Finding and developing talent is critical to growing businesses. With countries experiencing prolonged skills shortages worldwide, hiring skilled individuals is becoming increasingly difficult.
This makes it crucial for companies to develop skills within their existing workforce through internal talent development and internal recruitment strategies. This can help businesses fill relevant roles through internal recruiting, ensuring they can continue to grow and meet emerging business needs.
While internal hiring offers numerous advantages, it’s also important to consider the potential challenges. In this article, we explore the advantages and disadvantages of internal recruiting alongside strategies to balance these aspects effectively.
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Discover the pros and cons.What is Internal Recruitment?
Internal recruitment is the process of promoting or shifting existing employees into roles that are well-suited to their skills and capabilities. This kind of skill mobility helps companies address their talent needs while maintaining a strong and adaptable workforce.
An effective internal hire process involves recognising existing skills within your organisation and identifying skill gaps and critical roles that will support company growth. Rather than relying on external recruitment, businesses can use succession planning and internal job postings to hire for potential, and provide further training as needed.
10 Advantages of Internal Recruiting
1. Quicker Decision Making
External recruitment is time-consuming, involving role definition, advertising, and multiple interviews, often taking months. If no suitable candidates apply, the process restarts.
Internal recruitment is much quicker. With a smaller, well-known pool of candidates, companies that run training programs and regularly review employee performance can make informed decisions rapidly. This streamlined internal hiring process significantly reduces the time needed to fill a role, allowing companies to address their talent needs more efficiently.
Example: When a marketing manager position opens, you announce it internally. Reviewing existing performance records and employee motivations helps you select the right candidate within weeks rather than months.
2. Shorter Learning Curve
New employees need to be onboarded to acquaint them with your company, their roles and responsibilities, and how they align with company goals. While an onboarding checklist can streamline this process, it will still take time for external hires to become productive in their new roles.
Internal candidates are already aware of your history, mission and vision, as well as the structure of your organisation. While they may require training on new tools and responsibilities, the learning curve to take on a new role is significantly shorter. This faster onboarding with internal hires ensures they become productive and effective quickly, accelerating the positive impact on operations.
Want to Improve Your Onboarding Process?
Our customisable checklist can help.Example: Timmy, who has been with the marketing department for three years, is promoted to manager. His existing knowledge of the department’s processes enables him to implement improvements swiftly, aided by targeted training.
3. Better Chance of Success
When focussing on external recruitment, there’s always a chance new hires won’t be a good fit for your business. Forbes has found that 30% of new employees leave within the first 90 days of starting with a new company. Most of these resignations are due to company culture clashes and roles not meeting expectations.
While onboarding and induction training can reduce the resignation risk, hiring internally mitigates it. Since you already have a thorough understanding of employee skills, and employees already understand the role, their chance of success is substantially higher.
Example: Since Timmy was already in a marketing role before his promotion, he already knows how your company’s existing processes work. This puts him in a perfect position to innovate and find creative ways of enhancing marketing operations.
4. Save Money, Time and Resources
Between finding external hires, going through the interview process, onboarding them and paying recruitment fees, external recruitment can be expensive, time-consuming and resource-intensive. And that’s not even considering the new hire’s salary.
Hiring internally can be more streamlined and efficient, contributing to cost savings in recruitment. We’ve already looked at how internal recruitment can save time, but it also doesn’t require recruiter or finders fees. You won’t need to budget for an employee’s full salary either. Instead, you only need to cover the difference between their current payment package and the amount you’ve budgeted for the new role.
Example: Timmy was earning $36,000 per year as a marketing specialist. During your market research for the new marketing manager role, you found that $60,000 is a fair salary for the position. When you promote Timmy into the role, you are paying $60,000 annually rather than the $96,000 that you would have needed to budget if Timmy had remained in his role and you’d hired a manager externally.
5. Foster a Learning Culture
Focussing on internal recruitment involves building up skill sets within your company to ensure your workforce is adaptable to new roles. This instils a culture of continuous growth and learning, leading to increased employee engagement and overall business benefits.
