Internal Hiring

Internal recruiting is the process of filling vacancies within a business from its existing
workforce. On the contrary, external recruiting is how a business looks to fill vacancies from
outside.

Companies today use internal recruitment to fill roles in their business that are best suited to
having an insider’s view or knowledge, as well as encourage loyalty and a sense of progress for
employees. Internal recruiting is an important aspect of any business as it can save time, money
and resources when compared to recruiting externally.

Types of Internal Recruiting

 Promotions: The most widely used form of internal recruiting is the one everybody
hopes for – a promotion.
 Transfers: A transfer typically entails moving to the same job at a different location or a
similar level job in a different department.
 Temporary to Permanent: Similar to a promotion, this involves making a temporary
position holder or intern a full-fledged employee.
 Employee referrals: A hiring managers dream – and an often overlooked type of internal
recruiting. Employee referrals are a great, cost-effective way to get qualified candidates
in front of hiring managers. Having a system in place to encourage and gamify the
employee referral process will help to ensure you see a constant stream of employee-
referred candidates.

Hiring from inside your business makes sense because new hires are already part of your team
and know your culture and policies well. But despite the benefits of internal recruitment, relying
too much on promotions and lateral job moves might have negative side-effects.

Here are advantages and disadvantages of internal recruitment and how to ensure that when you
are hiring internally, your process works:

Advantages of internal recruitment

Hiring internal candidates can be more efficient than recruiting externally, because it can:

1. Reduce time to hire

When recruiting externally, hiring teams find candidates (either through sourcing or job posting),
evaluate them and, if all goes well, persuade them to join their company. All of which takes time.
 Conversely, internal candidates are already part of your workplace, so the time you need to find
and engage those candidates is much less. It’s also easier to assess internal candidates because:

 They’re prescreened for culture fit.

 Their track record is easily accessible.
 They may not always need full interviews with managers (for example, if they are moving
within their department, the department head already knows the candidate.)

All these reduce the time spent on each hiring stage and your overall time to hire.

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2. Shorten onboarding times

Everyone needs some time to adjust to a new role, but internal hires are quicker to onboard than
external hires. This is because they:

 Know how your company operates and most of your policies and practices.
 May be familiar with people in their new team, especially in smaller businesses.
 May already know the content and context of their new roles if they move within the same
team or to a similar one (for example, a sales associate becoming a category manager).

3. Cost less
Research has shown that external hiring may cost 1.7 times more than internal hiring. This is
because when hiring from within, you usually don’t need to:

 Post ads on job boards. It’s easy to inform internal candidates about job openings
through email or your company’s internal newsletter. You could also place printed job ads on
a bulletin board, if all your employees work in one place.
 Subscribe to resume databases. Instead of sourcing passive candidates on resume databases,
ask managers about their team members or look into your HRIS to find coworkers who might
fit in your open roles.
 Pay for backgrounds checks. You may already have conducted background checks on
internal candidates when you first hired them. And, you know if they’re in good standing
based on their manager’s input or employee records.

4. Strengthen employee engagement

Promoting from within sends a message that you value your employees and want to invest in
them. Giving employees more opportunities to advance their careers, or even letting them move
to other same-level positions that may interest them, is good for morale: employees who change
roles develop professionally and others know they may have similar opportunities in the future.
This helps to build a culture of trust that enhances employee engagement and retention.

5. Strong Cultural Fit

Company culture isn’t one-size-fits-all. Your company’s behaviors, beliefs, and attitudes work
together to shape your unique culture. Hiring for cultural fit requires ensuring candidates share
those behaviors, beliefs, and attitudes. Existing employees, however, have already proven they’re
a cultural fit. You know their working style and values align with your organization’s — so you
can move right to the next stage of your interview process.

Disadvantages of internal recruitment

Despite all the merits of internal recruitment, there are some things to keep in mind. Hiring from
within can:

1. Create resentment among employees and managers

Employees who were considered for a role could feel resentful if a colleague or external
candidate is eventually hired. Also, managers are often uncomfortable losing good team
members and may even go so far as to hinder the transfer or promotion process.

2. Leave a gap in your existing workforce

When you promote someone to fill an open position, their old position becomes vacant. This
means that a series of moves and promotions may ensue that could disrupt your business’
operations. Ultimately you may need to turn to external recruitment in addition to your internal
hire.

