5 Reasons HR Should Look Inside the Company When Hiring

In the midst of recruiting external hires via job boards, LinkedIn and employee referrals, the HR team often forgets about the high value proposition of hiring internally. With many bright employees already with the company, some may be ready for a job switch without the hiring team's knowledge. Three in ten employees look for a new job or take a call from a recruiter while at work, according to Accountemps, so providing the opportunity for employees to switch jobs internally is a win-win for both the employees and the company.

"Many people leave their employer because they’re not sure they can advance their career, even though they’d like to stay. That’s a problem that’s solvable with the right technology and cultural mindset," Dan Shapero, vice president of LinkedIn’s Talent Solutions group, recently told Quartz.

Hiring internally makes sense for the hiring team from all aspects, unless, of course, the employee doesn’t have the appropriate competencies for the new role. Nonetheless, encouraging employees to switch jobs internally allows the company to retain top talent instead of losing it to competitors. LinkedIn estimates that by hiring employees internally for a different position, companies retain 38 of 100 employees who would have otherwise left the company.

Here are five reasons companies should look internally when looking to fill a new position:

1. Save money. Marketing open positions on job boards, compensating new hires with relocation costs and training employees from the ground up can be costly. When an employee is already with the company, those expenses can be reduced. A single bad hire can cost more than $50,000, according to a survey by CareerBuilder. And the average cost of recruiting externally is 1.7 times more than internally ($15,008 vs. $8,676), according to the Saratoga Institute. Plus, external hires are offered compensation that on average is 18 percent more than for internal hires, according to a study by Matthew Bidwell, assistant professor at Wharton.

2. Fill the position faster. Recruiting an external hire can take months, from interviews and competency tests to background checks and compensation negotiations. With internal hires, time spent vetting potential candidates is often reduced to a few weeks since the employee’s information and performance evaluations are already in the corporate system.

3. Predict performance and culture fit. When hiring an employee externally, there are always the unknown factors of how he will perform and whether he will mesh with the company culture. Those unpredictable factors aren’t a consideration when hiring internally since the employee already knows the company culture and his former manager can attest to his performance and reputation.

4. Hire for success. Since internal hires don’t need to adjust to a new company culture and generally know what’s expected of them, they are more successful at a faster pace compared to external hires. According to Saratoga Institute, 40 to 60 percent of external hires aren’t successful in their new role compared to just 25 percent of internal hires. Similarly, 35 percent of CEOs hired externally were let go versus 19 percent who were promoted internally, according to research by Booz and Co. "Results show that internal mobility allows the firm to staff higher-level jobs with workers who have better performance but are paid less," writes Bidwell.

5. Internal mobility to boost morale and retention. When companies provide opportunities for growth and career advancement within the company, employees feel they have job security and see the upward path of their career. Hiring within addresses the main issue of why employees leave a company: the inability to advance in their career. Plus employees feel they are valued and are a key investment of the company.

Asking the HR folks to look internally for hiring before looking outside the company is the first step, but companies also need to make it easy for employees to find open positions within the company via internal job boards. Employees often aren’t aware of these resources. While HR is responsible for recruiting and hiring for new positions, employees often are just as eager to switch jobs internally as HR is to fill the position. How does your company make hiring internally a priority?

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