InnerMobility

Why Companies Are Afraid Of Internal Recruitment & How It’ll Cost Them

Studies consistently show that internal recruitment pays off, yet many companies are still reluctant to look internally for new hires.

By Miriam Wallack

May 2, 2019

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Even with 79% of HR professionals worldwide reporting that internal recruitment is important to their talent management strategy, companies are still holding back from pursuing internal recruitment.

This hesitation can be traced to the fear that comes with changing the foundational system of hiring and recruitment. Yet, as internal mobility practices are rising in top enterprise companies and with over 94% of employees reporting that they would stay at a company longer if it invested in their careers, companies must understand that their fears around internal recruitment are nothing compared to the loss of talent and relevance if they continue to resort only to external recruitment strategies.

“I got phone calls accusing me of stealing their people” – Internal recruitment can get messy

For many companies, internal recruitment is synonymous with instability. The concept of taking one employee away from thriving in their current role to a whole new position can change the dynamics of a company, not to mention threaten mid-level managers who want to keep their top talent.

As Lisa Pueschel, the Head of Talent Acquisition and Workforce Planning at Staples, told the Society for Human Resource Management (SHRM), “[internal recruitment] was not popular with hiring managers. I got phone calls accusing me of stealing their people.” This resentment is often accompanied by the conviction that if an employee moves to a new position, their original position just becomes vacant, meaning the company still needs to hire an outside candidate anyway. Along those lines, many also argue that just because someone is good at one position, doesn’t mean they’ll succeed in another.

Internal recruitment drains resources

Companies know that internal recruitment isn’t as simple as posting positions on an internal job board, and that’s what scares them. As University of Pennsylvania Wharton School Professor Matthew Bidwell contends, “to promote more people internally also means that companies need to have a long-term perspective and know how big a pipeline of people will be needed in the future.”

Internal recruitment requires a huge shift in company culture from one that actively discourages managers from poaching workers from other functions to one that supports skill building and encourages employees to look internally for personal growth opportunities.

Internal recruitment means a restructuring of the entire organization from establishing career programs to creating experiences for growth and learning. This is a huge effort that requires a substantial amount of time, money, and resources– assets that most companies are reluctant to take away from their budgets. Beyond simply spending valuable resources, companies are even more reluctant as to what these resources actually go to– the people. Often organizations are fearful of investing in their employees’ skill building and career development since many end up leaving the company, taking all of the skills and training away from the company and on to benefit a new organization.

Managers love the thrill of a fresh resume

In a similar vein, the perceived limitations of internal recruitment frighten organizations, who feel that current employees do not bring any fresh skills or experiences. The hype around being part of the external recruiting market and having a competitive edge for top talent is certainly a pull for many organizations, especially since external hiring has substantially grown for high level positions and larger organizations over the past thirty years.

In today’s world of LinkedIn and Glassdoor, every company wants a stake in talent that isn’t theirs. As Professor Bidwell points out, “there is a suspicion that ‘the grass is always greener’ attitude plays a role in some companies’ desire to hire from the outside. Managers see a great CV and get excited about playing ‘Let’s Make a Deal,’ even when it’s hard to know what weaknesses the external hires bring with them.”

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Why internal recruitment is the best investment for companies

When the facts are laid out, external recruitment should be what’s scaring companies, because external recruitment can cost companies millions of dollars, result in lower employee performance and productivity, and can drive away top talent from your company.

Internal recruitment pays off, literally

More than four hundred million dollars ($400,000,000) are lost on external recruitment every single year at large enterprise companies. From a decrease in productivity caused by employees leaving the company to the costs involved in recruiting, hiring, and training new employees, companies spend most of their human resources budgets just on hiring external candidates.

Meanwhile, companies could be saving millions of dollars if they strategically shift to internal recruitment and look inward for their new hires. The spending doesn’t stop once external candidates are hired and trained since “external hires earn 18 percent to 20 percent more than existing employees promoted to similar positions,” according to professor Bidwell’s research.