Encouraging teams to upskill and take on passion projects can improve employee satisfaction. This will allow your employees to engage with your company and connect with your missions and values on a personal level.
Example: Sarah and Alex also applied for the marketing manager position. However, neither had the analytical skills required for the role. You encourage them to develop those and other leadership skills. This leads to increased productivity and eventually justifies salary increases, reflecting their enhanced contributions.
6. Emphasise Opportunities for Growth
When employees feel that there’s little room to grow within a business, they may start to experience career stagnation. This is the sense that a career is at a standstill, and the natural response is to look for opportunities elsewhere.
Hiring internally can reduce the risk of career stagnation by showing employees that their continuous professional development is valued and rewarded. If they develop skills that align with company growth, there will be progression opportunities. Even if roles don’t open up in management, by growing, learning and contributing towards organisational success, employee efforts will be recognised and compensated for.
Example: After Timmy is promoted, he takes paternity leave. The company temporarily assigns some of his responsibilities to Sarah and Alex, who are fairly compensated. This reinforces their commitment to the company and their belief that there are opportunities for their own advancement.
7. Improve Employee Retention
Employees who feel that a company appreciates their efforts and provides opportunities for career progression are less likely to look for new jobs. By offering opportunities for internal talent mobility, companies demonstrate their commitment to employee happiness and success. This leads to improved satisfaction and motivation, resulting in better employee retention and reducing the need for further talent acquisition.
Example: Sarah receives a job offer from a competitor, but she chooses to stay with your company. She values your growth opportunities and positive work environment, even though the competitor offers a slightly higher salary.
8. Boost Motivation and Loyalty
Motivation has a significant impact on productivity. Employees who feel their skills and efforts aren’t recognised are often less willing to expend effort. On the other hand, employees who feel that their efforts can lead to becoming better internal candidates for advancement will be more motivated to excel. When companies recognise these efforts, it further boosts motivation and can improve employee engagement and loyalty.
Example: After Timmy’s promotion to marketing manager, Sarah and Alex are inspired by his success. They take on more responsibilities and seek out training. The company acknowledges their efforts through regular feedback and small incentives, such as public recognition in team meetings. This motivates them further, and they begin to see their roles as pathways to future leadership positions within the company, boosting their overall loyalty.
9. Better Team Integration
Bringing on external employees can sometimes disrupt team dynamics, particularly if the new hire’s work style or views don’t align well with the existing company culture. An internal hire, however, is already familiar with their colleagues and the company’s way of working, making for a smoother transition and reducing the risk of conflict within the team.
Example: When Timmy becomes the marketing manager, Sarah and Alex adapt quickly because they’re already familiar with his work style. This familiarity ensures a smooth transition and maintains strong team dynamics.
10. Smoother Transition in Leadership Roles
In companies with a supportive culture, internal promotions are often celebrated. Employees are more likely to accept leadership changes when they see the hard work that led to the promotion. Internally promoted leaders are also more likely to maintain a cohesive and collaborative management style, as they better understand the intricacies of the roles they’re managing compared to external hires.
Example: Timmy’s promotion is well-received by the team because they’ve witnessed his hard work. His understanding of the team’s roles leads to a seamless transition, and he maintains a collaborative leadership style that the team trusts.
10 Disadvantages of Internal Recruitment
1. Impact on Morale
While internal recruitment can boost motivation, it may also harm morale if employees feel unfairly overlooked for roles. This can lead to resentment and decreased productivity.
2. Potential to Overlook Strong External Candidates
Focusing solely on internal recruitment may cause companies to miss out on highly qualified external candidates who could bring advanced skills or fresh perspectives.
3. Reduced Talent Pool
A reduced talent pool may simplify hiring processes, it can limit a company’s options. If there aren’t any good candidates for internal recruitment, you may need to open the search to external applicants.
4. Stifles New Ideas and Fresh Perspectives
Internal hires, while familiar with current processes, may resist innovative approaches leading to stifled innovation. External candidates often bring new ideas that challenge the status quo.
5. Creates Different Skill Gaps
Internal recruitment can create skill gaps in an employee’s former role without proper planning. This can lead to operational disruptions, requiring additional training or external hiring.
