The Complete Guide to Internal Hiring for Recruiters

Since businesses switched from the traditional model to hybrid due to the pandemic, there has been an immense increase in job opportunities. While this is great for professionals all across the world, it is also causing businesses to lose talent at an alarming rate. This is what we are calling "The Great Resignation," and it's wreaking havoc on the business world like nothing we've ever seen.

To keep the increasing attrition levels in check, companies are taking various measures like revamping their R&R methods, delivering better employee experience, offering compensation hikes, etc. However, there still lies the gap in place of those who have already left or are planning to leave soon as part of the quick talent drain regime.

Posting publicly to fill the available vacancies surely looks like the way to go, but it’s time-consuming in a rapidly changing business environment. This is where the concept—or, should I say, a more practical solution—of internal hiring may come in handy. 

If the term "internal hiring" has rung a bell in your head, let's take a look at what it means and how it has evolved.

First, What is Internal Hiring?

In simple terms, internal hiring or internal recruitment is the process where you give more preference to your existing employees to fill up a vacant position rather than sourcing new talents from outside the organization. 

Instead of publishing the available vacancies in public forums, you circulate information about them amongst your teams either within a department or throughout the organization via internal communication channels/mediums. Thereby saving a lot of time, resources, and associated human effort compared to hiring externally.

Internal hiring isn’t only about filling vacant roles as it can be divided into these four categories-

1. Shifting from temporary to permanent payroll

As the point says, it’s mainly about upgrading an existing employee’s position from a temporary one to a permanent one, just like lifting someone serving as an intern and offering them a full-time position in the corresponding job role/department.

2. Promotions

Another format of the recruitment process is promotion. Here, the permanent employees are uplifted from their current job roles to a higher ones with additional responsibilities complemented by better pay & other benefits.

This category of an internal hiring process is the one that employees mainly look forward to when their professional goals align with the organization’s motives.

3. Employee referrals

This internal recruitment model is where suitable leads or candidates for a job role are gathered from the existing employees. In this scheme, HR managers can leverage the professional connections of their internal employees to connect to and recruit the best candidates.

4. Transfer

In this mode, the existing employees’ are either sent to a different work location to fulfil a similar job role or to another department within their current work location where they could be assigned a matching role or something new.

Why & When to Consider Internal Hiring?

It won’t be wrong to say that the answer to this question is still a topic of discussion for many HR and business leaders. Usually, whenever there’s a vacant role lying around, companies tend to look for or attract potential candidates from the outside. 

It has got numerous pros, but for why you should also focus on hiring internally, I present with a strong opinion. 

You’ll surely find someone who is experienced in multiple disciplines and has the potential to bring new verticals to the business. However, at the end of the day, you should also see that your business sticks to the core goals that you and your existing employees have worked for over the years. 

At the same time, as a responsible business leader, you should present your employees with ample opportunities to develop and grow their careers within the organization.

Further, it’s the trust factor that comes to play. You’ll trust those who have shown their mettle working for the organization and have played a key role in its growth.

Coming to the next part of the question, when should you consider hiring internally?

There are various instances where internal hiring could be the most viable option for filling job vacancies at your workplace. 

Instance 1 - If the position involved requires a great amount of internal company knowledge. 

Instance 2 - If you have a tight budget for hiring and onboarding fresh or experienced employees from outside the company. 

Instance 3 - The qualifications required for the vacant job role are already present amongst most employees within the existing workforce. 

Instance 4 - You already have enthusiastic talents from your existing workforce who are willing to take up the vacant position and prove their mettle yet again. 

Instance 5 - When filling up the vacant position is the need of the hour without having much time to explore talents externally. 

Now that you know when to consider let's look at the best practices to follow during internal hiring.

Internal Hiring Best Practices to Follow

Hiring from within the existing workforce can be tricky if not dealt with properly. Any wrong move and you might end up losing your best talents. For this reason, I’m noting down some of the best practices that you can consider when planning to hire internally.