New employees perform worse than internal hires

However, newer, higher paid employees don’t perform better than internal hires. In fact, it takes external hires two years to even reach the performance levels of internal hires in similar roles, based on Bidwell’s study. And that’s if external hires even make it two years at a company, which according to Deloitte’s report, is a rarity.

The report contends that 61% of external hires are more likely to be laid off or fired in their first year while 21% are more likely to leave the company on their own. As Bidwell expresses, “companies should understand that it can often be harder than it seems to bring in people who look good on paper.” When looking for an external candidate, hiring managers tend to focus too much on the candidate’s experiences, rather than considering the candidate’s potential performance in the company’s culture and within the specific position.

Harvard Business School professor Boris Groysberg sums this up with his evaluation that “many [external hires] underperform because what makes them successful are the companies that they used to work for… Everybody likes to hire from Goldman Sachs, but the reality is that Goldman Sachs is a very firm-specific place.”

Companies are more satisfied with their internal hires

Meanwhile, internal candidates have actually demonstrated their abilities and have proven their performance to hiring managers, who have the convenience to learn about the candidate first-hand from their direct managers. Not to mention the unrivaled advantage of internal candidates’ deep familiarity with a company’s culture, operations, and expectations, which only adds to their superior success and productivity.

Aligning with Bidwell’s findings, internal recruitment allows organizations to fill high level positions with candidates who perform better and are paid less than external candidates. Correspondingly, companies that hire internally are 32% more likely to be satisfied with the quality of their new hires.

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Talent hoarding and a lack of internal mobility leads to great loss

Companies that only focus on external hiring tend to repel top talent and lose key employees. While many hiring managers fear upsetting colleagues by transferring away key team members to other departments, the lack of internal career mobility within a company actually pushes top talent away.

As Deloitte reports, a culture of talent hoarding often leads to a culture of talent loss, explaining “when you block people from moving up within an organization, they often simply go elsewhere.” This generates a negative talent cycle in which companies don’t want to invest in career development programs because employees keep leaving while employees don’t gain the skills to be considered for new positions internally, forcing the best employees out of the company.  

The bottom line is that employees want internal mobility programs, with  94% of employees reporting that they would stay at a company longer if it invested in their careers. The opportunity to grow skills and build a career through internal mobility opportunities goes beyond financial incentives for employees.

In fact, The Harvard Business Review reports that nearly 90% of employees would move to an internal position without any financial incentives. As a Deloitte study states, “the reality is that workers will always want more than a job. Most want a career path, and the best ones can either find it from you or someone else.”

Every company is capable of internal recruitment

Although internal recruitment can seem overwhelming, it really comes down to three main factors: culture, skill building, and accessibility.

Creating a strong culture of internal mobility is fundamental to successfully implementing internal mobility. All members of a company, especially managers and leaders, must encourage and support employees to grow their skills and strive towards their professional goals.

Beyond establishing a supportive environment, companies need to provide real opportunities for employees to grow professionally by offering skill building experiences in addition to re-skilling opportunities and career support services.

Employees should be involved in experiences that are genuinely engaging and relevant to their interests and career aspirations. Through connecting employees’ career goals with company objectives, companies foster symbiotic relationships with their employees in which both the company and the employee thrives. The employee grows their professional skills while companies build a more competent workforce.

 

In order to be successful, internal mobility opportunities need to be visible and accessible to all employees. Companies should make it easy for employees to find internal opportunities and connect directly with internal hiring managers. As Deloitte points out, “at many low-performing organizations, talent and strategy are seen as separate channels. At many high-performing organizations, recruitment and retention and internal mobility are inextricably linked.”

The power of the InnerMobility platform

Companies do not need to spend bountiful resources creating their own system of internal mobility, as it is quite clear that internal job boards don’t cut it, because the perfect solution already exists.

InnerMobility by Gloat goes beyond the basics by providing companies an Artificial Intelligence based system that instantly matches employees with internal career opportunities such as part-time projects, full-time jobs, mentorships, and more that speak to their unique interests and goals. The platform combines all three elements of internal recruitment, from inspiring a culture of internal mobility to connecting employees to relevant skill building experiences to matching internal candidates to open positions.

 

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