Hiring Internally vs. Externally

When a company has a new job position to fill, they can face the following dilemma: hiring internally vs externally. Internal recruitment can have multiple advantages, especially with regard to the engagement and morale of employees.

At the same time, hiring externally can also bring in a fresh perspective. There is also the possibility to select from a larger pool of candidates. This article will discuss hiring internally vs externally.

Hiring Internally vs. Externally

As a company expands, it is clear that its needs for employees will also expand. So there is always an expectation for hiring externally. However, we are going to show that there are multiple pros and cons of hiring internally vs externally.

What Is Internal Hiring?

Internal hiring refers to a company filling a job role by choosing from one of the existing employees.

If an employees are in a situation where they would like some mobility within the company, then internal recruitment could be the best option for them. Then, the company prepares an internal interview as part of an internal recruitment process.

What Is External Hiring?

By contrast, external hiring refers to a company filling a job vacancy by choosing from candidates outside the company. The company itself, or third party collaborators, such as recruitment agencies or headhunters, manage the recruitment process.

Regardless of how they fill job positions – hiring internally vs externally – employers have to aid new hires in their transition to a new role. When employees step for the first time in an organisation, they have to participate in preboarding and onboarding. Meanwhile, employees who are changing job positions will have to participate in a crossboarding process.

Pros and Cons of Hiring Internally vs Externally

In order to investigate when do companies prefer to hire internally vs. externally, we have compiled a list of pros and cons of hiring internally vs externally. As this list will show, there are advantages and disadvantages associated with both strategies.

What Are the Advantages of Internal Hiring?

Evaluating the advantages of internal recruitment can help you answer the question of why do companies prefer to hire internally. Or, if there are circumstances when an organisation should strive to hire externally only.

Reduces Hiring Cost

External recruitment can cost as much as 6-times more to hire from the outside than to build from within the organisation. This the conclusion of Josh Bersin, industry leader and HR analyst.

The cost per hire for external candidates is higher than for internal candidates. Firstly, there is less expenditure on job boards or sourcing expenses. Moreover, there will be no expenses for pre & onboarding the employee.

Secondly, new employees are more expensive for companies because of the learning curve associated with onboarding. New employees cannot be as productive as tenured employees. They initially lack a full understanding of the company and its processes.

Allows for employee Knowledge & Understanding of Culture

When crossboarding to a new role or department, they will preserve the knowledge and understanding of culture. They gathered everything from the very moment of signing the contract. Your Pre & Onboarding and daily work experiences are also crucial.

As an internal recruit you have a clear advantage. You understood the organisational culture and developed skills adapted to the organisational needs.

Makes Shorter Processes

The speed of filling a position is much lower in case of internal recruitment. Think, for example, of the processes of background checking, gathering documentation for setting up the taxes, pension, insurance etc. All of these occurred the first time you joined the company.

Speed to full productivity is definitely linked to gaining a full understanding of business culture and “how things are done.” So, unsurprisingly, internal hires have the advantage of knowing the company culture, its tools, methodologies and formal and informal practices.

Organisational knowledge is something that takes a while to be grasp. You need time to fully understand and then to fully apply it in your day-to-day work.

Increases Employee Engagement

Once employees fully immerse themselves in a company, its culture and its mission, they feel that they belong. Consequently, they are more prone to remain in a long-lasting employment relationship.

Long-term employee life-cycles are beneficial for both employer and employees. To keep you inside the organisation for the long term, your employer will be more prone to invest in developing your skills. This leads to your professional development and to a raised productive output. All of this contributes to your engagement with and commitment to the company.

“Hiring internally also increases engagement. And folks tend to refer others more frequently when their own career has grown within the organization.” These are the highlights of Daniel Sonsino, Founder at Guia Consulting and former VP of Talent Management.

Provides Employer Value Proposition

An employer that commits to helping and guiding employees up their career ranks, benefits from positive employer branding. Rewards for devoted and capable employees, and better career prospects and continuous upskilling will motivate you. Also, you will be more prone to recommend the employer to friends and family.

In addition, a culture founded on constant improvement contributes to increased morale of the entire workforce.

Increases Success Rate

Hiring externally can always be a gamble. Although companies spend time and resources in finding the best match for a job, nothing can guarantee a successful hire. Will the new hire be someone that adapts, learns, integrates and contributes fast?

Data from CCI Consulting suggests that poor cultural fit, rather than lack of competencies or skills, plays a greater part in why new hires leave companies.

This is the reason why introdus focuses so much on preboarding and onboarding. Structured Pre & Onboarding Programmes mitigate the risk of losing new employees. This is due to the fact that they strategically address both the practical needs of a new hire, and their social and emotional needs. Pre & Onboarding must make employees feel at home in their new companies.

