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Advantages and disadvantages of Internal and external recruitment

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 — February 20th, 2019

Advantages and disadvantages of Internal and external recruitment

Recruitment is arguably the single most important task any organization undertakes. Without new blood and fresh ideas, an organization will inevitably stagnate and wither in the face of competitors who do.

As Harvard Business School professor Boris Groysberg puts it, “‘Do we build it or do we buy it?’ is a useless debate in the 21st century because you have to do both.”

Recruitment choices are affected by a myriad of factors. Is the company small, lacking the in-house expertise to capture the attention of the best potential candidates? Does an external agency offer vertical specialist recruitment knowledge which will help a company (of any size) in getting the right candidate for the position? These are just a few of the potential variables which affect the internal versus external choice.

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The advantages of internally hiring staff?

If you’ve ever heard the phrase, ‘better the devil you know’, you’ll appreciate that hiring staff from within a pool of people inside the organization can have some immediate benefits. Recruiting from within means you know what your not-quite-new hire is capable of.

As Brian Scudamore explains, “You’ve already seen that Fred in analytics is a project managing machine. An external candidate may seem like an exciting blank slate, but they may bring problems that can’t be easily solved. Stats even suggest that companies that rely on external hires for management positions have double the turnover of companies who focus on internal promotion.”

Promoting someone from within the pool of available employees already working for a company has some inherent advantages.

  • They know the company culture and norms.
  • Cost of hiring will likely be much lower.
  • Management will already know whether an internal candidate has met performance expectations.

Then there is the practical advantage that an internal candidate will typically hit the ground running. They already know where everything is, who to talk to to get something done, recognize how the culture operates. Quite simply, their learning curve in the new role will be shorter.

Interestingly, a 2016 LinkedIn Talent Trends study, conducted between January and March with more than 26,000 professionals, showed that 25pc of professionals today have their eye on a promotion inside their current company. The issue is, the same research also showed that being passed over for internal recruitment to a more senior post is the reason that 24pc of employees say they are considering jobs elsewhere. Food for thought.

The disadvantages of only looking at internal recruitment

But it’s not clear-cut in favor of the internal candidate. Hiring from within comes with some potential drawbacks.

John Feldmann thinks the fresh blood model brings some major benefits. “Most companies are well aware of the importance of employing a diverse workforce. Diversity in areas such as employee background, race, gender, age, and religion sends a message of inclusivity both inside and outside the company, creating a competitive advantage in a diverse world.”

Only considering internal recruitment can have its own set of challenges, such as:

  • Removing qualified/experienced personnel from one role to a more senior will create consequential vacancy needs.
  • It has the potential to create resentment with existing employees.
  • You are not seeking qualified candidates from a wider potential talent pool
  • It may stifle innovation/diversity if the work culture does not receive fresh thinking from external sources.
  • Removing a member of an existing team may disrupt the group’s overall performance.

Additionally, internal recruitment may present challenges depending on the company’s size and the pool of available talent.

The benefits of going outside the organization

Hiring from outside allows companies to draw in fresh ideas, challenge accepted norms and test assumptions about how to best achieve the organization’s wider objectives. One of the hardest challenges facing any company as it grows is to maintain the benefits smaller companies enjoy in being able to react fast to external conditions and keep up with changing demands. One of the ways to do so is to draw in new talent to the company and not rely too heavily on already established working practices inside the company culture.

Hiring externally brings advantages

  • Access to skills potentially lacking in internal candidates.
  • A challenge to internalized assumptions about how a particular role should perform.
  • Allows an opportunity to bring in talent with knowledge of the competitive landscape.

External hiring is essentially the breath of fresh air that can ensure companies, as they grow, continue to innovate and challenge established assumptions about the best way to achieve sector leadership... and challenges.

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Yet, for all the potential benefits that external hiring brings to the party, it still presents real issues that have to be considered.

  • External hiring can cost a lot more
  • It can take more time
  • It may require third-party help from specialist recruitment consultants
  • An external hire may perform well at interview and fail to deliver once in the door

As with so many aspects of Human Resources and effective management of a company’s people, the path to success will always be a balancing act between the pros and cons of internal versus external candidates. This will be dictated by very specific market and sectoral conditions which act to determine what the best course of action is.

And those conditions will inevitably evolve over time and with changes in internal strategic objectives against dynamic factors in the wider sector. Wherever the next candidate comes from, one thing that is certain is uncertainty. This is why knowing the pros and cons will help in making the right choices at the right time.

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