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Internal vs. External Recruitment: The Pros and Cons

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7 min read
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With today’s rapid expansion and market growth, new positions and opportunities are opening up within organisations all the time. Eventually, if companies want to successfully thrive and compete in this ever-changing environment, they will have to carefully plan their recruitment and selection process.

When you have open positions that you need to fill, how do you go about recruiting for them? There are two different strategies that you’ll use: internal recruitment and external recruitment. How you use them might be different to another company.

Hiring internal candidates makes sense because they already know the business and fit with your company culture. But rely on internal recruitment too much and you can create gaps in your workforce, generate a stagnant culture and experience resentment in your teams.

So how can you use internal recruitment and external recruitment effectively for your business? Let’s go through the pros and cons of each recruitment process and how you can ensure you get skilled candidates for every open role at your organisation.

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What is Internal Recruitment?

Internal recruitment prioritises hiring existing employees for new or vacant positions within a business. Some companies will only advertise roles internally, while others may advertise them externally but look to fill open positions with current employees first.

There are lots of benefits to internal recruiting that can help your company thrive, including improving retention, increasing team motivation and saving money – but lots of businesses are still falling short.

The 2021 State of Internal Mobility Report revealed 61% of people said that their company has a ‘clearly defined, well documented process established for recruiting internal employees’. While that doesn’t sound so bad, these respondents all work for some of the world’s biggest and best-known brands, so this should be much higher.

So why should your company make use of an internal recruitment process?

The Benefits of Internal Recruitment

Let’s look at the top advantages of internal recruitment:

1. Reduces time to hire

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Internal hires already know your business, which will save time during the onboarding process. While they may need some additional training for the new role, you won’t need to go through all of your policies and procedures with them.

You might not even need to conduct full interviews when you hire internally. You’ll have access to the candidate’s track record and be able to speak to their line manager to confirm their suitability for the role.

2. Saves money

Recruiting internally can reduce your costs considerably. It can cost SMEs up to £12,000 to recruit a new team member on the average UK salary, and even more for more senior roles.

If you recruit for an internal position, the only money you’ll spend is on the wages of the hiring team that spend time working on the job description, adding it to internal job portals and on conducting the interviews.

3. Increases team motivation

If you have a strong internal recruitment policy, you’ll improve team motivation. If people know that there are promotion opportunities at your company, they’re more likely to work hard to win that promotion.

But there’s no use in simply dangling the carrot. Individuals will see through it quickly if you don’t follow through with your policies. Make sure you nurture your teams’ professional growth and development to help retain top talent and prepare individuals for their next role.

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4. Reduces uncertainty

A big advantage of internal recruitment is that hiring managers will already know the candidates and can confirm their success in their previous roles in your company.

They’ll be able to work with the HR team to gauge their suitability for the vacant position; managers should know their staff best, so they should be able to tell you whether they’re a good fit.

Recruiting existing staff leaves less up to guesswork. While things can always go wrong, it’s much less likely that they will if you already know the person you’re giving the job to.

The Disadvantages of Internal Recruitment

There can be too much of a good thing. There are some disadvantages of using a fully internal recruiting strategy, so it’s important to be aware of them so you can get the right blend of internal and external recruitment:

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1. Can create resentment

Unfortunately, internal recruiting can reduce employee morale as well as boost it. It’s great for those that get promoted, but those who miss out can become demotivated. When a team member’s feeling sour, it can quickly spread through the rest of the group and create an unsettled working environment.

2. Limits your applicant pool

While it’s important to give current employees opportunities to grow and develop, it can mean that you might not have lots of qualified candidates to choose from when a role comes up.

Hiring purely internally can mean that you miss out on hiring people with new skills and ideas. Make sure you focus on skills development to prepare your current team members for promotions so you don’t end up with gaps when a position becomes available.

4. Leaves gaps in your existing workforce

When you promote someone, their old position becomes vacant. So then, you’ll need to recruit internally for their role, and it can go on like this forever!

You’ll probably need to turn to external recruitment processes for at least one role to ensure you’re not without vital team members for too long.

5. Can create a stagnant culture

While hiring internally means that you’ll get great candidates that already fit into your culture, it can stagnate your company culture too.

