External vs Internal Recruiting

Whose Side Are You On?

I will be hosting the Next-Gen Recruiting 2016 event that will take place on 9-10 March 2016. To find out more, click on the link at the bottom of this post.

Recruiters spent a lot of time doing talent acquisition, looking for ways and methods to attract the best and the brightest to work for the organization.

external vs internal recruitment

Many recruiters start with the mindset that talent must be brought in from outside and acquire someone else’s talent who can be operational immediately.

The study is by Matthew Bidwell, an assistant professor at Wharton a few years back shows that

  • External hires get paid more than internal transfers
  • External hires receive lower performance reviews in their first two years
  • External hires are 61% more likely to be fired and 21% more likely to resign
  • External hires are likely to have a better education and more experience
  • Employers underestimate the time it takes for an external to get up to speed

So many recruiters face the challenge:  Should we promote internally or hire externally?

 

Buy VS Build

Of course, there are clearly advantages and disadvantages of both promoting from within and hiring externally.

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While the research seems to show that internal promotion is the better option on paper, it is not an automatic home run.

In fact, a study by CEB found that 40% of internal moves involving high-potential employees end in failure.

Hiring from the outside provides a new perspective and fresh ideas. Sometimes the business requires a new set of skills and expertise not found within.

Suzie Custerson, Regional Head of Talent Acquisition Asia, Manulife Financial shares with us when would be the best time to buy from outside.

“From time to time, it is important for organisations to bolster internal capabilities with new ones”, she said,

“External expertise can supplement existing capability and new hires can provide an ‘outside in’ view which is invaluable when organisations are developing new products and services in a highly competitive landscape.”

These external hires can offer a boost to the internal culture, allowing companies to break out of the risky “group think” dynamic plaguing many mature businesses.

Conversely, she also mentions that continuing to invest in existing capability is both a critical employee retention tool as well as a ‘visible signal’ to other employees that an organisation cares about and believes in career development.

This is unique benefit from internal promotions!

“Furthermore, another interesting advantage that internal employees hold over external candidates is that they already understand how the organisation they’re in works,” Custerson said

“Understanding the annual rhythm and cycle of an organisation take time to learn, so it takes longer for external hire to get up to speed.”

Most organizations will consider both internal and external candidates in the selection process when looking to fill a new role.

After all, the most important factor is selecting the right fit.

While selecting an internal candidate will reduce short-run costs (recruitment time and cost), the long-term cost could be much greater if the candidate isn’t well suited to the role.

 

Supporting Internal Mobility

While most recruiters know about hiring external mobility, internal mobility is not as supported in most organizations.

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In a recent Futurestep survey, more than 1,000 executive responses, 87 percent said that having a strong internal mobility program, whereby employees are encouraged to apply for new roles within their organization, would help with attraction and retention efforts.

However, only one-third report that their companies have such programs.

“Successful internal mobility programs help to hire managers to learn about the skills, experiences and aspirations of internal candidates while employees learn about new roles that will allow them to contribute to the organization in new and different ways,” said David Marzo, Futurestep Vice President and General Manager.

“This kind of organizational transparency can increase employee engagement and retention while shortening time to productivity and reducing competitive intelligence leakage.”

One company to recognise the value of internal mobility is international credit rating agency Standard & Poor (S&P).

Over the past few years, since it launched its dedicated international internal mobility team, it has increased the proportion of its global hires filled internally from 23% to 35% in 2014, around 650 hires.

Whatever the source of the new hire, the keys to getting it right will be ensuring visibility of all the talent available for consideration, having a robust recruitment and assessment process, and acknowledging that it takes time for anyone to settle into a new role.

Hear more about Manulife Financial’s internal mobility program from Suzie Custerson at New-Gen Recruiting Congress 2016, 9 – 10 March 2016, Singapore Marriott Tang Plaza.

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