1. Have a proper SOP for internal hiring

Many HRs commit the mistake of handing out a role to an employee of their choice or someone referred from the top during internal hiring. 

This is indeed a wrong move, as it might create resentment amongst the other employees and present a negative image of the management. To avoid such situations, it’s always better to form an internal hiring committee and draft the necessary rules. 

You must also make sure that the policy created is well-communicated within the workforce and that their concerns are considered for revising the policy if required. 

2. Define the recruitment strategy beforehand for all the stakeholders

As an HR professional or a business leader, you’ll always want to welcome fresh talents for the available roles. However, if people with adequate qualifications for those roles are readily available within the workforce, you might have to choose whom to prioritize.

You can choose to keep the job vacancy visible to both public and internal prospects. If the job role is newly introduced, it should be mostly meant for someone experienced or a fresher from outside the organization. Thereby, you should clearly define how you wish to proceed, considering the various criteria for attracting, engaging, and retaining the best talents.

3. Make it a part of your employee L&D scheme

Employees and job seekers value organizations that support their career growth and are always willing to give their best to achieve more.

Having said this, it would be a better plan if you could come up with an internal succession policy that would work in tandem with your L&D scheme. This way, you can help your employees to upskill themselves and, at the same time, prepare them for future job roles within the organization. 

4. Keep it transparent and fair

One of the underlying principles of a successful internal hiring process is that you ensure that everyone is given a fair chance and that there are no hidden terms or conditions. 

One way of achieving this is by creating an inter-departmental hiring panel that comprises participants both from employees and the management side. Thus, making sure that the candidates are gauged equally based on their talent, work experience, and willingness to take up the new charge. 

5. Encourage internal employee referrals

Using Talent Acquisition Platforms like Applicant Tracking Systems (ATS) helps internal HR teams to manage and create fruitful employee referral campaigns. 

Employee referrals are one of the most effective ways of finding suitable candidates for available job roles. This method works well for both internal and external hiring strategies. 

E.g., there’s an empty role in the department, so you can take references from everyone working there about who could be fit for the position amongst them. Similarly, you can also notify the managers to refer the best candidate from their respective teams, who can then participate in the due process and claim their next position. 

Now moving ahead to the pros and cons of internal hiring.

Pros of Internal Hiring

1. Saves time

Picking candidates right from the current workforce to fill a position can help you save time compared to searching for anyone from the outside. This is mainly because it cuts down the clutter of marketing the job role and screening and onboarding external candidates.

2. Helps in retaining experienced employees

Internal hiring could be a go-to process as part of your retention strategies to stop experienced employees from leaving your organization by offering them a new challenge complemented by better pay and benefits. 

3. Keeps the employees motivated

Employees find a purpose to go the extra mile when they realize the future positions they can achieve working for the organization.

4. Can help reduce the finance associated with training and hiring

Hiring someone from within the organization immensely helps you bring down the cost of training and hiring compared to some external prospects. As mentioned in an earlier study by Saratoga Institute, hiring externally can cost you 1.7x more than that one done internally.

Cons of Internal Hiring

1. Hinders the influx of fresh talent

One of the biggest drawbacks of internal hiring is that it blocks fresh talents from entering the organization, adversely affecting the diversity and inclusion principles currently in focus in the corporate world.

2. Reduces the chances of generating new ideas and perspectives

Since the employees are hired from within the organization, they might have a hard time coming up with new ideas or visualizing things with a different perspective compared to external prospects.

3. It might negatively affect workplace relationships

Suppose an employee from a team is promoted or shifted to some role that puts them in a better position. In that case, it might invite negative emotions from the other team members, which would put their overall performance in jeopardy.

Conclusion

This article is aimed to provide you with an overview of the basic things that you need to take into account if you ever think about practising internal hiring in your organization. 

Though internal hiring has its benefits, you shouldn’t overlook the cons if they coincide with the organizational requirements. Moreover, if you wish to implement it, I would advise you to start with a pilot project where you keep the job role open for both external and internal prospects until you can get a clear picture of who can perform better.