Without anyone new challenging your processes, you might find that your teams get too comfortable with the way things are done and fail to spot inefficiencies and ways to improve your product or service.

External candidates can shake up a culture and offer fresh perspectives on things that can help your business stay competitive in your market. When considering applicants for roles, try to think about culture ‘add’ as well as culture ‘fit’.

Now let’s move on to external recruitment.

What is External Recruitment?

External recruitment is when an organisation looks to recruit candidates from outside of the company. This opens the role up to a wider pool of candidates, adds to your culture and helps bring in fresh ideas.

On the other hand, external recruitment also costs a lot more and it can have an effect on employee engagement.

Let’s have a look at the pros and cons of external recruitment strategies.

Advantages of External Recruitment

1. Encourages new ideas

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When you mostly recruit internally, you can become at risk of creating an ‘echo chamber’ of the same ideas and opinions within your teams.

Recruiting externally will help to bring new perspectives into the company, challenging the status quo and ultimately making you more competitive.

2. Offers a wider talent pool

External recruiting opens up your talent pool much further than internal recruiting does. You’ll increase your chances of finding quality candidates that are qualified for the role and can jump straight into the job without extensive training in essential skills. Internal candidates might require more training to get up to scratch, which will result in larger training costs.

It’s important to get the balance right between helping team members progress through your company and shoe-horning them into job vacancies because you want to keep that person in your organisation.

3. Enhances diversity

External recruitment means that you can promote inclusion and empowerment by recruiting from a diverse range of backgrounds. Diverse teams are 1.7 times more likely to be innovation leaders, and are 1.8 times more likely to be change-ready – so it makes business sense to ensure your recruiting process promotes diversity, as well as it being the right thing to do.

Disadvantages of External Recruitment

Just like internal recruiting, there are disadvantages of external recruitment to be aware of:

1. Increased costs

External recruitment methods traditionally cost more than internal ones. Your HR team will spend longer on the recruitment and selection process and you’ll probably have to pay to post the vacancy on job boards. If you’re not filling vacancies very quickly, you might consider asking recruitment agencies to help you, which can be very expensive.

You’ll probably also need to invest in an applicant tracking system, which is another cost to consider. These systems are vital in helping you streamline your recruitment process and ensure you treat all candidates fairly.

2. Increased onboarding time

a new employee sitting on a bench completing a digital onboarding presentation with their laptop open as they take notes

New hires require more training on your company’s general policies and what your business does. This will take a hiring manager a lot of time, which pulls them away from other tasks.

Consider using digital onboarding methods and spreading general training out over a few weeks to reduce the impact on the day-to-day running of your organisation.

3. Can affect employee morale

Hiring external candidates over internal ones can impact employee engagement. If you’ve overlooked a current team member for a role, they’ll be disappointed and may become demotivated.

This demotivation can spread throughout the team as they confide in their colleagues about their disappointment. You could end up with a negative working environment where individuals don’t feel valued.

Make sure you communicate your reasons for hiring externally and work with your teams on their progression plans so you can have productive conversations with them that manage their expectations.

How to Use Internal and External Recruitment Effectively

It’s easy to turn to either internal or external recruitment methods and not focus enough on the other. But using both recruitment strategies will help you build a thriving team that will help you stay competitive in your market as well as the job market.

Identify the needs of the company

What skills do you need for the role? Is it vital that the candidate knows the business well, or is it more important that they can hit the ground running with a new strategy or project?

Consider what your organisation needs to help you decide whether to recruit internal candidates or external ones.

Assess your culture

What’s your company culture like at the moment? Is everyone feeling excited about new challenges and coming up with fresh ideas, or are things going a bit stale?

Decide whether parts of your organisation could do with a new perspective or could benefit from increased diversity.

Prioritise training and development

If you want to try to retain top talent and get the ideal candidate for a role from within your company, you’ll need to ensure that you’re offering enough training and development opportunities to your teams. Make sure you develop their skills so they’re ready when that promotion comes along.

So, while both internal and external recruitment processes have their pros and cons, you’ll get the best results when you use them together. See what you can do to improve your hiring process at your own company and create a better culture that promotes healthy competition, fresh perspectives and employee engagement.

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