Ensures Competitive Advantage

When deciding between hiring internally vs externally, internal hires have a competitive advantage. The company is already familiar with their performance to date. There is also awareness of their future potential.

Furthermore, companies already have information on the work ethic of internal candidates. They have already proved their professionalism and their competence.

Boosts Employee Performance

A landmark study published on The Effects of External Hiring versus Internal Mobility concluded that employees promoted from within the organization had a significantly better performance in their first two years than external hires.

Additionally, the study revealed that external hires were 61% more likely to be fired from their new jobs. Meanwhile, internal hires were promoted faster and had lower rates of voluntary and involuntary exit. Hence, performance on the job is an indicator for the success of the hiring process.

What Are the Advantages of External Hiring?

In the other hand, we have also identified some advantages of external hiring. It’s important to consider these essential points in order to make the right decision:

Brings Specific Expertise and Diversity of Candidates

Internal recruitment can provide a great strategy for companies with a substantial workforce. However, for many smaller companies, this might simply not be an option. The company might be small enough that it simply misses the expertise specific for the new job vacancy.

In this context, external recruiting ensures accessing a large pool of talented candidates. There is always the potential to find a rock star for the organisation. This would be someone that is just perfect for the organisational needs and its objectives.

Boosts Potential for Innovation

Bringing in new employees, who have gathered considerable experience from other workplaces, means also a boost of new and fresh ideas. Sometimes, an external candidate has an outlook that is completely different. Their outlook is not influenced by the routines that more tenured employees might have developed. Outsiders are not enmeshed in any organisational politics that might render them unproductive.

“The new hires have the potential to bring in a unique perspective on the organisation”, according to Andreas Olesen, HR Business Partner for Trafikstyrelsen.

Fills a vacancy without creating another

When a company uses internal candidates to fill up a job position, they are automatically creating new vacancies. So, for example, if a technical team leader is promoted to CTO, the company will need to fill up the newly vacated technical team leader position. And they promote a senior engineer as a technical team leader, then the company needs a new senior engineer.

Thus, external hiring is convenient because it fills a vacancy without creating another. Whereas, internal hiring creates a cascade of new vacancies within the job hierarchy.

What is Crossboarding?

Onboarding and reboarding processes target bringing you (back) into a company’s workflow and set employees up for achieving productivity. Comparatively, a cross-boarding process refers to keeping the employee relationship with the same company, but switching to a new job. This new job is different enough to require preparation in order to successfully perform your new job duties.

Cross-boarding is a process occurring when filling up positions in a company from an inner talent pool. Thus, rather than seeking external talents, companies would look at existing employees. They then assess who might be the best match for a specific position.

In the case of recruiting external talent, the new hire would participate in Pre & Onboarding processes. Meanwhile, in the case of using internal talents for filling up job position, that is no longer a necessity.

Thus, we define crossboarding in the following way. Crossboarding is the process that assists an employee in their transition to a new role within the same organisation.

Crossboarding has strong training and adaptation strategic components. Yet, there are no rules for the kind of transition that would warrant a crossboarding process. It can refer to transitioning across departments, from technical roles to managerial roles etc.

5 Reasons to Implement a Cross-boarding Process

1. Increases Cost-Efficiency

Finding talents is an expensive process in terms of use of resources. It takes away skilled employees from performing more value-creating activities. Sometimes, it is more cost-effective and it simply makes more sense to promote existing employees to new roles.

2. Provides New Challenges and Opportunities

Cross-boarding can also facilitate cases where current employees take new roles that are not promotions per se. Instead, they provide a window of opportunity for grappling with new challenges.

3. Discovers untapped talent and potential

A well-structured and well-documented cross-boarding process provides companies with the means to make the most out of their existing human resources and possible untapped talent and potential. 

4. Brings Value

Although you already have been working for that employer, crossboarding brings value. It helps emplyees by providing a framework for additional training for their new role.

5. Helps Get Introduced to a Potential New Team

Through crossbboarding, you get introduced to a possible new team, set milestones and expectations. All the components of the cross-boarding process will guide your path towards full productivity in your new role. You can view it as an Onboarding 2.0.

How a Pre & Onboarding Software Helps Cross-board Employees?

When companies decide to cross-board employees to new positions, offering them the support necessary to up-skill for the new roles. It sends a message to all employees that the company is investing the necessary time and resources into their workforce.

Investing into the workforce, helping the employees grow and learn new skills will have a beneficial impact on talent retention and employee motivation. Additionally, it can also contribute to decreased risks of hiring wrong candidates and saved onboarding costs.

