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How to know when to hire internally and when to look outside

Rich Hein | May 15, 2013
In a perfect world promoting internally is a good way to lower costs, create a talent pipeline and build morale. However, in the real world, you must weigh those benefits against the need to get the right skillset for the job.

"The hiring process is much quicker. With an internal hire it can take a few weeks but with an external hire it can take months," says Schawbel. If you hire internally you already have a reputation and performance record. There's also no background check needed, notes Schawbel. Another consideration: It takes internal hires less time to get up to speed. They already have a solid contextual knowledge of how things are done and a network to help them do it.

"You don't have to devote as much time to training--the person already knows the environment--so you can focus purely on getting him or her up to speed in their new role," says Tracy Cashman, Partner and General Manager in the Information Technology Search division at WinterWyman.

3. Hiring Internally Builds Morale
"You can be a hero if you consistently look to promote or hire from within. The best managers are always looking for ways to enhance their staff's careers," says Cashman. The top talent is not only concerned about doing the best job possible they are also concerned about their career trajectory.

One of the top reasons people leave their job is because they feel there is no room for advancement. However, when there is a career path and clear expectations on what it takes to get to the next level employees will have less interest in moving on. "It helps with retention; employees see a path upwards and job security. That loyalty is rewarded," says Doug Schade, principal consultant, technology search at WinterWyman.

Another salient point: An internal hire is already a known quantity. "You already know the person fits the culture; otherwise, you wouldn't be considering them," says Cashman.

4. Internal Hires Have a Better Success Rate
The Saratoga Institute study also revealed that 40-60 percent of external hires aren't successful in their new role as opposed to 25 percent hired internally.

The research done by Bidwell agrees, reporting that external hires receive lower performance reviews for the first two years of employment. Bidwell's research indicates it takes this long for external hires to build an internal network and to learn the inner workings of the company. The end result is that internal hires reach their potential faster.

Bidwell's research also indicates that there is 61 percent higher rate of terminations/layoffs and a 21 percent higher rate of voluntary exits for externally sourced employees. Numbers like that demonstrate one of the reason companies may want to start building an internal talent pipeline.

3 Reasons to Hire Externally

1. Finding the Right Skillset for the Right Job
"If you have an open or newly created position and just don't have the talent in your organization to support that position, then you have to go externally," says Schawbel.


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