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Company Culture Recruiting

Why Companies Should Embrace Internal Hiring

Celential.ai
Written By Celential.ai
On Jan, 21 2020
2 minute read

In 2015, Oracle released a survey that found that more than 60% of employers claimed internally promoted workers performed significantly better than externally hired workers in similar positions. The data varies from company to company, but a study conducted in 2017 by recruiting corporation Jobvite suggests that internal workers are up to “6x more efficient than any other source of hiring”.

Still, less than half of all positions are offered to internal employees, a number that only shrinks when it comes to high-level or executive positions. Employers in tech sectors seem reluctant to invest in their own workers, preferring to hire tech talents from outside competitors due to less required training time. Vacancies are also outsourced to subcontractors at an alarmingly increasing rate, saving companies money but not productivity or engagement.

According to the Harvard Business Review, over 90% of positions before the 1970s were filled through lateral assignments and promotions. With the 50% decrease of internal hiring over the past half-century comes inevitable decreases in retention and company loyalty. Many tech workers feel that the only way to advance their careers is through accepting positions in other companies, at an average cost for their original company of $15,000, or, for higher-ranking executives, up to 2x their annual salary. And with 70% of workers actively searching or considering to look for a new job, it’s more crucial than ever for companies to find a way to encourage them to stay.

In 2018, tech emerged as the business sector with the highest percentage of turnover, outranking categories with traditionally low retention rates like retail and media. A 13.2% turnover rate in a 12 million worker economy means that more than hundreds of millions are going down the drain in lost revenue, a number that could be amended if more focus was directed towards employee retention.

Internal recruiting has been shown to increase workplace morale, engagement, and, subsequently, profits. Investing in employee training and encouraging internal mobility helps companies prove that they truly care for their employees, building a foundation for mutual trust and respect. Internal recruiting is also cheaper and more efficient. Internal hires save thousands of dollars on recruiting and screening costs, while prior employees need less training and time to adjust. It’s also much less of a risk to take on an employee who has already proved themselves to you over and over again than a completely unknown recruit who may turn out to become a poor hire.

Inversely, establishing internal recruitment opportunities and benefits helps attract stronger external technical talent. A LinkedIn survey revealed that more than 60% of applicants applied for a job because it offered better career opportunities. Higher instances of internal recruitment not only brings stronger external applicants to the table, but increases the chance of them choosing to stay with the company in the long-term.

Tools like career maps and transparent hiring processes can help employees understand what skills and experience they need in order to further their career with your company. By providing employees with a clear roadmap to success, companies receive in return dedicated employees with a vested interest in productivity.

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