When most companies have a vacancy, their typical response is to hire externally.
This is because external candidates may provide new perspectives or have skills that are not available within the organisation. Nonetheless, hiring internally can complement external recruitment, given its benefits.
Over the years, various studies have also shown that internal hires perform better than external candidates.
In a study of 3,700 managers at a quick-service retail organisation based in America, researchers found that “internal hires generally outperform external hires, both individually and collectively, and they do so for less money.” The results were published in the Journal of Applied Psychology in 2018.
Perhaps one reason why companies are reluctant to recruit internally is because of structural barriers such as a culture or policy that discourages hiring from within. Another possibility is that supervisors do not want to give up an important member of their team because doing so will mean that they have to expend more effort to look for a replacement.
Regardless of the reasons, here are some reasons why internal recruitment can be advantageous to organisations.
1. Internal hires have a wealth of institutional knowledge and internal connections
Zurich-based bank UBS sees its employees as assets who can better serve their clients. In an interview with Gallup, Mr Stefan Seiler, Group Head Human Resources at UBS said: “UBS can only outperform its competitors if we are able to bring the whole bank to our clients.”
“It’s much easier to deliver the whole bank to clients when you’ve worked in different areas of the organisation. And internal hires certainly trump external hires in bringing institutional knowledge and an internal network.”
Elaborating on the value of internal hires, Mr Seiler said: “If you move from one division to another, you’ll maintain and grow your internal network. Gaining experience across the front, middle, back and control functions develops a much more holistic picture of the firm.”
As such, the bank introduced an internal mobility online platform called the Career Navigator. Through the platform, UBS employees can easily search for vacancies and UBS recruiters can search for internal candidates.
The Career Navigator can also assess employees’ suitability for a role and it also highlights openings that employees can consider, as well as provides links to learning opportunities. To date, 120 employees have applied for positions through the platform.
2. Increased job satisfaction and staff engagement levels
A lack of career progression has frequently been cited as one of the key reasons why Singapore employees want to quit their jobs. This will lead to additional costs to replace and re-train workers to fill the vacancy.
A 2018 survey by recruitment firm Randstad showed that 1 in 2 millennial respondents within the age of 18 to 24 saw career progression opportunities as a “must-have” criterion for employers. In contrast, only 36 percent of respondents between 45 and 64 said that ‘career progression opportunities’ are important to them.
If employees were given the opportunity to take on a new role within the organisation that fulfils their career aspirations, it is more likely that they will be engaged and have higher job satisfaction.
Japanese fashion retailer Uniqlo beat 150 other companies to be named the best employer in Singapore in 2020. Its secret? Grooming their staff for a purposeful career.
In an interview with The Straits Times, Mr Yuki Yamada, chief executive of Uniqlo Singapore and Malaysia, said the company believes in investing in their staff through training. For instance, it has a manager candidate programme to develop leaders through mentorship and classroom training. Having such programmes give employees the assurance that their hard work and talent will be rewarded through career progression, thus increasing their job satisfaction and engagement levels.
3. Cost and time savings from internal recruitment
When businesses choose to hire internally, they can save on referral bonuses and relocation costs since the candidate is already working in their organisation. Companies can also save on extensive training as the internal candidate comes with some organisational knowledge.
Recruiting from within also takes a shorter time as compared to external recruitment. This is because the organisation has access to the candidate’s performance reviews and supervisors can give their feedback on the candidate directly. This saves the hiring team the time of sifting through countless resumes.
While putting in place structures that encourage internal mobility is important, what is more effective is to change employees’ mindsets about the value of internal recruitment and encourage a culture of internal mobility.
Ultimately, it is not easy for companies to look for and identify top talent. Given that talent is crucial to a company’s success, it will bode well for companies to use both internal and external recruitment to ensure that they secure the best talents for the position.