When an organization has to cover a new position for its business needs, it can choose between two routes: either turn to the organization’s internal talent and promotion processes or hire external professionals who fit in with the company’s needs and culture.
According to a study by the Wharton School of the University of Pennsylvania –Paying More To Get Less: The Effect Of External Hiring Versus Internal Mobility –productivity and performance is significantly lower for employees who are hired in than those internally promoted in the first two years which is the time workers need to adapt to the company. Thus, it follows that external hires seem less profitable, even though they cost 20% more than employees promoted internally. However, the study counter argues that professionals hired into organizations have higher qualifications, because the recruitment processes they went through to qualify for the vacancy are more demanding. So, after having presented the pros and cons of both methods, how do we choose the best strategy?
The two routes are valid, because if the recruitment process was carried out properly, both enable the vacancy to be covered by the right professional. However, if we go beyond filling one or more jobs and focus on a company’s hire policy, the best strategy would be to strike a balance between internal and external talent. Even though it may appear that companies choose both options in a balanced way, a recent article in 2015 suggests otherwise, and that it is not always clear when you should buy or build talent. In the HR Magazine published by SHRM, the author, Eric Krell depicted a different reality in his article, Weighing Internal vs. External Hires. Data provided from the SHRM Human Capital Benchmarking Database showed that in 2013, the average number of positions filled in organizations with a workforce averaging 595 full-time employees varied significantly between external and internal recruits: for every 26 internal hires, there were 66 external ones. Clearly most organizations chose to buy in external talent rather than build up what they already have. This finding suggests that implementation of professional development policies may be lacking which could then lead to stagnation and lack of employee motivation.
To tackle this marked imbalance between internal and external talent, it will be particularly helpful to first fully understand the benefits of implementing internal mobility policies for both employees and the organization itself, and next be able to manage a company’s internal talent effectively in order to achieve the best results.
Internal mobility is fundamental for motivating employees, increasing their engagement with the organization, as well as improving their productivity. Such aspects have a direct impact on reducing work absenteeism and on decreasing workforce attrition rates. Furthermore, promoting internal talent helps to keep their knowledge within the organization, improves the work ambience, and saves costs in recruitment processes. However, to be able to take this route, it is essential to thoroughly understand the capabilities, interests and development of the employees. The key will be to know your workforce well, because as Socrates said, "There is only one good, knowledge, and one evil, ignorance." Knowing what each employee is like and being aware of their needs, is the key to successfully and effectively manage talent. What’s more, the best ally for talent management is undoubtedly technology.
Today there are tools for managing talent in organizations and for designing personalized development plans for each of the established employee groups. Using these, companies can obtain real-time information to be able design concrete action plans, such as: creating succession plans for key positions and people, setting up development programmes for employees at a high risk of leaving, or planning to cover strategic jobs that require specific skills and knowledge.
In a nutshell, promoting internal talent within an organization is no easy task, since it requires thorough assessment of all professionals for which technology has now become and indispensable enabler.