Internal versus external sources of recruitment

Why internal talent pools are a more cost effective source of skills

Hiring, finding, and upskilling workers are now top concerns for 60% of C-suite executives. Yet skills shortages, tight labor markets, and increasingly high labor costs are making it difficult to find the right talent. As leaders strive to bridge widening skill gaps on tightened budgets, there’s one component of the talent management process that’s coming into focus: recruitment.

While recruiting the right candidates for a specific role has always been challenging, today’s talent landscape adds a new layer of complexity. There is a shortage of talent, and there aren’t enough highly skilled workers in the market to recruit sought after skills through traditional channels. It’s also becoming increasingly expensive to hire for in demand skills, particularly as unemployment hovers at 3.9%.  It’s now up to leaders to harness new technologies and frameworks to help them make more strategic decisions about internal and external recruitment.

What is external recruitment?

Generally, when people think about recruiting talent for new opportunities, external recruitment comes to mind. It describes any search or hiring process involving candidates from outside of the organization with the intent to fill a specific role. Bringing new talent into the organization has traditionally been the dominant form of recruitment, and many leaders view it as a valuable practice because new hires come with fresh perspectives.

What are some types of external recruitment?

Three of the practices that support this talent acquisition strategy include:

Advertisements

Advertisements are created to make a job opportunity sound attractive to potential candidates, often by emphasizing the type of work this person would get to do and showcasing a company’s employer brand. Advertisements are often posted on job boards and social media to maximize visibility.

Educational institutions

Schools and universities are often good sources of recruitment as graduating students begin entering the workforce. Some organizations participate in job fairs or other networking events to connect with prospective job seekers directly.

Employment agencies

Employment agencies provide a database of skilled candidates that organizations can tap into to use for their recruitment efforts at a cost. Some employment agencies will specialize in a specific industry or function, giving hiring managers direct access to talent pools that aligns with their priorities.

What is internal recruitment?

Internal recruitment occurs when existing employees are presented with opportunities to take on new roles within the same organization. It describes the process of finding internal talent to reallocate or redeploy to another function or area of the enterprise to meet shifting business needs. Many organizations are increasingly using internal recruitment to respond to emerging priorities while keeping overhead costs low.

What are some types of internal recruitment?

Six types of internal recruitment include:

Internal mobility opportunities

It is critical that employees have visibility into open roles within the company to drive mobility. Historically, this was done with internal job boards, but now, advanced tools like a talent marketplace can surface these opportunities and provide personalized recommendations based on the skills, interests, and experiences of individual employees.

Employee referrals

Recommendations from your current workforce is another method to find candidates for open roles. Since employees already have an understanding of the culture and the quality of work their contact can do, it increases the likelihood of them being a good fit. This is a great way to attract talent who may not actively be looking for a new opportunity. It also incentivizes employees to recommend stellar candidates as it reflects on their reputation. Some talent marketplaces enable employees to recommend their connections for opportunities to broaden reach and cross-functional connections

Skills inventory and talent pools

Many people within an organization may be open to a new role but don’t know the opportunities or aren’t currently looking. This is where skills inventories and talent pools can be a resource. By knowing the skills your employees have, it becomes easier for internal recruiters or managers to find talent that suits their needs. Recruiters can contact potential candidates to create awareness and open dialogue on the position and explore a fit. This method is especially helpful when looking for specialized roles, skills, or larger-scale redeployments of talent.

Career development discussions and training programs

Not everyone’s career ambitions are the same. Having conversations with a manager or mentor can be helpful to tailor a path specifically to an individual. They can also help make introductions to others in the organization for networking opportunities or to create higher visibility for a candidate when applying internally for a role.

If the business has a growing need for specific roles, a training program may be considered to help funnel internal candidates to fill the demand. Employees get learning opportunities to build the right skills to move into a new future-fit role and the business equally benefits by broadening its internal talent pool.

Internal mobility programs

Sharing talent company-wide to create an internal mobility program can provide visibility into opportunities that might otherwise be hidden. This could range from part-time projects all the way to full-time positions. Candidates in internal mobility programs could be moving vertically, laterally, or cross-functionally. This helps to meet the unique needs of employees while also filling critical roles within the business.

Internal campaigns and employer branding initiatives.

External recruiting often leverages social media, targeted promotions, and more to attract candidates to opportunities. These same tactics can be effective internally – creating meaningful moments focused on employee development, connection, and career exploration. Communications plans, internal marketing, and encouragement from leadership to explore priority opportunities can help surface qualified internal candidates.

