McDonald’s is a great example of a MNC that has to a good extent, conquered internal mobility, with ‘9 out of 10 Business Managers and a third of executive staff starting from crew. Their retention rate is very high and they train crew members in such a way that when their employees do get promoted/change roles they would be able to transition smoothly and learn from their predecessors.

In today’s day and age, with the ongoing pandemic, and in times of crisis, cost cutting and revenue prioritisation are king.

In such an environment, I make the argument for internal mobility, having seen several of my friends and contacts suffer from companies failing to consider this. Both external and internal hiring have their pros and cons. However, a study from Wharton showed:

External hires have notably lower performance reviews in the first two year, have higher exit rates at 18-20% and are paid significantly more than internal hires.”

These are 3 significant value propositions already identified. Internal hiring is the process of finding and existing employee from within the business for a specific vacancy. This role is actively promoted amongst the current workforce.

Pros VS Cons

It's worth considering the pros and cons of internal hiring to lessen the burden on your wallets at the very least. But let’s summarise all the important ones.

Time

Hiring – Internal 1 : External 0

Firstly, for internal hires, time taken to hire is drastically reduced as they are already part of the company. Background checks have already been conducted, the applicants record is known and as such screening would not take as long since the best people who understand about the candidate are within your organisation.

Onboarding and Training – Internal 2 : External 0

Internal hires would already be accustomed to the working environment at the company. In most cases, having someone who already has a lay of the land could be beneficial. The candidate would be familiar with common practices, responsibilities that come with the role and how the team functions.

Costs

Hiring - Internal – 3 : External - 0

Both internal and external recruiting have their own set of costs that need to be considered. Let’s try and draw some comparisons of possible costs. Since these are hiring costs, there will be many overlaps between internal and external hiring.

At the very beginning, you will incur recruiting costs, be it through recruiters in person or software.

Internal External
Recruiting costs (Software/Recruiters) Company referral program/E-mail blast ATS, Job boards, screening tools, background checks
Advertising Minimal ($) Outsourced ($$$)
Salary Standard 18-20% more
Relocation Expensive Hire locally
Signing Bonus Not applicable As applicable

Performance

Engagement – Internal – 4 : External - 0

This only applies to internal hiring. Allowing for a change of role provides opportunities for employees to further their careers or even swap to a different career path altogether.

How does one go about increasing internal mobility then?

You could consider part time projects where employees from different departments can work closely and learn from each other. For example, Google famously allows all developers and employees to spend 20% of their time to work on ANY project that takes their fancy. This heavily promotes an environment of innovation and productivity and in turn leads to possible job swaps where employees can try their hand in a different department with potential mentorships/permanent swaps. Even relocation could help internal mobility within bigger organizations. According to a recent Indeed poll,

42% of Millennials would relocate voluntarily if their organizations allowed it.

When employees are engaged more in this way, it creates a positive atmosphere of growth and increases retention rates within the company.

Resentment – Internal 4 : External 1

This is probably the first real downside to internal hiring that must be considered. If an employee is considered for a specific job and loses out to a co-worker or external candidate, it breeds negativity and reduces that person’s morale within the team. Employees could potentially lose faith in the potential for growth in the company and this could possibly lead to reducing productivity and decreased retention rates.

While a competitive spirit is always fostered, it takes careful management to ensure that its directed and doesn’t turn toxic.

Fresh Perspectives – Internal – 4 : External : 2

External hires will always take time to get used to the way things are run in your company but with their own unique industry experience, they can bring a fresh perspective and new ideas to improve efficiency and accuracy. This can serve as a motivating factor for current employees to stay on their toes and move away from the status quo. However, on the flip side, providing employees the flexibility and opportunities to experience different roles in the same company could, as mentioned before, boost performance. These employees would come into their new roles with existing knowledge and experience of how the cogs in other departments turn and how to work hand in hand with them.

Growth – Internal – 4 : External 3

If you’re looking to increase the size of your company to scale up, internal hires will never be able to do the job. External hires will be the saving grace here.

Competitiveness - Internal – 5 : External - 4

Hiring a mix of both external and internal hires increases competitiveness and boosts productivity in the company. Although this could trigger an environment of fear and frustration, finding a balance that works for your company is a whole other ball game. (Stay tuned for our next blog for more on this!)

The right profile today is really not about finding candidate with the right hard skills, but finding candidate with the right mindset. Hire for attitude, train for skills. We need someone adaptable, with high engagement. Even if you have someone skilful, ticks all the boxes, but they get bored easily, they are very hard to retain. Having an environment where there is skill gap, increases the engagement of talent.

Equipped with this knowledge now, hiring in the current pandemic doesn’t need to be so taxing on your wallets, while still allowing your employees to grow and expand their horizons.