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The advantages and disadvantages of internal recruitment

Internal recruitment is the process of hiring from within the business. It's efficient as internal candidates are already part of the team and understand the company's culture and policies. However, over-reliance on internal recruitment can have negative side-effects, such as creating resentment or leading to an inflexible culture.

Nikoletta Bika
Nikoletta Bika

Nikoletta holds an MSc in HR management and has written extensively about all things HR and recruiting.

Internal vs external recruitment

Hiring from inside your business makes sense because new hires are already part of your team and know your culture and policies well. But despite the benefits of internal recruitment, relying too much on promotions and lateral job moves might have negative side-effects.

Here are eight advantages and disadvantages of internal recruitment and how to ensure that when you are hiring internally, your process works:

Advantages of internal recruitment

Hiring internal candidates can be more efficient than recruiting externally, because it can:

Reduce time to hire

When recruiting externally, hiring teams find candidates (either through sourcing or job posting), evaluate them and, if all goes well, persuade them to join their company. All of which takes time. Conversely, internal candidates are already part of your workplace, so the time you need to find and engage those candidates is much less. It’s also easier to assess internal candidates because:

  • They’re prescreened for culture fit.
  • Their track record is easily accessible.
  • They may not always need full interviews with managers (for example, if they are moving within their department, the department head already knows the candidate.)

All these reduce the time spent on each hiring stage and your overall time to hire.

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Shorten onboarding times

Everyone needs some time to adjust to a new role, but internal hires are quicker to onboard than external hires. This is because they:

  • Know how your company operates and most of your policies and practices.
  • May be familiar with people in their new team, especially in smaller businesses.
  • May already know the content and context of their new roles if they move within the same team or to a similar one (for example, a sales associate becoming a category manager).

Cost less

Research has shown that external hiring may cost 1.7 times more than internal hiring. This is because when hiring from within, you usually don’t need to:

  • Post ads on job boards. It’s easy to inform internal candidates about job openings through email or your company’s internal newsletter. You could also place printed job ads on a bulletin board, if all your employees work in one place.
  • Subscribe to resume databases. Instead of sourcing passive candidates on resume databases, ask managers about their team members or look into your HRIS to find coworkers who might fit in your open roles.
  • Pay for backgrounds checks. You may already have conducted background checks on internal candidates when you first hired them. And, you know if they’re in good standing based on their manager’s input or employee records.

Strengthen employee engagement

Promoting from within sends a message that you value your employees and want to invest in them. Giving employees more opportunities to advance their careers, or even letting them move to other same-level positions that may interest them, is good for morale: employees who change roles develop professionally and others know they may have similar opportunities in the future. This helps to build a culture of trust that enhances employee engagement and retention.

Disadvantages of internal recruitment

Despite all the merits of internal recruitment, there are some things to keep in mind. Hiring from within can:

Create resentment among employees and managers

Employees who were considered for a role could feel resentful if a colleague or external candidate is eventually hired. Also, managers are often uncomfortable losing good team members and may even go so far as to hinder the transfer or promotion process.

Leave a gap in your existing workforce

When you promote someone to fill an open position, their old position becomes vacant. This means that a series of moves and promotions may ensue that could disrupt your business’ operations. Ultimately you may need to turn to external recruitment in addition to your internal hire.

Limit your pool of applicants

While your company may have a lot of qualified candidates for specific positions, this isn’t necessarily true for every open role. For example, if a role is fairly new to your business, your employees will have other specialties and may not be able to fill this skills gap. Relying solely on internal hiring means you could miss the chance to hire people with new skills and ideas.

Result in inflexible culture

Doing most of your hiring from inside your business may result in a stagnant culture. This is because employees can get too comfortable with the ‘way things are done’ and struggle to spot inefficiencies and experiment with new ways of working. An inflexible culture will be more problematic in leadership positions where employees may need to advocate for change and improvements instead of relying on established, inefficient practices. External hires are essential in shaking up culture and offering a fresh perspective on existing problems.

What could you do to mitigate the disadvantages of internal recruiting?

To avoid resentment, cultivate trust and ensure you hire effectively, you could:

  • Ensure promotions or job moves aren’t the only ways to recognize employees or help them advance their careers. Consider offering opportunities for training, job shadowing and job rotation. Also, lay the foundation of rewarding employees frequently (for example, encourage supervisors to praise their employees or give out performance-related bonuses.)
  • Have a transparent process. Ensure internal candidates understand your hiring process and why they weren’t selected. It’d be good to give them interview feedback or pointers on what skills they might need to develop to be successful in the future.
  • Train managers to prepare their team members’ career paths. Help managers think of possible career moves for their team members and ask them to take part in formulating your business’ succession plan. That way, if a position opens, you could immediately consult your plan to see which employee may be a good fit.
  • Avoid communicating an opening if you already have a candidate in mind. Communicating an open role means that you give employees hope that they might be hired for this role. But if hiring teams already prefer a particular candidate, it’s best to reach out to them directly first, instead of encouraging others to apply.
  • Use a balanced mix of internal and external recruiting. Each time you want to fill a position, decide whether to recruit internally, externally or both. Base this decision on the job requirements and the skills your current employees have as well as your company’s needs for a culture add.

At the end of the day though, whether you’re focused on internal vs external recruitment, it’s important to structure your hiring process to ensure fair and effective recruiting. Use screening tests and structured interviews, which help you assess candidates more objectively, and communicate well with all candidates. These practices will help you make good hiring decisions and will also build trust in your hiring process.

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