to work harder. The morale of the hired employee is boosted and they get confirmation from their employer that their performance is appreciated, respected and needed.
Familiarity with culture
Assimilating to a company culture is one of the most difficult aspects of hiring for a company and candidates to get right. Some candidates don’t know what they're getting into, and it is difficult for a company to advertise their culture to people outside of it.
It’s no wonder that one of the biggest reasons that employees leave a company within their first 6 months is difficulty with fitting into the company culture.
When hiring from within, there’s no risk of hiring someone who is not a good culture fit to the company. Which is often very hard to predict.
Internal recruitment disadvantages
There are many disadvantages to internal recruiting too, these are:
Limited candidate pool
While there are many advantages to hiring internally, it doesn’t come without its drawbacks. One of these being the candidate pool for a new role is extremely limited. Companies may find better and more suitable talent outside of the organisation who can bring new ideas, skills and talent to the role.
Creates another vacancy
Possibly the biggest headache when internally recruiting is the need to fill the previous vacancy from the successful employee. This adds time and money if hiring externally to fill this role. Or if this role is filled by another internal employee, it creates a chain of vacancies needing to be filled.
Demotivate unsuccessful employees
Unsuccessful internal candidates may feel extremely unmotivated and lethargic when they go for an internal job posting and they don’t get it. It can lead to them feeling extremely unsatisfied and even hold feelings of resentment to the organisation.
How to successfully handle animosity or resentment that can arise with internal hiring?
When companies do choose to hire internally, there are ways to mitigate any problems caused with unsuccessful employees.
Be direct and nurture
It’s extremely important that HR staff are absolutely honest with unsuccessful internal employees as to why they didn’t get the role. This is to minimise the odds of losing a good employee.
HR teams should take the time to sit with unsuccessful candidates, thank them for applying for the role, discuss the reasons why they didn’t get the role this time, and review what they can do to be successful next time.
As an organisation who values their employees, you should do your best to inform unsuccessful candidates of new roles and promotions you think they’ll be successful in. You can even enroll them into training and development courses that can develop their skills to be more suitable for similar future roles.
This can turn disappointment into enthusiasm.
External recruitment advantages
Here’s the reasons why you should advertise your new position externally.
Fresh new ideas
Hiring externally comes with many advantages, one of these being the new ideas and innovation, a fresh perspective and bags of enthusiasm.
They may have skills, behaviours and experiences under their belt that your organisation will benefit greatly from.
New employees are not as affected by company culture, which can have a ‘drag down’ effect on long-term employees.
Fresh talents are often more proactive, positive and satisfied in their new roles.
Many companies who suffer with a poor company culture find that their employees develop a culture of ‘hating the organisation’. People become complacent and unmotivated over time. When employees have this attitude, they often become unmotivated to try new ideas, and have enthusiasm because they feel working towards their full potential is pointless.
When a company culture hits this stage it needs to be seen as a huge wake up call to the HR department!
Opens up future CV lists
When you open up and advertise similar roles again in the future, you have a list of CV’s who may be suitable for the role and open to future positions. To avoid any GDPR legislation around contacting people, you should receive authorisation from candidates that they would like to be contacted for future job opportunities.
Larger candidate pool
With external hires there is a much larger candidate pool to choose from.
This makes it easier to find a better candidate with wider experiences, qualifications and skills.
External recruitment disadvantages
High recruitment costs
We’ve touched upon some disadvantages of external hiring already, but one of the biggest drawbacks of hiring externally is all the associated costs.
It can cost up to 30% of your new employees salary when adding up all the direct and indirect costs of their hire.
Not only is there the advertising costs, but the training and orientation. Plus the indirect costs of running the business while this position is vacant. Plus the indirect costs of hiring managers leaving their daily roles for interviews, reviewing candidates and more. Then there is the time of training and costs associated to get the new hire up to speed in their new role. This process can last for weeks! Incrementing many costs to the business just for one vacant role.
Bad culture fit
A risk that can be hard to avoid in advance is selecting candidates who are a bad culture fit.
With some candidates it's easy to see who will be a great fit and who would be a total mismatch. But for most candidates, it can be hard to gauge their personality type in the short space of the recruitment process. This may result in the candidate being unsuitable to the company culture and leaving the room very early on.
Resulting in more incurred hurung costs for a new hire and all the sunk costs associated with the failed hire.
Whether you choose to hire internally or externally, the most important factor is deciding on the right person for the job.
With the many differences between internal and external recruitment, you should be able to effectively decide which path is right for your new position to fill.
If you can’t decide on which hiring strategy to choose, why not do both?
It is very common practice for organisations to hire internally and externally for a new position.
Is the privacy and secrecy of your organisation an important factor to your hiring decisions?
Do you want to support a culture of promotion and long-term career opportunities?
Is your current workforce sluggish and in need of a fresh set of skills and enthusiasm to drive motivation?
Or is workplace diversity and opportunity part of your company culture?
There are many reasons to choose whether you should hire internally or look externally. But one question should remain consistent. Is your hire the best talent for your vacancy? As we stated in our introduction, our employees are our most valuable asset, it is through the determinations, skills and traits of our employees that enables our companies success.
Whether internally or externally, each hire strategy should be reviewed and decided upon based on the type of vacancy and the situation.