The key differences between internal and external recruitment

The main difference between recruiting internally and externally comes down to what it takes to find a qualified candidate. Unlike external recruiting, you can’t just search for employees with similar titles in similar industries. Internal recruiting requires a more nuanced approach to dig into what skills and capabilities could be transferrable. This is where technology can be helpful to understand what roles might have related skills and identify candidates that might otherwise be overlooked given different titles.

Since internal candidates are already working for the company, processes like interviewing and onboarding are often streamlined, because employees understand how various organizational systems work. As a result, internal recruitment is more efficient, and it often comes with a lower associated cost because companies don’t need to spend on recruitment marketing or talent sourcing. It’s also likely to lead to better retention since research from Cornell University found that the highest-performing internal hires are particularly likely to stay with their organization, while the highest-performing external hires are more likely to leave.

In contrast, external recruitment describes any hiring process in which applicants are coming from an outside organization. Since these candidates are new to the company, it often takes longer to vet them and for them to get familiar with the systems and technologies that their new organization uses. Bringing new talent into an organization can also come with high price tags, with the average cost per external hire estimated to be $4,683 or $28,329 for an executive position. While companies have traditionally relied primarily on external recruitment to fill vacancies, talent leaders are shifting their focus to internal mobility to harness the skills they need on expedited timelines.

What are the pros and cons of different sources of recruitment?

Both internal and external recruitment have a place in an HR leaders’ toolkits. While each has pros and cons, both hiring practices can have maximum impact when applied to different circumstances. Understanding the advantages and limitations of both methods is key to creating the most effective and cost-efficient hiring strategy.

Pros of internal recruiting

When it comes to internal recruitment, some of the most noteworthy benefits are the savings in time and money that companies can reap by streamlining their hiring processes. Given that two out of three employees indicate that they would leave their jobs if internal mobility wasn’t offered, this type of recruiting strategy can also help maintain workforce engagement and retention rates.

Cons of internal recruiting

There may not be a candidate internally with the specific set of skills needed to fill more niche roles. In this case, hiring externally may be faster and less expensive than leaving a role unfilled while developing internal talent.

However, there’s also a risk that managers will begin feeling possessive over their direct reports and discourage them from pursuing new opportunities within the organization. For internal recruitment to succeed, all team members must embrace a talent-sharing mindset, which can be a significant shift for leaders to make.

If leaders don’t champion this mentality, it can have consequences on the business. Lack of engagement, lower productivity, and attrition from employees feeling overlooked adds up to $1.35 trillion in missing savings for US organizations alone.

Pros of external recruiting

External recruitment can be particularly valuable because of the ideas that new hires bring to the table. When employees join a new organization, they bring best practices from previous roles and fresh perspectives with them. If a company urgently needs employees with a specific skill set and their workforce is entirely unfamiliar with it, external hiring can also be a more efficient way to access that expertise.

Cons of external recruiting

The disadvantage of external recruitment is the process is often more expensive and time-consuming than internal recruiting. Deloitte estimates that it takes two years for an external hire to gain the same level of insight into an organization that an internal hire has.

Internal hiring vs. external hiring: when to choose what?

Whether an organization opts for internal vs external recruitment depends on its current needs. It’s likely that a company will run both methods for various reasons.

Internal hiring is a cost-efficient option that improves employee retention and productivity. It provides employees with growth and development opportunities, maximizes productivity, and ensures critical institutional knowledge is retained. It also typically takes less time to fill a role via this method.

External hiring is best when looking for capabilities that don’t exist in the current talent pool and are highly specific and difficult to build internally. The recruitment process can be more expensive, particularly in a constrained market, but this method is helpful to bring in skills you just can’t surface elsewhere.

Taking recruitment strategies to the next level with a workforce agility platform

Ultimately, there’s no one-size-fits-all strategy for sourcing candidates. At every organization, there will be times when it makes the most sense to hire externally, moments when talent can be “borrowed” from other teams, and occasions when internal candidates can be upskilled or reskilled to fill high-priority roles.

The new challenge for talent acquisition teams is making strategic decisions about when to upskill existing employees, when to hire externally, and when to reallocate team members—which is where an agile workforce OS comes into play. By pairing a talent marketplace with skills intelligence, these platforms create a continuous loop of insights to action that takes recruitment strategies to new heights.

An agile workforce OS can help talent acquisition teams capitalize on internal mobility by ensuring their organizations can tap into all of the skills within their workforce. If you’re looking to learn more about how to find talent internally, check out: Talent marketplace 101: unlocking skills, talent, and workforce agility.