To promote internally or to hire externally?

I strongly believe that a business is only as powerful as its people. When taking on a new senior role, my first priority was to build a bright and bold global leadership team, setting the foundation for success.

But before launching job postings for new roles, I needed to review the most efficient recruitment strategy. Internal hiring could inspire existing company advocates to share their vast experience, whilst external hiring offered an opportunity to bring in fresh perspectives.

As I saw it, both routes have their advantages. Before engaging with recruitment agencies or hiring managers, you may want to consider the following pros and cons of internal hiring, which I explore in the blog below.

Review your recruitment options

What is internal hiring?

Internal hiring means selecting candidates from within the organization to fill open roles. While interviews and internal assessments may still be conducted, evaluating cultural fit isn’t necessary.

What is external hiring?

External hiring is probably the most common and familiar form of recruitment. By advertising job descriptions and hosting interviews, companies hire new professionals from outside of their organization. External hiring is one of the most common recruitment methods, allowing companies to bring in new professionals through job postings and interviews. But did you know that employee referrals are among the most effective ways to attract external talent? They streamline the hiring process, as internal colleagues already understand the qualifications and cultural fit needed for success. According to Equo Refer, 34% of employee referrals who apply are hired, a significant jump compared to the typical 2-5% application-to-hire rate from job boards.

Learn from your peers: my experience in building a leadership team

At Hays, I focus on delivering consistent, world-class resourcing solutions to clients, regardless of geographic location. My plan is to build a globally aligned strategy that supports evolution and growth. This approach combines investment in people, processes, and technology.

Establishing a strong senior leadership team is essential for driving business development. Getting just one individual wrong would have threatened the whole recruitment strategy. One bad hiring decision is all it takes to affect the positivity and productivity of the entire team. I needed to make sure that everyone would be pulling in the same direction and supported by the wider business from the start.

The first question I asked myself was whether I wanted to use internal hiring or external hiring when sourcing candidates. As I saw it, both routes have their benefits and drawbacks. Here’s what I found when comparing internal hiring and external hiring.

What are the pros and cons of internal hiring?

I’m a huge advocate of internal promotion. After all, internal promotions have got me to where I am today. The advantages of internal recruitment include:

• Internal staff have a better business understanding: Those who have been with the business for some time should already understand the processes and systems. These employees are ingrained in your business’s culture. They will have a comprehensive understanding of its values and ambitions. This existing knowledge helps to make the onboarding process a lot smoother for the employer.
• Rewarding loyalty can inspire other employees: Rewarding top-talent employees within your business demonstrates that you care about their career progression. This approach shows that there are many more rungs on the career ladder within the business for team members to aspire to.
• As a result, your team are likely to have higher employee morale and remain loyal to the business. In fact, a study by Globoforce/Workhuman found that employees who receive regular recognition are five times more likely to feel valued and appreciated, six times more likely to invest in their work, and seven times more likely to stay with their current employer for at least another year.
• Internal hiring can be more cost-effective and save time: Identifying the skill sets you need internally can save time reviewing applications and CVs. You can speed up the interview process and won’t need to ask for references. You might also save money on outsourced recruitment fees.
• What’s more, internally promoted employees won’t require as much training or onboarding as external candidates. This approach invariably saves both time and money. What’s more, organizations that promote internally are 32% more likely to be satisfied with the quality of their new hires.
• Diversity of thought: Internal hiring is not without its limitations. Relying on the same talent pool may stifle access to fresh ideas and specialized skills that external candidates can offer.

What are the pros and cons of external hiring?

By hiring externally, you give yourself access to a far larger talent pool. This is particularly important if you are looking to fill an immediate skills gap. A popular approach is to first look within the business for employees with the relevant skills. Only broaden your search to include externally qualified candidates if you cannot hire in-house.

• New recruits bring fresh perspectives and innovative ideas: Perhaps the biggest benefit of external recruiting is the new variety of perspectives. Each new hire will have accrued a number of skills and expertise from their previous employer. By combining all of these insights, you can repeatedly come to the best and most efficient practices, rather than just leaning into tried-and-tested methods.
• External insights offer competitive advantages: Hiring team members from competitors helps to provide you with some perspective on how effective your strategy really is. It’s easy in a familiar team to become insular. Market leaders may think they have nothing to learn from rival organizations. However, with external insights, you may find that someone else has a leaner, more cost-effective or customer-focused approach. And, if they don’t, you’ll reaffirm that your business processes are already the most efficient and streamlined.
• Increased diversity: Improving diversity can strengthen a business from within and improve external perceptions. For example, gender-diverse companies are 15% more likely to outperform their less-diverse counterparts. Mirroring the diversity of your customer base can also bring benefits as you can better understand and meet their needs.
• Costly onboarding processes: However, the limitations of external hiring do present themselves. This approach requires more time investment, training and financial resources compared to internal hiring.

Is internal or external hiring best for my organization?

Both team-building methods have clear benefits. Having considered both approaches, I decided to use a mix of external and internal candidates.

A mix of the two would provide for the most diverse and dynamic team possible. I hosted a thorough assessment process for each position to identify the perfect candidate for the role. Having now completed the process, I feel we have a great team to support our future business growth.

The team members that I promoted internally have helped to embed external hires into our company culture and processes. The new blood brought in from outside has contributed fresh perspectives and suggestions to the team. Bringing together individuals from diverse backgrounds requires careful coordination. The next step is ensuring everyone’s priorities align and that the team works toward collective goals.

Need more advice on your recruitment strategy? Check out these other resources from Hays or get in touch to discuss how we can help.

• How to attract a temp and/or contract worker
• Retaining your team: Loyalty development
• Strategies for attracting and retaining top talent