A software solution that is easily customisable, allows for the implementation of a structured and effective cross-boarding programme. With introdus, employee onboarding software, employees will be even more engaged with their company. They progress towards acquiring new skills and taking on new challenges and responsibilities.

This will ensure that the cost of investing into employees is not overshadowed by the cost of lost talent and unfulfilled potential.

Internal Interview for an Internal Hiring

An internal interview will offer employees guidance in preparing for an internal promotion interview, or even in cases of interview for internal position, not necessarily a promotion. We have also prepared a sample internal candidate interview questions.

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What is an Internal Interview?

An internal interview is a method companies use as part of an internal recruitment process. It refers to companies fills job roles by choosing from one of the existing employees.

An internal interview can be used in a multitude of situations. For example, if you are proposed for a management promotion, or for a team leadership position.

Top 5 Tips For an Internal Job Interview

We have compiled a list of internal interview tips for internal promotion and cross-department moves. These tips aim to help employees prepare and ace their internal job interview.

1. Do Research

In order to prove that they are a good fit for the new role, employees have to know as much as you can about the new team, department, and the requirements for the role.

2. Reflect On The Journey

As an internal candidate, they are bringing baggage to a new role. Their histories with the organisation will definitely be a talking point of the internal hire interview. So employees need to prepare for their internal interview by reflecting on their employee journey to date.

3. Reflect on the Strengths and Key Competences

Moreover, employees have to devote time on reviewing their key strengths and competences. It might even be a good idea to consult with their mentor or buddy. Ask them for what they view as their strengths. After all, they can expect the recruitment manager or new team leader to ask your current work mates for feedback.

4. Be Prepared with the Right Motivation & Argumentation

Like in any kind of interview, be it for an internal role or for a new role in a new company, employees need to have a clear motivation for applying for the position. Additionally, they will have the arguments ready for why you want to switch jobs. So it is a must for them to be prepared with comprehensive and convincing motivation and arguments.

For example, their reasons could include a wish for career growth, obtaining new skills, a change in interests etc.

5. Check-in with Your Current Manager

It is always a good idea to check-in with the current manager or team leader when applying for an internal job posting. After all, it would be extremely awkward for them to find out from external sources. For example, if someone from the new team would ask them for feedback on their performance, they might feel blindsided if no conversation happened a priori.

Additionally, in case employees do not end up getting the job, the situation might be extremely uncomfortable for all parties involved.

Examples of Internal Interview Questions

We have put together a comprehensive list of questions with a high probability of coming up during an internal candidate job interview. We have grouped them by general topic. In this way employees can have an easier time navigating through them. Find some of the questions here:

1. What are the skills employees acquired in this organisation and their current role so far?
2. Have they faced any challenges? Have they overcome them? How?
3. What do they think this company’s top priorities should be in the coming years?
4. What keeps them engaged with this company?

Find more ideas in this sample internal candidate interview questions:

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Sample Internal Interview Questions to Ask Your Hiring Manager

Since we want you to be successful, we have compiled an additional supporting material, a list of internal interview questions to ask the hiring manager.

1. What’s your timeline for making a decision? What are the expectations for starting in the new role?
2. What are the expectations of me transitioning into this new role in terms of time to full proficiency?
3. Is there a structured crossboarding process in place to facilitate the transition?
4. Will you provide mentorship during the transition?
5. Are you pursuing any external candidates for the role? What would you say is their competitive advantage?
6. How would you measure my success in the new role? What could I do to exceed your expectations?
7. If hired, what are the three most important things you would like me to accomplish in the first 6 to 12 months in the role?
8. Which part of the transition do you expect to have the steepest learning curve?
9. What do you think will be the biggest challenge of this role?
10. Is there anything we haven’t covered that you think is important to know about this vacancy?

Hiring Internally vs. Externally: Conclusions

To conclude, the pros and cons of hiring internally vs externally should, of course, be placed in the specific circumstances of each organisation. It is not absurd that an organization would hire externally when its own pool of talents is very small. For example, a small organisation would never be able to have access to the same human capital resources as a multinational corporation.

However, the growth and development which can be put in motion by an internal recruitment strategy can produce many positive outcomes for that company.

Generally speaking, employees respond really well to growth possibilities within a company. It makes you feel like you always have space for development, that there is acknowledgement and rewards for your efforts. It will make you feel more prone to refer potential candidates to the company.

Companies invest considerable resources for filling up job vacancies. Especially with regards to external recruitment, they spend a lot of capital for finding the right person for filling a job position. And oftentimes these companies think that filling the position is the finish line of the recruitment race. But for us at introdus, signing the contract is only the beginning of the new hire journey.