It is an age-old HR debate: Should you recruit talent internally or externally? Most HR professionals would probably say, “It depends.” Well, by the end of this article, I will give you my definitive position on the subject, but first, let’s define both options and layout some pros and cons for each.
What is internal versus external recruiting?
Internal recruiting is the practice of looking for talent within the organization to fill open positions, also known as succession planning. With turnover being very high and tenure being at an all-time low, it’s hard to adequately succession plan. This makes it harder to develop internal talent within the company and facilitates external recruiting, opening the search for talent to outside candidates.
Here are advantages and disadvantages to both.
The pros of internal recruiting:
Rewards in-house know-how.
Boosts employee morale.
Costs less than external recruiting.
Creates better employee relationships.
Increases employee loyalty and productivity.
Takes less time to onboard because candidates are already familiar with the company culture and brand.
The cons of internal recruiting:
May perpetuate a sense of entitlement among employees.
May limit new ideas and creative problem-solving.
Could lead to jealousy from overlooked internal candidates.
May provoke resistance to organizational change initiatives.
The pros of external recruiting:
Brings fresh ideas, education, and experiences to the company.
Exposes the company to a new applicant pool and improves the talent pipeline.
Could motivate employees to compete for positions versus feeling entitled.
Could lead to corporate growth and business expansion.
The cons of external recruiting:
Could take more time to identify and attract the right candidate.
Costs more in time and money to advertise open positions, interview and hire.
Will lead to some bad feelings from internal candidates who feel overlooked.
Could have a negative impact on retention, morale, and engagement.
Takes longer because the new employee needs time to assimilate successfully into the company culture.
The lists to of pros and cons, or advantages versus disadvantages, to internal and external recruiting seems to clearly indicate that it is better to recruit internally rather than take a chance on an external hire. We all know that the hiring decision is one of the costliest decisions a company can make. If you choose an internal or an external candidate, the wrong person can set your company up for failure.
Just look at Yahoo! Back in 2012, they choose an external candidate in Marissa Mayer as the new CEO, and her tenure did not live up to expectations. As you may recall, Marissa Mayer was poached from Google, where she and the company experienced early success. Yahoo! was hoping she could duplicate that success, but, after a series of failed ventures, bad hires and poor decisions, Yahoo! was recently acquired by Verizon for $4.4B, and Mayer has resigned as part of that deal with a $23M severance.
Not all external hires are bad, of course. Take Ford Motor Company: They brought in an outsider in Alan Mulally back in 2007, and he led the company back from the brink of bankruptcy to profitability. Mulally retired in 2014 and was replaced by Mark Fields (no relation), who was not able to sustain and build on the advancements of Mulally. So, in 2015, Fields was fired and Jim Hackett was hired. But General Motors chose an internal candidate when they hired Mary Barra, former Head of HR, as the new CEO in 2014, and she’s been amazing. Mary Barra has turned the company around and been named one of the top paid CEOs in America.
I said I would give a definitive opinion on which recruiting strategy is better, internal or external, and here it is: I understand the benefits of morale boosting and saving money, but I think that companies need to be shaken up from time to time. I like hiring externally because I believe that, when chosen well, an external hire can galvanize the workforce, keep employees motivated and bring in new ideas. I think that external candidates are more objective and less emotional about tough decisions. They can make assessments from an outside perspective without some of the relationship baggage that comes with hiring internally.
Which do you think is best for the company, internal recruiting or external recruiting?