The job market is highly competitive nowadays. Companies are seeking the most effective recruitment solutions. Therefore, when choosing between internal and external hiring, we must keep in mind that hiring decisions can significantly impact both the short-term and long-term success of your organization.
So, which is the better choice: promoting from within or looking for new talent outside? Let's explore the benefits of internal and external hiring. Read on!
What does Internal Hiring mean?
Internal hiring involves promoting existing employees to new positions within the company. One of the main benefits of internal hiring is the reduced cost. Internal candidates already know the company's culture and processes, reducing the need for costly training or onboarding. It usually speeds up the hiring process as well. Another advantage is that promoting internally boosts retention and employee loyalty, which is a common HR concern. When hard work is rewarded, employees feel more valued and are more likely to stay long term. A study by Lever shows that 61% of employees will look elsewhere if they lack growth opportunities within the company.
While internal hiring may look impressive with the mentioned pros, it also comes with some cons. The internal talent pool is much smaller than the external one. This may lead to missing out on great talent with fresh ideas and diverse backgrounds.
What is External Hiring?
External hiring relates to hiring people from outside the organization. Partnering with executive recruitment services or hiring a headhunter can offer different benefits. One of the benefits is the access to a much larger pool of candidates. The best recruiting companies excel at finding top external talent that aligns with the company’s goals. Bringing new hires can also provide fresh perspectives and fill skill gaps. Monster created a report that shows that over 40% of companies find skill gaps as a big challenge. External candidates often challenge established processes, which can lead to innovation. Talent acquisition solutions help businesses identify the best external candidates for their needs.
Although it is quite efficient, external hiring comes with higher costs as well. It’s not just about the cost of recruitment services, but also the time needed for onboarding, filling the vacancy, and for the new hire to adapt to the company culture.
How does Internal Hiring Compare to External Hiring?
It's essential to consider short and long-term benefits and your business's situation. Internal hires speed up the process and lower talent acquisition and onboarding costs, while external hires bring valuable skills that offer a higher return on investment over time.
What to Consider When Choosing Between Internal and External Hiring?
- Company growth stage. A key factor in deciding how to address hiring needs is assessing the company’s growth stage. Startups and scaleups need external hiring to grow quickly and bring in new skills. Larger companies, on the other hand, may benefit from developing existing talent through internal promotions.
- Skills needed. Another question to be asked is: Does the current talent count on the skills to fill the position? If the team has the skills or can learn them quickly, internal hiring works. However, if your company seeks innovation, external hiring might be the better option.
- Budget. It is obvious but worth mentioning that the budget is key. What’s the budget for the short and long term? As mentioned above, internal hiring can save money in the short run, but external hiring is a better long-term benefit if the new talent brings innovation or fills critical gaps.
- Time to fill the vacancy. Consider how quickly the position needs to be filled. Internal candidates will adapt quicker to a new position, while external candidates may need more time.
- Cultural fit. This relates also to the culture of the company. Internal candidates already understand the company’s values, while external candidates may take longer to get used to them.
Conclusion
Both of these hiring strategies offer valuable advantages. Internal hires improve the employee’s loyalty. External hires offer a bigger talent pool. It is a matter of your organization’s stage and needs. The right decision will depend on the factors mentioned above. Ultimately, the goal is to keep your business competitive in a fast-changing market, ensuring that hiring aligns with your long-term vision.
