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How to Know When to Hire Internally and When to Look Outside

There are high costs to filling a vacant position with the wrong person. Among other statistics, 27 percent of US employers have reported a single bad hire costing more than $50,000, and 27 percent of UK employers have reported a bad hiring costing more than $77,000. Knowing when to hire internally or externally to find the right person for the job the first time can be a challenge, and Rich Hein writes for CIO.com about the merits to pursuing either direction. It breaks down like this:

4 Reasons to Hire Internally

  1. It costs less
  2. It’s faster
  3. Hiring internally builds morale
  4. Internal hires have a better success rate

3 Reasons to Hire Externally

  1. Finding the right skillset for the right job
  2. Getting a new perspective
  3. External hires more experienced and better-educated

On average, it costs 1.7 times more to hire externally than internally. Hiring internally also occurs quicker, because no background checks are required and performance records are easily accessed. Hires are already familiar with the work environment, so they only need to acclimate to the new role itself. External hires require on average three interviews by comparison. Only 25 percent of internal hires are unsuccessful in new roles, as opposed to the 40-60 percent of external hires. And hiring internally is a great way to put smiles on people’s faces:

“You can be a hero if you consistently look to promote or hire from within. The best managers are always looking for ways to enhance their staff's careers,” says [Tracy Cashman, general manager at WinterWyman]. The top talent is not only concerned about doing the best job possible they are also concerned about their career trajectory. One of the top reasons people leave their job is because they feel there is no room for advancement. However, when there is a career path and clear expectations on what it takes to get to the next level employees will have less interest in moving on. “It helps with retention; employees see a path upwards and job security. That loyalty is rewarded,” says Doug Schade, principal consultant, technology search at WinterWyman.

On the other hand, getting a job done in the best way possible is more important than promoting someone just for the sake of being a swell dude.  In cases where no one in the organization really has the specialized skills required, it can be quicker and less costly to hire externally than train someone internally. External hires also offer a fresh perspective that may offer the organization new ideas. And it is particularly noteworthy that although external hires face higher failure rates than internal hires, those who do succeed tend to receive promotions faster than internal hires. It becomes a case of if you want to pick a sure thing or take a chance on a potential ace.

Hein says that the bottom line in all cases is to hire the best people and retain them. A long term internal hiring policy should be developed, but external hires will always have their place as well. Use good judgement to weed out the duds from the stars.

About John Friscia

John Friscia is the Editor of Computer Aid's Accelerating IT Success. He began working for Computer Aid, Inc. in 2013 and continues to provide graphic design support for AITS. He graduated summa cum laude from Shippensburg University with a B.A. in English.

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