7

Hire From Inside or Outside the Organization?

Jack Welch, former CEO of GE, said, “Great people, not great strategies, are what made it all work. We spent extraordinary time recruiting, training, developing and rewarding the best. Our reach and our success would have been limited without the best people stretching to become better.”¹

When a position becomes available either through growth or to replace an employee who is leaving for any reason, it is important to stop and determine exactly what is needed. If it is a replacement, it is common for managers to decide to hire someone with exactly the same skills that the previous employee had. It makes sense to, before you start recruiting, take the time to know what is needed for this position at this particular time. This is a perfect time to update job requirements or job duties, because things rarely stay the same in our fast-moving world. We recommend that you:

1.    Review the current job description to determine if it accurately describes the position and if the requirements for success are as it is currently written. For example, you may decide that the job really doesn’t require a four-year degree; so, you can move that requirement to the desired category. You also may decide that a job duty that performed by the former employee who held this job is now being done by another employee—so you can remove that job duty from this job description. Your goal is to have the description be as current as possible.

2.    Look at the budget to see if there is money to fill this position at the current level or if other options should be considered, such as using a part-time employee or contractor to do the job.

3.    Carefully evaluate if the position should be filled at all. Could the duties be shared by others in the department or eliminated altogether?

4.    Will filling this position help your organization achieve its mission or contribute to growth in some way?

5.    Is this the right time to fill this position?

If you decide that filling the job is the way to go, and the job description is approved or revised to reflect any changes in scope or requirements, then the next decision is whether to recruit internally or externally. Most organizations have internal job posting systems whereby your current staff is given the opportunity to “throw their hat in the ring” prior to the position being posted externally. If you don’t currently have an internal job posting system, consider putting one in place.

“Any time a company has an opportunity, they should consider inside first,” says Bill Greif, co-author of No More Rotten Eggs: A Dozen Steps to Grade-AA Talent Management. “They know the person and what they are capable of, so it reduces the risk and uncertainty of a new employee.”²

Because we know that many people lie on resumes and, when you hire outside candidates, you must rely on what is on their resume/application, what you learn in an interview from how they respond to your questions and what you can glean from references—in other words, not much!

Promoting or transferring a current employee, whose skills are well known to you, can cost less and take less time than going outside to hire an unknown, but it is always a good decision to approach the situation strategically. Does it make sense this time to promote or transfer a current employee, or go outside the organization? And, of course, it is perfectly legitimate to do both; just be sure that you carefully consider both options and that, if you have a job posting policy that says that all jobs must be posted internally before any external recruiting can begin, you follow your policy.

Let’s look at the advantages and disadvantages of internal or external recruiting.

Internal Transfer or Promotion

Advantages

    Provides career paths for current employees.

    Saves cost of ads, postings, and search fees.

    Boosts morale.

    Can create a “domino effect” that results in several internal moves, which can be highly motivational for current staff.

    Less on-boarding time/effort as the employee already knows the culture.

    You already know a lot about the employee: skill set, work ethic, career goals.

Disadvantages

    May not bring new ideas/new ways of doing things to the organization.

    May result in significant need for employee development.

    May pit employees against each other as one gets the promotion and another doesn’t.

External Hire

Advantages

    Brings new ideas into the organization.

    May result in lower employee development need/costs.

    Brings new talent/competencies into organization.

    May bring competitive knowledge if new hire comes from a known competitor.

    May result in increasing organizational diversity (certainly of thought and experience, but perhaps in other ways as well).

Disadvantages

    Increased recruiting costs and lost productivity if the search takes a protracted amount of time.

    Decreased morale as current employees feel passed over for promotion.

    Increased on-boarding time as new hire learns the culture.

    You don’t really know much about the applicant except what he/she’s told you in the interview.

Internal Hiring Process

Promoting from within is a selling point for many organizations, and it can be an effective retention tool, but in order for it to be truly effective, there has to be an established and followed policy. According to Maureen Henson, SPHR, vice president of HR at Henry Ford Bi-County Hospital in Warren, Michigan, “Internal recruitment provides a higher level of employee satisfaction.”³

It is critical to have a well-crafted posting and application process, and to ensure that all employees know about the policy and how it works. Posting should focus on the skills and abilities you are seeking as defined in the job description, and it is quite important that you actually hire people with those skills and abilities to be sure your recruitment process is fair and legal.

And, if you use the same criteria for decision-making on inside and outside candidates—for example, you only interview people who have the minimum qualifications for the position—then you don’t have to consider every inside applicant. Inside applicants must be treated carefully and must be informed about why they aren’t being considered. You may want to also include in your policy a way to notify the person’s supervisor if he or she won’t be considered prior to telling the employee. Supervisors should be trained to encourage people who want to move up in the organization and to encourage them to develop the skills necessary for the next level. They should also be warned about “hoarding talent” and not holding back talented people. If a talented person thinks his or her career is being held up because a supervisor is afraid to lose him or her, the organization will be the loser as the employee will leave altogether.

If your organization has the ability to track skills of current employees, this is a great way to fill positions. When a position comes open, either because of a resignation or growth, you can go to your skills inventory and search for current employees who have those skills. If you don’t already have a skills inventory, consider this story from a leading organization:

A mid-sized government contracting firm in suburban Washington, DC, says, in our business, we need to submit candidates for proposals and sometimes we needed to move quickly. We didn’t have a skills inventory of current employees, so it was decided the time had come to bite the bullet and develop one. We put a template together and asked each employee to complete it. We then scanned the completed templates and, just like that, we had our skills inventory. It made me wonder why we hadn’t done it long ago! As we hire new employees or lose someone, we input their skills and abilities so the inventory is always up to date.

Whether you decide to go inside or outside your organization to fill an open position, keep in mind that your employees need to feel they were given a fair shot at the promotion/transfer and, if they weren’t selected, where they fell short. When the employee who didn’t get the new position knows what skills and abilities he or she must demonstrate to be considered next time, that person can work to develop that skill. Hopefully, your organization offers opportunities for development. Encourage your employees to take advantage of those opportunities to help them learn and grow their talents.

Discussion Questions

1.    Name some of the things to consider before starting to recruit for an open position.

2.    What are three or four advantages of promoting or transferring from within?

3.    What are three or four disadvantages of promoting or transferring from within?

4.    What are three or four advantages of hiring from the outside?

5.    What are three or four disadvantages of hiring from the outside?

6.    Why is it important to have an internal transfer policy, and how is it used?