3. Limit your pool of applicants

While your company may have a lot of qualified candidates for specific positions, this isn’t
necessarily true for every open role. For example, if a role is fairly new to your business, your
employees will have other specialties and may not be able to fill this skills gap. Relying solely on
internal hiring means you could miss the chance to hire people with new skills and ideas.

4. Result in inflexible culture

Doing most of your hiring from inside your business may result in a stagnant culture. This is
because employees can get too comfortable with the ‘way things are done’ and struggle to spot
inefficiencies and experiment with new ways of working. An inflexible culture will be more
problematic in leadership positions where employees may need to advocate for change and
 improvements instead of relying on established, inefficient practices. External hires are essential
in shaking up culture and offering a fresh perspective on existing problems.

5. Echo Chamber

External hires give you the opportunity to improve your company’s diversity, broadening your
collective outlook as a result. By exclusively hiring from within, you could risk creating an echo
chamber of employees with similar backgrounds and experiences. Make sure you’re continuing
to build a team with a diversity of perspective, background, and work styles. Doing so will keep
your organization innovative and inclusive.

6. A Hiring Domino Effect

Filling an open role with an existing employee means she’s now left her current role open.
You’ve filled one role and opened another! This isn’t necessarily a bad thing. But it does mean
internal hiring can spur even more hiring.

What could you do to mitigate the disadvantages of internal recruiting?

To avoid resentment, cultivate trust and ensure you hire effectively, you could:

 Ensure promotions or job moves aren’t the only ways to recognize employees or help
them advance their careers. Consider offering opportunities for training, job shadowing and
job rotation. Also, lay the foundation of rewarding employees frequently (for example,
encourage supervisors to praise their employees or give out performance-related bonuses.)
 Have a transparent process. Ensure internal candidates understand your hiring process and
why they weren’t selected. It’d be good to give them interview feedback or pointers on what
skills they might need to develop to be successful in the future.
 Train managers to prepare their team members’ career paths. Help managers think of
possible career moves for their team members and ask them to take part in formulating your
business’ succession plan. That way, if a position opens, you could immediately consult your
plan to see which employee may be a good fit.
 Avoid communicating an opening if you already have a candidate in
mind. Communicating an open role means that you give employees hope that they might be
hired for this role. But if hiring teams already prefer a particular candidate, it’s best to reach
out to them directly first, instead of encouraging others to apply.
 Use a balanced mix of internal and external recruiting. Each time you want to fill a
position, decide whether to recruit internally, externally or both. Base this decision on the job
requirements and the skills your current employees have as well as your company’s needs for
a culture add.
When to Recruit from Within?

Using an internal hiring process can be very beneficial, but doing it at the right time and in the
right situation is key. Here are some best practices to ensure your company is in the right place to
recruit from within:

 You have a system in place to differentiate your internal candidates from external
candidates. The last thing you want to do is send a generic rejection email and risk
sending a bad signal to valuable current employees, prompting them to look elsewhere.
 You have determined that having an insider’s perspective for the role would be more
impactful and timely than a new perspective.
 You have an internal job board and/or career ladder so current employees know what is
available, and they have a clear understanding of the next steps in their career path at
your company.
 You have evaluated the internal prospects and determined that the candidate up for
promotion is truly qualified and not being favored for improper reasons. This will reduce
the chance that their coworkers feel unfairly overlooked for the promotion.
 You have spoken with the management team to decide on logistics for your internal
hiring process. For example: would a manager from the design team be able to encourage
a sales team member to apply for an open role?

How to Recruit from Within Your Own Company

Taking into consideration the advantages, disadvantages and best practices outlined above, here
is a step-by-step guide for how you might go about implementing an internal recruiting strategy.

