Strategic HR 101: The Value Of Internal Recruiting

This year we’ve made a resolution to help HR professionals effectively practice strategic HR and become key players in the business activities of the entire organization. This is the main reason we started our virtual summit, and it’s what motivated a lot of the articles, research, and product developments we’ll be sharing this year.

One of the immediate ways we’ve found that HR can become these key strategic players is to get to work constructing a strategic pipeline that creates qualified internal candidates for future job openings.

That’s not to say external recruiting is a bad thing. External hires are necessary (and entrepreneurs know they are needed). They initially define startups, and as businesses grow it feels easier to continue to hire externally instead of fully considering the talent you have already trained and developed. But failing to consider the talent you have can be a costly mistake as recruiting, onboarding, and training new employees is quite expensive. And filling roles from within can be more advantageous. Here are three reasons why:

Cost. In addition to the administrative costs of bringing a new member onto the team, new hires receive 18-20 percent higher salaries than an internal employee recruited to the same position. Plus, hiring external recruits raises the pay levels across the board for your workforce.

Performance. Research shows that external recruits have lower performance during their first two years on the job than internal employees promoted or transferred to the same job. During those two years, external recruits are 61 percent more likely to be laid off or fired, and they are 21 percent more likely to leave voluntarily. So, in many cases, those external recruits will wash out before their performance catches up to that of internal hires. And even if they don’t wash out, the research found that it is rare for the external recruits to outperform internal employees recruited to the same job.

Experience. In his book “Chasing Stars: The Myth of Talent and the Probability of Performance,” Boric Groyberg points out that experience and performance at one job are usually tied to the resources of the job and company and often don’t carry over to a new job when recruited. So those really impressive accomplishments on an external recruit’s resume may not give them the advantage you’re hoping for when you hire them.

So, can we all, at least, agree that it is critical to examine our internal talent thoroughly before we go headhunting? After all, it’s an important way to boost morale among your employees and help them see that they have a future of upward mobility with your company. Furthermore, when we champion a culture of internal advancement, our employees are more productive, innovative, loyal, and dedicated to company goals.

Last fall, the business professionals from all organizational levels who attended our summit told us that while they feel like recruiting is the HR activity that receives top priority in their organizations, they feel like training and development should be their companies’ highest priority—asserting that they see value in nurturing internal talent.

So how do we nurture this talent to make sure we already have the strongest candidates when a position becomes available? Here are four suggestions to get you on the right track:

Hire right. Hire employees with ability and potential and who are teachable. Look beyond the job you are hiring them for and consider positions they might be well-suited for after you develop them. This also includes hiring for culture fits, because if you’re going to commit to investing in the power of internal recruiting, your employees may be with you for a while, and you want them to fit in.

Regularly take the pulse of your workforce. Have regular communication with your employees so you know how engaged they are. This can include frequent performance management and engagement assessments, but it can help you be aware of those employees who are developing skills, showing dedication, and becoming a vital part of the future growth of your company.

Create opportunities for growth. If you’re managing performance, you know what skills each employee possesses. So ask your employees with specialized proficiencies to conduct trainings for other interested employees. If you are a young organization or are strategically planning to grow and have a need for a new skill, bring in industry professionals to conduct relevant and pertinent trainings. And at the very least, find free online trainings and tutorials that employees can participate in. Whatever your strategy is, be sure to budget for training and development, tell your employees about opportunities, and encourage them to take part.

Have a healthy pipeline. Once you’ve done the previously mentioned steps, you’ll have a healthy pipeline of prospects ready for advancement. Keep it filled by continuing these steps, and when positions become available, you’ll have viable internal candidates to fill the positions.

Once you understand the value of recruiting internally, and you develop strategic activities to develop your existing workforce, you’ll be equipped and able to become more profitable and productive. And those characteristics translate into success for your entire company.