6. Potential for Bias in Selection
When handled ineffectively, internal recruitment can introduce risks of internal bias and unfair decision-making. For example, a long-time employee might be favoured for a role over a newer, more qualified hire simply because management is more familiar with them.
7. Risk of Perpetuating Inefficiencies
Internal hires might stick to outdated practices, perpetuating inefficiencies. This resistance to change can prevent the adoption of more effective tools or methods that could improve productivity.
8. Limited Diversity
Relying heavily on internal recruitment can reduce diversity by limiting the influx of different cultures, experiences, and perspectives. This can hinder the company’s ability to innovate and adapt in a global market.
9. Potential for Skill Mismatch
Internal candidates don’t always possess the necessary skills for new roles. This can result in companies overlooking emerging skill sets that external candidates could bring, limiting innovation.
10. Risk of Employee Burnout
Promoting from within can lead to increased workloads for other team members. This can result in burnout if additional hires aren’t made to fill the gaps left by the promoted employee.
How to Succeed with Internal Recruitment
- Implement Succession Planning. Succession planning ensures that key roles have prepared candidates ready to step in, minimising disruptions and optimising internal talent mobility. It helps identify and develop future leaders, making transitions smoother and more strategic. Using a succession planning template can further streamline this process by providing a structured approach to prepare and assess potential candidates.
Need Help With Succession Planning in Your Organisation?
We’ve got the tool you need.- Invest in Continuous Professional Development (CPD). CPD equips employees with the skills needed for future roles, enhancing their potential for internal promotions and contributing to internal talent development.
Professional Development Takes Careful Planning.
Download our customisable template today to simplify the process.- Plan and Track Skill Development. Having a plan for skills that need to be developed is crucial for aligning business and employee goals. An online skills matrix can track the development of these skills and ensure that your existing employees have the abilities needed for specific roles.
- Recognise and Reward Achievements. Recognition boosts morale and motivation, encouraging employees to strive for excellence and pursue growth opportunities within your company. However, it doesn’t always need to take the form of raises or promotions. Rewarding achievements through praise and celebration can also go a long way towards motivating employees.
- Maintain a Transparent Hiring Process. Transparency builds trust and ensures fairness, helping employees understand how decisions are made and what is required for career advancement. This reduces potential resentment and aligns employee expectations with company goals.
- Balance Internal and External Recruitment. Both sides have advantages and disadvantages when it comes to considering internal hiring vs. external hiring. Recognising when each approach is appropriate can help companies balance promotion while still bringing in new skills and perspectives. This internal and external recruitment process ensures a diverse and dynamic workforce that meets evolving business needs.
Internal Recruitment FAQs
Which is better — external or internal recruitment?
The choice between external and internal recruitment depends on the specific needs and goals of the company. Internal recruitment is often faster, less expensive, and helps retain top talent by providing growth opportunities. It’s ideal when a company wants to promote from within and build on existing knowledge and culture. External recruitment, on the other hand, brings in fresh ideas, new skills, and diverse perspectives that can drive innovation. It’s better when the company needs specific expertise not available internally or wants to expand its talent pool.
What are the potential downsides of relying too much on internal hiring?
Relying too heavily on internal hiring can limit the influx of fresh ideas and innovative approaches, leading to stagnation. It can also perpetuate existing inefficiencies, as internal candidates may be less likely to challenge the status quo. It can also create skill gaps in the roles left behind by promoted employees and may result in bias during the hiring process, where familiarity with candidates overshadows their actual qualifications. Over time, it may also reduce the diversity within the organisation, impacting its ability to adapt and grow.
When is internal hiring most appropriate for a company?
Internal hiring is most appropriate when the company wants to promote employee development and morale, especially if the role requires a deep understanding of the company’s culture and processes. It’s also suitable when the company needs to fill a position quickly and cost-effectively. Internal recruitment works well in environments where succession planning is strong, and there is a pipeline of talent ready to step into new roles. It’s also beneficial when continuity is important, and the role demands someone who can hit the ground running with minimal training.