1. Set up your processes – get your internal job board running; decide who should be
included in making these decisions; and make a clear and concise policy for both
managers and employees. Having all of these set up before you roll it out to your
employees will save you a lot of time and headache in the future.
2. Use an ATS (Applicant Tracking System) – adopting an internal recruitment strategy
could potentially inundate you with applicants. Have an ATS in place to easily keep track
of the entire hiring process of both internal and external candidates. This is paramount
to hiring in the most efficient way. A great ATS will also come with employee referral
features built right in.
3. Encourage Your Employees – this strategy only works if your employees actually know
you want them to apply internally. Have a meeting with the managers at your company
and advise them to encourage employees to look at the internal job board regularly. This
will ensure you have a constant stream of qualified internal candidates.
4. Screen – just because candidates are already employed at your company does not mean
the screening process should be any less rigorous. Make sure that people are applying for
 jobs that fit their skill sets, and that your company would benefit more from a current
employee in a new role versus their current role.
5. Be Fair – the last thing you want is for your nifty new internal recruitment strategy to
backfire and cause negativity in the workplace. Have multiple stakeholders involved in
the interview and promotion process to quickly weed out internal candidates using a fair
and transparent process.
6. Give Constructive Feedback – not every person who applies for an internal position is
going to be qualified or a good fit for that particular role. You want to let unsuccessful
internal candidates down easy; a generic copy-pasted rejection email isn’t going to cut it.
Offer advice on skills to work on or certifications to pursue that would make them better
suited for the role. Suggesting other roles that may be a better fit is also a good way to
ease the disappointment of being rejected for a particular role.

Internal Sources of Recruitment

Definition: The Internal Sources of Recruitment mean hiring people from within the organization. In
other words, seeking applicants for the job positions from those who are currently employed with the
firm.

In any organization, following are the most common internal sources of recruitment:

Transfer:
It refers to changing place from one position to another, but no change in pay scale and
responsibility. A transfer is a change in a job assignment. A movement of an employee between
equivalent positions at periodical intervals is called transfer. Transfers are normally made to
place employees in positions where they are likely to be more effective or where they are likely
to get greater job satisfaction. Transfer is often important in providing employees with a broad-
based view of the organization. It is a lateral movement of employees.

Demotion:
It refers to low pay scale and lower positions. However, it is a one kind of punishment.

Former Employees:
Former employees can include those who have worked on part-time basis and now desire to
work on a full-time employment, retired employees or those who have left the company for some
reason but are now willing to come back. Former employees are a good internal source of
recruitment. They have the advantage of knowing the organization and the organization knows
the performance of these people.

Typically, these are people who were laid off, although they may also have worked seasonally
(during summer vacations or tax seasons). Forming online alumni at work could be a simple and
cost-effective way to maintain a hiring pool of competitive candidates. Furthermore, a network
of former employees can be a source of employee referrals because they are familiar with the
company, its culture, and its values.

Job Posting:
Job posting is a way of hiring people from within. In this method, the organization publicises job
openings on bulletin boards, electronic media and similar outlets. For an example, Hindustan
Lever introduced its version of open job posting in early 2002 and over 40 positions have since
been filled through the process.

HLL even allows its employees to undertake career shifts like from technical position to non-
technical jobs such as marketing, market research, etc., through the open job posting system.

For example, the AV Birla group allows its employees an opportunity to apply not just for jobs
within their own companies, but for jobs in any company in the Birla group, in India and in
abroad.

One of the important advantages of this method is that, it offers a chance to highly qualified
employees working within the company to look for growth, opportunities within the company
without looking for outside.

Promotion:
Promotions are the most common form of internal recruitment wherein the employees are moved
to the upper levels of the organization with more responsibility and prestige. When the higher
level positions fall vacant companies recruit from within the organization so as to capitalize one
of the following benefits:

The employee is familiar with the working of the organization.

Less cost is incurred as compared to hiring the person from the external sources.

The chances of selection are bright since the performance card of the individual is readily
available with the firm.

It boosts the morale of the employee.

The others in the organization also get motivated to work harder to get promoted to the higher
levels of the organization.
Employee Referrals:
The present employees can refer their friends and family to the job. They are well aware of the
organizational culture, working conditions and job requirements. If they find their friends or
family suitable for such position can recommend their names to the management for recruitment.

The organizations encourage employee referrals as the cost and time could be saved than from
hiring people from the external sources. Some organizations, in order to motivate employees to
pay “finders fees” in the form of incentives for each successful hire.

Internal Advertisement
Hiring managers can promote a position within the business to internally recruit. They can hang
notices in break rooms and on bulletin boards, and send a memo to employees. If the job is
posted online, include “internal only” in the job description.