This article is written to compare the benefits of hiring internally vs externally, so that you can best fill any position within your business.
Whether it’s due to higher output requiring more hands on deck, new positions being developed as your business changes, someone has left a position, etc. choosing the right candidate for an open position is the most important aspect of building a team and culture you can be proud of. We have published several articles on hiring, including how to write job descriptions, workforce planning, and recruitment processes, to name a few. Now it’s time to take a look at where you are sourcing your candidates from, whether that be internally from other positions or departments, or externally.
There are benefits and downsides to both internal and external hiring, though it can often be boiled down to a few select facts. External recruiting and hiring is often best when your business needs fresh energy or skills that are not yet present, though it can take much longer for external hires to fully gain organizational understanding and therefore complete engagement with a business’s values and mission. Conversely, internal hires will retain organizational knowledge and get up to speed in their new roles quicker, though hiring internally can run the risk of appearing to (or actually) involve favouritism, therefore creating conflict amongst colleagues and potentially leaving a gap elsewhere in your business.
External hiring is very similar to marketing, in that you are essentially promoting your business and the employment opportunities you present to potential candidates, so use your marketing strategies to your benefit! One of the first things to determine when hiring externally is whether you are looking for active or passive job seekers. Active job seekers are those who are unemployed at present or are unhappy in their current employment. Passive seekers are satisfied with where they are working, meaning they may have more positive professional experience. Often, employers will want to target passive seekers through direct sourcing over the phone or social media, though most traditional recruitment strategies are geared towards active seekers (ie: job boards, postings, etc.).1
Internal hiring, conversely, can be done in a variety of formal and informal ways. Internal job postings are the most formal system, as they allow current employees to apply if they choose. Often, HR departments will use Human Resources Information Systems (HRIS) to keep track of current employees’ knowledge, skills and abilities (KSAs) in a database. Using an HRIS system, whether in conjunction with internal job postings or as an independent initiative, is a great way to determine which employee’s KSAs are best suited to a new job’s needs. Succession planning is another way to internally fill positions, as this form of hiring involves developmental plans to help prepare individuals for promotions, and allows for a smooth transition of duties.
Finally, the most informal system for internal hiring is hiring by nomination. Especially in smaller organizations, nominations by an individual’s manager or supervisor can be very efficient, as individuals will already be familiar with the work of their employees and the employees of other departments. This, however, is where favouritism could come into play – so be careful, considerate, and objective.1
To help you understand and compare external vs internal hiring, we have created a table contrasting each method:2
At the end of the day, both internal and external hiring can be a great way to change your business’s team around! Whether that change comes from resituating an employee in whom you have faith or bringing in fresh energy and skills to the team, every business situation and individual position may impact whether you source within your organization or without. As a general rule, choosing whether to hire internally or externally can depend on where your company is in its business cycle. If your business is thriving and succeeding, and does not need new ideas to push it further, internal hiring will build on your existing strengths and internal candidates might be your best option. If your business is new, struggling, or in a tough turnaround mode, hiring externally will bring new ideas and energy into the space, perhaps creating better processes, culture, or productivity!2
The next time you have a new position to fill, be that a retirement gap, a new role that has come up as your business changes, or anything else, take the time to go through what your business needs from your candidate. Do they need to be connected and integrated in your already-thriving culture? Or do they need to provide skills or ideas that are not presently in your business?
By examining each position separately, and not just falling into routines of shuffling people for the sake of shuffling them or hiring externally without considering your current employee base, you will ensure that every position is filled with the best fit and every job is executed by the right people.
Download this resource Hiring and Promoting Internally vs Externally.
1 “Recruiting Internally and Externally.” Society for Human Resource Management. https://www.shrm.org/resourcesandtools/tools-and-samples/toolkits/pages/recruitinginternallyandexternally.aspx
2 Krell, Eric. “Weighing Internal vs. External Hires.” Society for Human Resource Management. https://www.shrm.org/hr-today/news/hr-magazine/pages/010215-hiring.aspx