What are the advantages and disadvantages of external recruiting of internal recruiting?

Successfully filling the gaps within an organisation is one of the biggest challenges facing HR professionals. With such a diverse range of candidates applying for every role – each bringing their own unique skills and experience – it can be difficult to decide who will be the right fit.

Internal recruitment can be a way of easing this hiring process, ensuring the chosen candidate is suitable for the role and enabling talent progression within an organisation. But what is internal recruitment? What are the advantages and disadvantages? And what steps should you follow when recruiting internally? Read on to find out more.

What is internal recruitment?

When hiring for a role, an organisation can choose to look externally or internally. External recruitment invites applications from those outside of the company, resulting in a more diverse range of candidates. Internal recruitment, on the other hand, is choosing an existing employee to promote or hire into a new role. Rather than using traditional recruitment methods such as advertising on job boards or using agencies to source candidates, internal recruitment looks inwards to fill a gap using the company’s current talent.

Internal recruitment isn’t right for every company or position, but it can ease the hiring process for a number of reasons. One study found that external hires are paid 18 per cent more than internal promotes and are 61 per cent more likely to be fired.  However, internal recruitment can also bring some downsides, so it’s important to weigh up the pros and cons when choosing which path to take. This article will explore the main advantages and disadvantages of internal recruitment, as well as the steps to follow to ensure the process is effective and successful.

There are a range of advantages to recruiting internally that can be beneficial for both an organisation and its employees. Here are some of the key benefits:

1. Familiarity with the candidate

One of the main advantages of internal recruitment is that the candidates are already known to hiring managers and should be the right cultural fit for the company, no matter what role they move into. This also means that their strengths and weaknesses have already been assessed, and there is a familiarity with how they carry out their work. Managers can quickly and easily access an employee’s track record and other relevant information by using an HRIS. For example, the Humaans employee database holds a wealth of important people data.

2. Improved employee learning curve

An existing employee should be familiar with the inner workings of the company – the operations, processes and procedures that are unique to the business. They can bring this experience to a new role, even if it’s in a different team or department. As such, their learning curve will be shorter than that of a newly hired employee, who will need to be taught about the company from the ground up.

3. More time effective

Internal recruitment can result in a more streamlined onboarding process, saving time for both the employee and the company. An existing staff member may be able to start a new role quickly, without having to give a long notice period. They may also undergo a shorter interview process than an external candidate, particularly if they are known to the hiring manager. Recruiters can save time that would be spent posting the job advertisement and promoting it externally, easing administrative burden and improving efficiency.

4. More cost effective

According to one study, it costs a company an average of 1.7 times more to hire externally than internally. This is because money is spent advertising on job boards and via other recruitment channels, as well as on necessary hiring procedures such as background checks. What’s more, when hiring an external candidate, an organisation may have to budget for purchasing new software, providing training and allocating desk space.

5. Emphasises opportunities for growth

By choosing internal recruitment, a company highlights its commitment and investment in their existing employees. It enables them to retain top talent within the organisation, while also showing a clear path of progression to staff members. This investment in the workforce can improve morale, engagement and performance, therefore providing positive benefits for the business.

Disadvantages of internal recruitment process

While choosing to recruit internally can be advantageous for a company and its workforce, there are also some potential downsides. Here are some common disadvantages of internal recruitment and the ways in which these can be mitigated:

1. Negative impact on other employees

Internal recruitment may have a negative effect on other employees, particularly those who applied for the role and weren’t successful. This could result in them becoming less engaged in their work and decreasing job satisfaction, with one study finding that 24 per cent of people were open to a job elsewhere because they had been overlooked for a promotion. What’s more, if an employee is promoted above their peers, this could cause resentment or a lack of respect towards them. A manager who is losing a valued team member may also be resentful of this.

In order to avoid these issues, hiring managers should ensure that the other internal candidates understand why they weren’t selected. Giving personal interview feedback in a one-on-one meeting can indicate that the employees are valued and their efforts are recognised. This will also help them when applying for future positions. An effective rewards and recognition programme is also important to ensure that employees are regularly praised and compensated for their hard work.

2. Reduced talent pool

If a company chooses internal recruitment, the pool of possible candidates is greatly reduced. In some cases, an existing employee may be the best fit, but in others an external perspective might be preferable. A new employee may bring with them innovative skills and refreshing ideas that could benefit the role and team. An overreliance on internal hiring could also lead to stagnant company culture and employee complacency.

Moreover, a talented internal candidate will not necessarily thrive in a new role. Their skills and experience may not successfully translate, and a change of position could impact their attitude or workplace behaviour. Additional training may also be required of them, compared to an external candidate with knowledge of the role in question.

