The hunt for talent never ends and successful companies are closely managing and monitoring their existing workforce as a way to fill the skills gap. As recruitment budgets are being slashed, HR professionals are forced to do more with reduced resources. A study conducted by The Wall Street Journal shows that employers are generally oblivious about the extra costs they incur when authorising a search to find new hires.
According to Saratoga Institute, the average cost of finding and hiring someone from outside the company is generally 1.7 times more than hiring internally. Research also shows that between 40% and 60% of external hires are not successful, compared to only 25% for internal hires. Interesting findings from the online journal of the University of Pennsylvania Wharton School of Management suggests that external hires need to be paid up to 20% more than internal candidates.
A key advantage of hiring from within is that it already attracts candidates who are familiar with an organisation’s practices and procedures. This eliminates the learning curve – time that is taken up to teach someone how to be effective in a role. Companies that are serious about developing existing employees into future leaders will be more inclined to hire from within.
Why internal promotions are preferable
1. It’s more cost-effective
You will inevitably save money on recruitment fees, training, the opportunity cost of not having the position filled, online advertising, travel and possible relocation costs.
2. It’s quicker
The entire process, which starts with reviewing a job description to advertising to potentially paying a recruiter and interviewing several candidates, can easily take months. This process also does not always guarantee the perfect candidate. On the other hand, internal hiring can be completed within a few weeks if not days. Internal candidates already have the backing of managers and their performance reviews are already accounted for.
3. Better predictability of outcomes
The likelihood of existing employees succeeding at a new job in the same company is a lot higher. They possess the benefit of deep-rooted knowledge about how work is processed within the company and they are already relationally connected. Lesley Joyce, Chief People Officer at Novelis, comments on how internal employees need less infrastructure and support to be successful and observes that internal candidates achieve peak performance faster than externals.
4. It’s great for employee morale
Promoting internally encourages employees and shows them that they have a future at the company, acting as a powerful retention tool.
On the flip side, in order for companies to successfully promote within, they need to prevent the departure of great talent and carefully groom future leaders. Internal employees also naturally assume that internal candidates have the edge over external candidates.
How to boost your internal applications
To boost internal applications, HR Managers have to arouse considerable interest in a position from within their own firms and then encourage candidates to apply. This gives the company recruiter a lot more control as they are able to conduct a more focused and tightly controlled search.
For candidates who have a desirable educational background and tangible skills, a department head might be more suitable for identifying the best candidates.