The Benefits of Internal Hiring: Avoiding Recruiting Agencies

Recruiters know better now than to make the mistake of looking for candidates externally and gaining misguided assistance through recruitment agencies when more often than not, the right candidate for a new job opening is actually in front of you. 

iHire’s 2023 Hiring & Job Search Outlook Report is a testament to this; it shows that 49.5% of U.S. employers encourage internal hiring strategies and actively plan to hire or promote employees from within their organizations to fill vacancies. 

Why is internal hiring suddenly a smart strategy, though? 

New research shows that 47% of employees in the U.S. and 50% of employees globally said they keep an eye out for new job opportunities. Whereas, 38% of Gen Z and 37% of millennials are more likely to say they want to quit. 

And, I wish I could say it was all talk, but one in two companies now has an employee turnover rate of 15% or more, while one in five has a rate of 30% or more.

Now, all this begs the question of why so many employees not only want new opportunities but are ready to jump ship at the first chance. 

A LinkedIn report shows that three out of the top five reasons your employees are looking for new jobs are related to career growth within the company, opportunities to develop and learn new skills, and chances to do challenging and impactful work. 

If your employees don’t see these opportunities at your company, they’re looking somewhere else. 

One would think that the #1 operational priority for organizations would be revenue, but it is in fact, retaining their talent, according to the Organizational Wellbeing Report 2023, Gallagher. 

And, this may be because the current cost of employee turnover is approximately 1-2 times the employee’s salary. 

Given today’s talent shortages and the challenges in employee retention, internal hiring doesn’t seem like a bad idea at all.

With a solid internal hiring approach, you can choose from qualified candidates within your company who will perform well in the new role, instead of taking a risk and struggling financially and administratively to attract and onboard someone else.

Benefits of Internal Hiring

Hiring internally does not only increase employee retention but has a lot of other benefits too. 

Internal hiring is cost-effective. 

In light of a fluctuating economy and uncertain labor demands, internal hiring is a smart move financially. 

It is three to five times less expensive than traditional hiring methods. 

When you hire or promote from within, you incur little to no recruitment expenses, such costs associated with advertising job openings, working with recruitment agencies to find the right candidate, equipment costs, and background checks. 

You also simultaneously enhance your workforce without increasing headcount and adding another employee to your payroll. 

Internal hiring saves time. 

It takes approximately 36 days to fill a position and sometimes even longer, depending on the industry and complexity of the role. Internal hires reduce your time-to-hire by 20 days, allowing hiring managers to focus on more critical projects. 

Searching internally for qualified talent also helps hiring managers avoid the lengthy process of sourcing, screening, and interviewing candidates. 

Let’s also not forget the time it takes to negotiate salaries and onboard new candidates who have yet to prove they fit well with your company’s culture and workplace.

Internal hiring lessens the learning curve and ensures a better cultural fit. 

Your employees are already familiar with your company’s processes and culture, making it especially useful when you have open roles that need to be filled immediately. The familiarity also eliminates the need for a lengthy, costly onboarding process and ensures a better cultural fit. 

Similarly, you have a rapport with that employee and are already aware of their capabilities, potential, and work ethic, reducing the risk of a bad hire. These employees have already decided your company is worth sticking around for, and that's a big deal when 17% of new hires leave after the first month. 

Internal hiring improves employee retention, motivation, and engagement. 

Along with the LinkedIn report mentioned earlier, iHire’s 2022 Talent Retention Report also found that 28.3% of workers quit their jobs because they saw few opportunities for growth or advancement. 

Your employees want to know they have upward mobility and room to learn, challenge themselves, and develop new skills. 

When your company offers promotions and learning opportunities, employees are more motivated to learn and grow. You’ll discover new talents you didn't know your employees had and nurture a culture of learning that helps you attract new candidates and retain the employees you already have.

Similarly, when employees apply for an internal position, they prove they’re willing to invest more career time into your organization and are less likely to leave. Choosing these employees for promotions shows them that you value them and are actively looking for ways to help them advance their careers.

Types of Internal Hiring Strategies

Internal hiring may seem complicated, but it all comes down to knowing your in-house talent and understanding your employees' long-term ambitions.

Here are a few popular methods you can explore depending on the nature of the new role: 

1. Use talent pools and skills inventories: The first thing your talent team must do is collaborate with hiring managers regularly to create talent pools and skill inventories. This is done by identifying qualified internal candidates whose skill sets and expertise could translate into new roles outside their current team. 
   
   You can also host formal monthly meetings where you collectively assess employees’ strengths, weaknesses, and career aspirations to guarantee successful placement in open roles.
   
   
2. Have a solid succession plan: Secondly, you should have a list of employees ready for promotions. You can then assess these employees to choose one who has the skills required for the new role.
   
   
3. Know which employees have transferable skills to move laterally for effective departmental transfers: When there is a job opening, consider whether you need to hire a new employee or if you can add more variety to an existing employee’s role and upskill them in new areas. 
   
   For instance, a digital marketing specialist may also know how to use Adobe Photoshop and take on graphic design responsibilities as well. Similarly, a company can transfer a resume writer to the content marketing department for his/her help in gaining traction on the company website because of their in-depth knowledge of constructing an ATS-compliant resume.
   
   
4. Capitalize on employee referrals:  referrals from people managers and departmental leaders who oversee employees and can verify their growth within the company are priceless and a reliable internal hiring method. If they are vouching for employees and recommending them for another role within the organization or even a promotion, you should consider it carefully. The strategic employee placement might just be the right move to boost your business.
   
   
5. Use internal job boards: These are integrated platforms for disseminating open positions and their job descriptions within your organization. Employees can come here to scan these job openings and apply if they feel like they have the right transferable skills. 

Exploring a variety of internal hiring strategies gives your team options to choose from to find the perfect candidate for a new role. 

Conclusion

An internal hiring strategy isn’t just a nice-to-have for your company. It’s an invaluable talent acquisition approach that reaps countless benefits for both your workforce and business at large. 

With a strong internal hiring strategy - 

1. You don’t have to rely on recruiting agencies anymore who don’t fully understand your recruitment needs or workplace culture. 
   
   
2. Your employees can take advantage of career-pathing and mobility opportunities by moving laterally or upward into positions that align with their ambitions and career goals, increasing employee retention rates. 
   
   
3. And, your talent acquisition team does not have to waste company time and money scouring the candidate marketplace and instead advance existing full-time employees who will excel in these new roles. 

The question for your organization isn’t “should we focus on hiring internally or externally?” 

Rather, it’s “how can we best use the internal hiring strategy to retain our top talent, ensure cost-effective hiring, and realize our growth goals?”