The Advantages and Disadvantages of Internal and External Recruitment

20 Advantages and Disadvantages of Internal and External Recruitment

Considering whether internal or external recruitment is the right way to fill your recruitment needs? Which is best for you will depend on your business and your hiring needs for that particular role. But we’ll be breaking down at the biggest advantages and disadvantages of internal and external recruitment, so you can make the right decision for you.

Internal and External Recruitment: What’s the Difference?

Internal recruitment is where you fill a job vacancy by hiring someone who already works within your organisation: So this can be a direct promotion, or change in role than “hiring” as you move someone into a new area or team. 

Meanwhile external recruitment is where you go through the recruitment process of attracting and recruiting someone from outside your organisation to fill a vacancy. This is the more typical hiring process, and can be done through your own recruitment efforts, or through a talent solutions partner, like us here at Dynamic.

10 Advantages and Disadvantages of Internal Recruitment

Internal recruitment in one form or another is crucial to the longevity of your business and the long-term retention of your employees. But if you rely on it too much, it can be detrimental to your business. Here’s 5 advantages and 5 disadvantages of internal recruitment.

5 Advantages of Internal Recruitment

Let’s start with the positives, the advantages of internal recruitment for your business.

1. Quicker time to hire

When you hire externally it takes time. Even if you work with a recruitment partner like us here at Dynamic to reduce your time-to-hire, there’s no guarantee it will happen overnight. 

However, if you hire from within your own team, you can instantly advertise the role to candidates you know will have the required skills: Of course there is no guarantee they will be immediately interested, or immediately available.

2. Shorter onboarding process

The onboarding process is a lengthy process, generally covering the first year of a new employee’s employment. But, a strong onboarding process is the best way to ensure your new hire will be a fit for the role and team, and will improve your businesses employee retention.

When you hire internally, you can reduce (but not eliminate) some of this onboarding process. After all, you must still ensure that the internal hire is adapting to their new role and is fitting in well with the team. 

But they will be familiar with how the business operates, the policies you have in place, and be familiar with the people in the team and business: Reducing some of the initial onboarding and the risks of hiring new employees.

3. Saves effort, money, and resources

As we’ve discussed, hiring internally can save time. But that isn’t where the advantages stop.

This quicker time-to-hire also means less time interviewing or looking through relevant applicant CVs, you can get to work on new projects and clients quicker, and less money is spent on job boards and advertising services.

Hiring a new employee can cost your business well into the tens of thousands, depending on a variety of factors. But hiring internally, can help to reduce a lot of these costs. Although of course not all of them.

4. Can strengthen employee retention 

One of the most important parts of internal recruitment is the effects it has on employee retention. Because employees are only going to stay with a business that actively looks to progress its own employees, and when they have opportunities for career progression.

Meanwhile, hiring externally for positions that people are hoping to be promoted to will quickly breed resentment. Employees will resent these new hires who have come in at positions they wanted, who they may have to report to, and who haven’t been with the business as long as they have.

5. Greater certainty around cultural fit

One of the risks with any new higher is whether they are going to be a cultural fit for the business. Obviously you can ask questions in the interview process to gain insight into whether someone will be a good fit for the team and business, but it’s not something you can guarantee.

But with an internal candidate you will have a much better understanding of the candidate and if they will be a good fit for the new team and position.

5 Disadvantages of Internal Recruitment 

However, internal recruitment isn’t all sunshine and roses, as there are some significant disadvantages you need to consider.

1. Resentment among colleagues

Hiring internally and promoting can cause resentment among colleagues and other employees when not handled correctly. For a variety of reasons:

  • It can be a difficult change for colleagues who used to work together, now being manager and employee. 
  • It can breed resentment for an employee to see a colleague promoted into a position instead of them.
  • Team members left behind may resent the new gap in their team that needs filling and potentially increased workloads.

2. It doesn’t stop you needing to hire

When you hire internally, you’re still going to have a gap somewhere in your business left by the internal hire.

Meaning that you will still need to hire externally and bring someone new into the business: Thereby removing a lot of the advantages that come from internal recruitment. 

It can mean spending the same (or more) amount of time, effort, and company resources to now hire for two vacancies (one internal hire and one external) with two onboarding processes.

3. Reduces the pool of total applicants

Obviously when you hire internally you have a much smaller pool of applicants to work with. Depending on the size of your organisation, this may or may not be a problem.

However, most companies choose to use the best of both worlds to mitigate this effect: By offering the role internally and posting job adverts online.

Ensuring that existing employees have the opportunity to progress, but also gives the business to measure their internal candidates against what’s available, while also widening their available talent pool.

4. No new ideas entering the business

One disadvantage of internal recruitment is the lack of new ideas or new people entering the business. New hires joining the business is a great way to keep the culture and company growing. 

Additionally, new hires add some much needed breaths of fresh air for the existing team, avoiding them from coming stagnant in their work.

And as new technologies and software’s develop, it can be essential to bring in new employees with new skills and new ideas.

5. It can create a skills gap

If you internally recruit for multiple positions in quick succession, it increases the risks of a growing skills gap in your company. This can be due to: 

  • A lack of people with new skills entering the business, (making your own company training and development even more important).
  • Too many people with crucial skills leaving a team.
  • Or someone being internally recruited who doesn’t have a specialist skill that the business needs, creating a skills gap for one particular skill in a team.

