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Internal Recruitment   | 2 Min Read

Are We All Wrong About Internal Hiring?

Written By poojaganeriwala

Dear recruiting manager, here’s why you don’t need to look far and wide for that open position you’ve been interviewing for: the right talent is perhaps sitting right under your nose!

In the world of recruiters, the debate on whether to hire someone externally or to promote from within is an inconclusive one. That is theory. However, numbers seem to suggest that in practice, across the globe, companies favor the recruiting of external candidates instead of accessing the pool of talent that exists internally. Which might not sound as much of a issue until the publication of a 2012 study by Wharton management professor Matthew Bidwell, that explained why promoting from within beats external hiring hands-down!

For one, the study brought out the fact that employers didn’t realize how much more they were paying to bring in workers from the outside. On average, companies paid 18%-20% more for an external hire, than they would pay for an internal promotion for the same job. Infact, popular HR opinion indicated several pecuniary considerations for a business hiring externally in the long run, such as an external hire sometimes brining on a department or company wide salary raise.

If you are already looking for ways to justify the additional expense for an external hire, here’s another startling (or maybe not so much) discovery the study made.

It takes two years for the performance of an external hire to match that of an internally promoted employee. External hires consistently scored poorly in performance reviews for the first two years in the job and were 61% more likely to fired from that position than those who had been promoted from within the firm. They were also 21% more likely than internal hires in similar positions to leave a job on their own accord.

Now before you go thinking Professor Bidwell must have been a disgruntled employee, who was passed over for promotion in favor of someone brought in from the outside, consider the logical interpretation that the study offers, and some that we can draw on our own.

A new hire cannot hit the ground running from day one

Employers often underestimate the time and effort taken by a new hire to get upto speed. Small tasks such as, not knowing whom to ask a question, or whether to wait for approval on something, play on the efficiency a new hire may bring. It takes time to develop routines, and for an employee to find a rhythm that suits their personal as well as organizational needs. Although a promoted individual can sometimes take time to adjust themselves to new responsibilities – they do have the basic foundations to thrive in the business’ culture and environment. According to Bidwell, internally promoted individuals successfully fulfill their roles 23% faster than external hires.

Integrating with corporate culture

A huge part of an employee’s success in an organization is dependent on the relationships they form – with managers, colleagues, customers, and everyone invested in the business. A new hire will take time to adapt to the corporate culture, which is key to forming relationships, and to succeed. Internal candidates on the other hand, already know the ropes. They have proven they fit in with the company culture, do not disrupt team dynamics and have the skills and experience necessary to succeed within the company.

Training and employee investment

Bringing in someone new to the organization also equals time and cost in the training and development. It’s most likely, that others in the department too will have to pitch in to bring the new hire up to speed, thus affecting the performance of the whole unit. Additionally, hiring externally can affect the morale of existing staff, and reduce loyalty. Employees are more likely to stay with a company that they feel offers them opportunities to move forward in their career or learn new skills. When your employees watch their coworker move up the ladder of success within the company, they are more likely to work toward the same goal. In all, you not only increase employee loyalty but their motivation to be successful as well.

So, knowing as much as we do, are companies still preferring to hire externally? Apparently yes. External hiring has grown much more frequent since the early 1980s, especially for experienced high-level positions and especially in larger organizations.

One reason for this, Bidwell explores is that external hires often have more education and experience than internal employees. Hiring managers often approach the process with a ‘grass-is-greener-on-the-other-side mindset.’ However, while it’s easy to be tempted by a fresh perspective or a prestigious résumé, it’s time managers understood the cost to bringing in talent from the outside. It’s time all of us understood that it pays to nurture and promote from within, than hiring those that look good on paper.

Topics: Internal Recruitment

Originally published December 28 2018,updated June 29 2019

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