Why You Should Hire Internal Candidates

Hiring is simultaneously one of the most difficult and most important processes of any business. Employees are the life of any major company, as they produce value and carry the brand of an organization. As a result, finding the right candidate for an open position can pose a major task for any HR team.

A bad hire can cost an organization up to $240,000 in expenses related to training, retention, and compensation. Depending on the size of your business and your company’s margins, a few bad hires could be the difference between making a profit any given year. A bad hire could set your company back months or even years, plus — in situations like these — you have to start the hiring process all over again.

Companies are competing for talent at a higher rate than ever before, and an internal candidate hiring system can help combat talent shortages. There are a number of advantages of choosing an internal candidate over an external candidate. Let’s take a look.

Reduce Hiring Time

Having an open position can be detrimental to the long-term performance of any organization. HR teams need to ensure that they can hire the right candidate as quickly as possible, while still taking all the necessary steps to ensure that the chosen candidate is the right fit. Working with an external candidate can be difficult as HR teams have to work around the potential employee’s schedule. Finding time for interviews can take weeks, especially if the candidate has a full time job.

Internal candidates can reduce the overall time it takes to fill a vacant position and scheduling interviews will be much easier since HR can coordinate with the internal candidate during working hours. Time can also be saved in other facets of the hiring process. For example, internal candidates may not need full interviews with every stakeholder. If an employee is moving within their department, many of the key stakeholders may already be familiar with the candidate. Internal candidates will not need extensive background checks and can negotiate a transition plan to their new role that may be faster than giving 2 weeks notice.

Cost Savings

Trying to cut costs should never be the primary reason to hire internally, as a bad hire will cost far more than a recruiter. However, it should be a factor to take into consideration when deciding to hire internally or externally. Budgets are being constrained more than ever and HR teams are being forced to cut costs wherever possible.

Your HR team won’t have to fork over thousands of dollars for expensive recruiters or spend time and money posting jobs online. You can also save costs in the way of compensation, because you generally don’t have to pay internal candidates as much as external candidates. University of Pennsylvania Wharton School professor Matthew Bidwell’s research into investment bankers showed that external candidates earned between 18% and 20% more than internal candidates promoted to a similar position.

Familiarity

The onboarding process will be much smoother for an internal candidate because they won’t need to learn the fundamentals of your organization. They are familiar with the software, the hardware, and employees at your organization. This puts internal candidates at a huge advantage compared to external candidates.

New external hires will have to learn the lay of the land. They will not know who to ask to accomplish a specific task and who has the specific knowledge they need to learn from. Niche company knowledge could take months to learn. On the other hand, depending on the size of your organization, internal candidates may already know exactly what to do when they run into a problem. Thus, they will be able to hit the ground running when they start their new role and adapt easier than their external counterparts.

Another issue for external hires is that they have habits from their prior organization that may need to be broken. Additionally, external hires may have trouble adjusting to the way that your organization functions, which could decrease employee performance. Meanwhile, the internal candidate knows how your organization works and is already prepared to shine within your company.

No Surprises

Hiring external candidates is always going to present a risk because there could be unexpected issues that arise during or after the hiring process. Issues — such as failed drug tests or lying about their performance or skills — can completely derail the hiring process. When all is said and done, employers may find themselves with a new hire that does not meet their needs.

Internal candidates will not present the same risks. Organizations can look accurately at the employee’s career performance, interview managers and teammates, and distribute skills tests to get a clear picture of their internal candidate. This will help employers ensure that they have the right person for the job.

Improve Employee Morale and Retention

Some employees will see the bright side of watching their co-worker ascend to a different or higher position within a company. The effect of this ascension may lead other employees to be more motivated; they will want to improve their career and move up in the organization as well. Employees will be more likely to stay with your organization over the course of their career if they know that they can continually move to higher positions and hiring internally helps embody this ethos.

Employee retention can also benefit when internal hiring is part of your culture. Employees will be able to see themselves at your organization for their entire career, instead of jumping from company to company. Keeping all-star employees is more difficult than ever, but seeing a deserving colleague move up the career ladder could convince them to stay.

Encourage Succession Planning

One of the benefits that is often not considered when forming an internal hiring strategy is that it helps organizations start to form a succession plan. Only about 35% of companies have a formal succession plan in place, and hiring an internal candidate may help your company take succession planning seriously.

Your company will be more likely to properly train and upskill employees to ensure that they are ready to move into the higher position when succession plans are in place. Internal candidates will be ready to excel in the position that has been set for them in the succession plan, and your company will have a much shorter job gap if a succession plan for internal candidates is properly developed and adhered to.

Adopting an internal hiring strategy is a no-brainer for HR teams. The best talent is already known and trusted by your organization and is ready for their next opportunity. The benefits of internal candidates are clear and plentiful, from cost savings to employee morale. Here’s your chance to embrace talent that you’ve already began investing in.

To learn more about the benefits of hiring internal candidates, check out our white paper:

Winning in the Skills Economy: The Strategic Guide to People Development