Pros and Cons of Internal Recruitment10 Advantages and Disadvantages of External Recruitment

External recruitment is essential to the continued growth of your business. But when compared to internal recruitment, there are some advantages and disadvantages you should consider…

5 Advantages of External Recruitment

1. Fresh ideas and perspectives

External recruitment is essential in bringing in fresh ideas and perspectives that help your business grow into new avenues and verticals. These new people and perspectives help to develop your businesses new and existing processes, and keep your team engaged with, and enjoying their work.

A lack of new people however, can raise the risk of the workplace becoming stagnant and lacking innovation.

2. Access to a much larger talent pool

One of the biggest obvious advantages to external recruitment is access to a much larger talent pool of potential candidates: Instead of being limited to the tens, hundreds, or even thousands of potential candidates for a role within your business.

While this is obviously dependent on the physical location of your business, the difference this makes to the skills available to your business can be significant: Especially when you factor in remote workers etc.

3. Bring in new skills to the business

With how quickly industries such as digital and IT evolve, it’s essential to bring in employees with new skills to the business to ensure your business stays at the forefront of the industry.

Additionally, external recruitment is essential in filling any existing or emerging skills gaps in your current internal talent pool. Skillsoft IT Skills and Salary report showed that 66% of organisations reported a skills gap in their business, and 43% attributed it to technology developing faster than their skills development programs can keep up.

Highlighting just how important external hiring it is to your business, in bringing new skills into the business.

4. Creates a more impartial hiring decision

Hiring externally can reduce any internal biases or workplace politics that can cloud decision making and create a more impartial hiring process.

When you recruit internally, workplace relationships can play a part in who is hired, even if unintentionally. And hiring externally reduces the risk of any negative consequences for people who were looked over for the position in favour of a colleague.

5. External recruitment actually fills the hiring need

And finally, external recruitment actually solves the hiring needs of the business, whereas internal recruitment can simply shuffle around the employee gap.

Because unless you decide there is no longer a need for the internal hire’s old position, when you internally recruit for a position you still need to hire someone.

So while internal recruitment can be essential for helping your internal team progress and stay happy, it can often actually fail at what it’s supposed to do: Fulfil your hiring needs.

5 Disadvantages of External Recruitment 

1. The recruitment costs

The big barrier to hiring and recruitment is cost. And it’s no surprise, because when you take into account the time, money, and effort that is invested into the entire recruitment and onboarding process: It can add up.

Of course, hiring and recruitment costs are an essential part of business. But if you can hire or promote internally, it can be a way to reduce those costs.

Although you obviously will still have to replace the person you are now promoting, so it doesn’t eliminate those costs completely.

2. Cultural integration

A disadvantage of external recruitment is the uncertainty around things like cultural integration and cultural fit of any new employee. While these may seem small, especially if the employee has the skills they need for the job at hand, hiring and retaining someone who isn’t a cultural fit for your business can have a more significant impact on your business than you first think.

While you can ask questions in an interview to try and gauge if someone will be a cultural fit for your business, these aren’t foolproof and there is always a risk of making a bad hire.

3. Uncertainty around performance

Similarly to the above, there is no guarantee that any external hire will perform at the necessary level for your business. 

And again, while you can ask the right interview questions and ask interviewees to complete a performance based task or presentation, there’s no way to be absolutely certain that an external hire is right for the role.

However with internal hires, you have access to their work history, the projects and work they’ve previously completed, and can speak to their manager and colleagues about their performance.

4. Can demotivate existing employees

One of the biggest drawbacks of external recruitment can be its effect on your own employees. If one of your existing employees feels they are a good fit for the role but is overlooked, or isn’t given the opportunity to apply for the role, it can demotivate your existing employees.

When employees aren’t rewarded for their hard work, they may start to look elsewhere for the promotions they feel they deserve.

5. Longer hiring and onboarding process

Internal recruitment is typically much faster than external, requiring less time to find candidates for the role, a quicker interview process as your business already knows the employee, and much less paperwork as a lot of it is already taken care of.

Additionally, external recruitment typically demands a much longer onboarding process, to make sure that the new hires are fitting in well with the team and feel comfortable with their work.

Pros and Cons of External RecruitmentSo, Internal Recruitment or External Recruitment: Which is the Best?

When it comes to internal or external recruitment, there’s no absolute clear winner, and both are incredibly important. 

As a recruitment agency we would love to say that external recruitment is the one and only solution to your hiring needs. However, internal recruitment should also play a huge part in your business plans.

External recruitment is essential for growing your business, bringing in new ideas and innovations, and filling your hiring needs. Whereas internal recruitment is essential for ensuring existing employee retention and can drastically speed up the hiring process.

Although as we’ve warned, internal recruitment does actually fail to completely meet your hiring needs: As you will still need to hire someone new into the business.

So when you do need to dabble in external recruitment, it can be helpful to have a recruitment partner to support you and work alongside your own talent attraction efforts. If you’re looking for IT recruitment support, you can see how we can support you here.

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