When it comes to hiring, organizations can choose between hiring internally, promoting an existing employee, or hiring externally, bringing in new talent from outside the organization. What are the pros and cons of each approach? There’s so much information out there, let’s distill it down to what matters for your business here.
The Pros of Hiring Internally
1. Quicker hiring process and lower recruitment costs
Hiring internally can reduce the costs associated with recruiting and hiring a new employee. The organization does not need to spend time and money on advertising, screening, and interviewing new candidates. You don’t have to spend time writing job descriptions and job postings either. Depending on how many internal recruiters you have, this might be a good solution so your organization doesn't have to manage as many job openings.
The hiring process internally is much quicker too. Hiring internally is ideal for a company with fewer resources (especially in human resources) and less time on hand.
2. Motivated employees and higher retention rates
Promoting from within can motivate employees to work harder and aim for promotion opportunities. It also reinforces the idea that the organization values and rewards hard work and loyalty.
Employees who are motivated and feel like there is space to grow tend to work for the organization longer as well. This creates career development opportunities - something employees take into consideration seriously in the modern world of work. This also saves the employer time to retrain new hires and money to replace employees who come and go often, improving the retention rate.
3. Better fit and shorter onboarding
Internal candidates already know the organization’s culture, goals, and values. This makes it easier to evaluate whether they are a good fit for the role, team, and organization rather than taking a chance on an external hire who the organization is not sure of. There is a clear performance history.
This is especially true if an organization is in a very niche business market. Internal candidates tend to have specialized skills that are better suited for the roles and responsibilities at the organization. In this case, hiring internally makes more sense.
Internal hires also require less time to onboard since they already have knowledge of the organization, its procedures, and the industry. There is no need for a background check. Additionally, internal hires can start executing tasks and carry out their responsibilities much sooner than external hires. Once again, this saves the business valuable money and time.
The Cons of Hiring Internally
1. Limited diversity & pool
Hiring internally can limit diversity in the organization, especially in skills. Since most of the internal candidates will have similar backgrounds and experiences, the organization may miss out on the diversity of thought and ideas that come from hiring externally. Furthermore, hiring internally can limit the pool of potential candidates for a role, especially if there are no suitable internal candidates.
This is not ideal for innovation. Organizations that are diverse and inclusive tend to be more productive. These organizations typically have a happier and more engaged workforce too which results in a better working environment.
2. Office politics may arise
Hiring internally can lead to political considerations such as favoritism, nepotism, or bias, especially if there is a pre-existing relationship between the internal candidate and the hiring manager.
Hiring internally can also cause negative competition that affects a healthy work environment. Employees may think about leaving if they feel that promotions were given unfairly.
3. Less transparent hiring processes and an ongoing need to fill vacancies
Hiring internally requires being fair and transparent in your decision as an employer. Use performance records and other quantifiable credentials (such as key performance indicators or goals) to make your decision. This ensures that each employee understands that the hiring process is unbiased.
Moreover, when an internal employee is promoted, their previous roles are left to be filled. Nonetheless, fewer resources are needed to fill a junior position than a senior one. Companies with fewer resources should keep this in mind.
The Pros of Hiring Externally
1. A wider pool of candidates and efficient hiring
Hiring externally does open up a larger pool of candidates with diverse backgrounds and experiences. This can help the organization find candidates with the specific skills and experiences needed for the role and business.
When hiring externally, you could also find candidates who may be more suitable for other positions at your organization. The hiring process may be more efficient in meeting the business needs of your organization.
2. Fresh perspectives
Hiring externally can bring new ideas and perspectives into the organization. This can challenge the status quo and stimulate innovation. This is great for companies that are looking to grow.
When new employees come to the organization, they can also offer new insights into how to improve company processes and so much more. They bring in expertise about previous tools they have used that are relevant to the industries they are in. They can contribute more than just ideas for a product or service.
3. Professional development
External hires can bring in new skills, knowledge, and expertise that can benefit the organization and its employees. They can also serve as role models and mentors for existing employees.
This is the case when you hire someone in a more senior or managerial position. They can offer advice and wisdom that current employees will appreciate. This is a great opportunity for current employees to develop professional skills, build lasting professional relationships and increase the size of their professional network.
The Cons of Hiring Externally
1. Higher recruitment costs and longer onboarding
Hiring externally can be more expensive and time-consuming than hiring internally since it involves advertising, screening, interviewing, and potentially relocating candidates.
External hires require more time to onboard and get up to speed on the organization's culture, procedures, and the industry. New external hires require training as well, depending on the scope of their responsibilities and the industry they are in.
2. Cultural misfit
External hires may take longer to adjust to the organization’s culture, goals, and values, or may not fit in at all. When you hire externally, you are taking a chance on the individual.
It may become a costly hire. In the event that the new hire leaves during or after the probationary period, your organization will have to look for someone to fill in the position yet again.
3. Demotivating existing employees
External hires may demotivate internal employees who were also interested in the role and feel they were passed over for promotion. Hiring externally can affect employees that want a promotion negatively and they will start to look for other opportunities.
This creates friction in the workplace and organizations may go through unpredictable changes if employees start to leave. Organizations may have to carry out more resource-intensive hiring processes if they need to replace more than one experienced employee.
Hire Seamlessly with Borderless
When considering hiring a new employee, there are several factors that should be taken into account. Here are some important considerations such as skill sets and qualifications, cultural fit, personality, availability, salary and benefits, diversity and inclusion, and references and background checks. Overall, taking the time to carefully consider each candidate can help you hire the best person for the job internally and externally.
Borderless is here to help you hire employees internally and externally no matter where your candidates are in the world. Borderless is a win-win solution to your hiring needs. You get the talent you need, and candidates get the opportunities they deserve.
Disclaimer
Borderless does not provide legal services or legal advice to anyone. This includes customers, contractors, employees, partners, and the general public. We are not lawyers or paralegals. Please read our full disclaimer here.
