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Grow Your Business Your Team

Internal Hires May Not Always Have the Inside Track

image for Andrey_Popov/Shutterstock
Andrey_Popov/Shutterstock
  • The most crucial factor when a company is hiring is whether the employee is suitable for that role. Having an incompetent staff will be very expensive for the company.
  • It is relatively cheap to hire internally.
  • Internal staff do not necessarily have to be competent. They have to prove the qualifications for the post.

It's no secret that some employers have a strong preference for hiring from within. In the world's top organizations, it's nearly impossible to even land an interview, let alone a job, unless you're already involved in the company in some way. But are outside job seekers forever doomed to lose out to existing talent? Probably not.

Research carried out by the American Management Association (AMA) found that the majority of companies don't necessarily favor internal talent when filling open positions. More than half (55%) of respondents said their company has no overriding preference and acts according to shifting business needs, while 11% expect high turnover and recruit external candidates aggressively. Only 34% actively focus on developing and retaining current employees.

The AMA survey also found that 52% of companies say their employees are less loyal than they were five years ago before joining the organizations. Sam Davis, vice president for AMA's customized consulting solutions, believes this relatively low percentage of companies with a strong internal hiring strategy could be the reason for lackluster loyalty.

"So many companies seem to discount internal candidates and just call a recruiter to fill an opening," Davis said in a statement. "But this sends an unfortunate signal to employees, who are usually eager for promotion and advancement."

Larry Nash, director of an accounting and consulting company EY, notes that "internal candidates have a strong knowledge of our culture, processes [and] methodologies, and have many relationships throughout the organization."

According to research done by the University of Pennsylvania, external hires earn 18% percent to 20% more than internal employees promoted to a similar position. The research also indicated that these employees performed significantly poorly in the first two years as compared to internal staff employed in the same position.

In large organizations, in particular, companies are more likely to base their hiring strategy on the business's current needs. Davis noted that human resources departments often put a priority on building internal talent, but managers who are involved in the day-to-day operations may call for an outside search to meet their requirements.

While employers' ambivalence about internal hires may be discouraging for professionals looking to advance, it's good news for job seekers who are looking for new opportunities. External recruitment is sometimes unavoidable, Davis said, such as when there are skills gaps that no internal candidate can fill, or when an infusion of outside expertise is needed. [Read related article: https://www.businessnewsdaily.com]

Regardless of whether you're looking to join a company from the outside or get promoted at your current employer, Davis said the most important thing you can do to improve your chances of landing the job is selling yourself as the perfect fit.

"[Potential or current] employees need to do their research and be able to present how their specific skills meet with a gap in the organization," Davis told Business News Daily. "It's even better if they can demonstrate how their skills will help to deliver on the organization's business objectives. That is how job seekers stand out."

Employees hired internally retain organization knowledge and can get up to speed in their roles much easily as compared to external hires. Internal hires are more likely to have served in an acting capacity in the vacant roles. They are well conversant with the organization's culture and policies.

Internal staff require less time to engage to take up new positions. With an already existing performance track record, less time is required to screen the candidates. Full interviews may not be conducted.

The learning curve of internal hires is shorter as compared to that of external hires. Internal staff are already familiar with the context and content of their new role. They are also familiar with team members. They adapt to their new roles very quickly.

When a company hires from within, this sends the message that the company values its current employees and is willing to appreciate hard work. Employees are therefore more willing to put in their level best based on this level of trust. This creates an improved level of employee engagement.

Hiring external staff is expensive compared to hiring internal staff. Internal staff are informed of new posts through emails or internal boards. External hires require newspaper advertisement or in some cases hire the services of a hiring agency. Carrying out a background check on external employees comes at a cost to the organization.

Here are a few cautions to put in place when hiring internally:

  • Have a transparent process. Internal employees should have a clear understanding of the internal process. Let all qualified employees have an equal chance to the vacant positions. Give feedback for failed interviews and explain what could have done better or the qualifications you hoped to find.
  • Have other ways to recognize employees besides new hires. It is impossible to appreciate all employees through promotions or new hires. Have alternatives ways of appreciating employees such as bonuses or incremental salary increases. Have performance-related rewards.
  • Do not communicate vacancies that you already have candidates in mind fo. This will create distrust between the hiring team and the employees.

  • Have managers train their team members toward their career path. This will make it possible for them to qualify for vacant positions once they are available.

Companies should evaluate whether it is more preferable to hire internally or externally before making a vacancy announcement. While it may be cheaper to hire internally, some positions require a vast of experience in all sectors. Internal staff do not always have the required skills for the advertised post. The company may also need some fresh leadership skills. External hires will not be limited by the organization's culture as they are not aware of it. The company should weigh if they are willing to invest in an external staff or hire internally.

Business News Daily Editor

Business News Daily was founded in 2010 as a resource for small business owners at all stages of their entrepreneurial journey. Our site is focused exclusively on giving small business advice, tutorials and insider insights. Business News Daily is owned by Business.com.