Organisations should therefore try to strike a balance between hiring internally and externally, and not limit their options for the sake of internal employee progression. Managers can also improve the internal talent on offer by budgeting for team training and encouraging employees to identify the skills they’d like to advance and goals they’d like to work towards.

3. Another gap to fill

While it’s great to fill a role within an organisation, internal recruitment may result in another gap elsewhere. This could mean turning to external hiring to take on the role of previous employee, incurring the cost and time issues previously discussed. Small and fast-growing companies may not have the option to hire internally at all if their pool of talent isn’t large enough.

HR managers can ensure there are no unforeseen gaps within an organisation by implementing workforce planning processes. By analysing business goals and workforce capabilities, HR can determine that the right people are working in the right roles, supporting current and future business goals.

4. Bias concerns

Internal recruitment can cause bias concerns within an organisation. This is because it’s harder for hiring managers to be fair and objective when choosing candidates that are already known to them. These biases – whether implicit or not – may cause prejudice for or against a particular candidate and lead to the most suitable employee missing out on the role.

To mitigate the risk of bias, an organisation should make the internal hiring process as transparent as possible. They could also choose to anonymise the application process, with candidates judged solely on their skills and experience. Hiring managers should also follow the internal recruitment steps that are listed below to ensure that the process is effective, successful and adheres to employment law.

Steps to follow for successful internal recruitment

Internal recruitment might seem less informal than traditional hiring methods, but there are still some crucial steps to follow when completing it. While hiring managers needn’t carry out background and CV checks and may not require an in-depth application from candidates, following the steps below will ensure a streamlined and legitimate internal recruitment process.

1. Advertise the role

It’s important to advertise a role, even if it isn’t open to applicants outside of the organisation. This means providing detailed information on the job description, responsibilities and salary. A thorough person specification will also ensure that suitable candidates apply and know what will be expected of them if they’re successful. Roles can be shared via internal communication channels such as company newsletters or intranet homepages.

2. Assess the candidates

While a formal interview may not be necessary when recruiting internally, there should be an appropriate assessment of the applicants.  This could consist of an informal meeting with a hiring manager, or candidates might be asked to take a test or provide a portfolio of work for evaluation. When hiring internally, an employee’s previous achievements and progress within the company can be easily accessed and evaluated using an HRIS.

Carrying out these assessments will ensure that managers are hiring an employee based on their skills and suitability for the role. The decision should therefore be as fair and objective as is possible.

3. Make job offer and sign contract

Once a suitable candidate has been chosen, hiring managers can make a job offer in person or via email. The successful applicant should be given some time to decide whether they want to take the position and, if they accept, a new contract must be drawn up and signed before the placement is official. The company must also inform HMRC of the change of role.

4. Notify unsuccessful candidates

When recruiting internally, it is crucial to notify the unsuccessful candidates as quickly as possible. They should be informed of the news by the hiring manager, either via a rejection letter/email or in person. A one-on-one meeting with an applicant is a great way to explain why they were unsuccessful and suggest some areas and skills for improvement. Managers can also research training possibilities for these employees to provide them with alternative development routes within the organisation.

These measures will ensure employee engagement and satisfaction remains high, resulting in improved talent retainment for the company. If a candidate understands why their application wasn’t successful, there is less risk of resentment towards the chosen applicant.

Conclusion

Internal recruitment can be hugely beneficial for both an organisation and its employees. This is because the skills and experience of internal candidates are already known to hiring managers and, as they are familiar with the business, their learning curve will be improved. They should also be the right cultural fit for the company. Internal recruitment can be more time and cost effective, with no need to advertise the role externally and a smaller budget spent on training and preparing an existing employee. When a company recruits internally, it also emphasises opportunities for growth within the organisation.

That said, the downsides to internal recruitment must also be taken into consideration. It can have a negative impact on those employees who missed out on the job and, due to a smaller talent pool, an internal recruit may not be the best fit for the role. Transferring or promoting an existing employee can also cause gaps within the organisation, which must then be filled by an external applicant. There are also concerns around bias and the risk of prejudice when choosing a candidate.

While the internal recruitment process is simpler and more time effective than traditional hiring methods, there are still some key steps to follow. Hiring managers must advertise the role, assess the candidates, make the job offer, ensure a contract is drawn up and signed and, finally, notify the candidates that were unsuccessful.

Ultimately, internal recruitment enables an organisation to retain its top talent. While it isn’t the right choice for every company or role, a successful internal recruitment strategy enables an organisation to make the most of its existing employees, giving them the opportunity to progress and flourish.

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