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Internal vs. External: Who Should You Hire?

Posted by The Bean Team

23-Oct-2014 16:00:00

“Our industry goes away if organizations quit recruiting from the outside, yet internal promotions are critical to our success. It is virtually impossible to consistently recruit top talent to an organization that fails to promote from within.” - Carter Baldwin, Executive Search Firm

Hiring externally is essential for the growth, innovation and overall sustainability of any organization. That being said, it isn’t always the only option. Furthermore, it isn’t always the best option. Promoting internally, rather than hiring externally has positive budget, performance and employee engagement effects.

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Internal Candidates are Budget-Friendly

While organizations will inevitably need to look beyond their walls, there are some amazing advantages to promoting from within, not the least of which is the savings in vital organization resources. Beyond recruiting, onboarding and training costs, external hires make an average of 18% more than internal hires. broadbeantwitter-01 See how quickly this is adding up? Very often, employers don’t realize how much they can save if they work with the talent they have first, before hiring externally.

 

Internal Candidates are Performance-Friendly

There is always a learning or performance curve with external hires, but employers don’t seem to be collecting enough data on just how severe that curve can be, that, or they aren’t paying attention to it. If they were, most employers would invest a bit more in internal hiring initiatives. A study conducted by Assistant Professor, Matthew Bidwell, focused on patterns of work and employment, with an emphasis on job-hopping trends. Consider a couple of key points he discovered about the differences between external and internal hires in his study of over 5,300 employees:

  • External hires score worse on performance reviews than internally promoted employees.
  • External hires were 61% more likely to get fired than internally promoted employees. broadbeantwitter-01

While turnover cost will always vary across industry, location, field and role, here are some broad examples of turnover costs from a CAP study:

  • High Turnover: 16% of annual salary (earning under $30,000) results in a $3,328 cost to the organization.
  • Mid-Range: 20% of annual salary (earning $30-$50,000) results in an average $8,000 cost to the organization.
  • Highly Educated Executives: 213% of annual salary. The example is a cost of $213,000 to the organization to replace a CEO earning $100,000.

So why wouldn’t every employer, everywhere look internally first? Why are so many great internal candidates so often overlooked? Usually, it is simply the automatic default to hire externally when organizations lack the proper tools to assess the talent they already have. Of the client companies that we have helped with internal hires and promotions, we find that their succession planning and performance management processes are lacking the tools and knowledge it takes to efficiently fill open positions with internal candidates. So, without the proper resources, external hiring becomes the easier and faster route. Notice we didn’t say “cheaper” or “more efficient”.

We, as a company with a trillion tools and features aimed at helping recruiters find the best external candidates, know fully well that organizations also need the technology that enables them to efficiently hire internally as well. That’s why we offer BroadbeanSearch, a tool to assist employers, recruiters and search firms to use data they’ve already sourced. With BroadbeanSearch you can run a single search that covers both internal and external candidate data. Internal hiring might not always be the way to go, but wouldn’t you like to know what your options are? 

So while we revel in offering tools and features to help you find new, quality, blow-your-mind-talent, we also offer tools to help you recognize and optimally utilize the talent you already have. Take Broadbean’s demo for a spin, and let us know what you think.

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Topics: hiring , Internal Hiring , BroadbeanSearch