Request a Demo
Home     >
Our Blog     >

The Hidden Benefits of Internal Hiring: Cost Savings, Improved Performance, and Higher Retention

The Hidden Benefits of Internal Hiring: Cost Savings, Improved Performance, and Higher Retention

  • June 6, 2024

Hiring

Performance

Retention

In today’s competitive job market, many organizations focus their hiring efforts on attracting top talent from outside the company. However, internal hiring – filling open positions with existing employees – can offer significant benefits in terms of cost savings, improved performance, and higher retention rates. New insights shed light on the advantages of prioritizing internal talent mobility.

Cost Savings

 

One of the most compelling reasons to prioritize internal hiring is the potential for significant cost savings. The cost of hiring an external candidate can be up to three times higher than promoting an existing employee. These costs include advertising job openings, conducting interviews and assessments, and providing onboarding and training for new hires.

 

In contrast, internal candidates already have a deep understanding of the company’s culture, processes, and systems. They require less training and ramp-up time, which translates into immediate cost savings. Additionally, internal hires are less likely to negotiate for higher salaries than external candidates, as they are already familiar with the company’s compensation structure.

Improved Performance

 

Another key benefit of internal hiring is the potential for improved performance. Internal hires tend to outperform external hires in the first two years on the job. This is likely due to several factors, including:

 

  • Familiarity with the company’s culture and values
  • Existing relationships with colleagues and stakeholders
  • A deeper understanding of the company’s products, services, and customers
  • A stronger sense of loyalty and commitment to the organization

 

By tapping into the existing talent pool, companies can identify high-potential employees who have already demonstrated their skills and abilities within the organization. These employees are more likely to hit the ground running and make an immediate impact in their new roles.

Higher Retention Rates

 

Finally, internal hiring has been shown to lead to higher retention rates over time. In most cases, internal hires are more likely to stay with the company for at least three years, compared to external hires. This is likely due to several factors, including:

 

  • A sense of loyalty and commitment to the organization
  • Opportunities for career growth and advancement within the company
  • A better fit with the company’s culture and values
  • Existing social connections and support networks within the organization

 

By investing in internal talent mobility, companies can create a culture of growth and development that encourages employees to build long-term careers within the organization. This, in turn, can lead to lower turnover rates, reduced recruitment costs, and a more stable and engaged workforce.

Barriers and Solutions

Despite these compelling benefits, many organizations still struggle to prioritize internal hiring. Some common barriers include:

 

  • A lack of visibility into the skills and capabilities of existing employees
  • A bias towards external candidates who may have more impressive resumes or credentials
  • A lack of formal processes for identifying and developing internal talent
  • A culture that values external expertise over internal knowledge and experience

 

To overcome these barriers, organizations need to invest in tools and strategies that support internal talent mobility. This may include:

 

  • Implementing a formal process for identifying and developing high-potential employees
  • Creating a culture of continuous learning and development that encourages employees to acquire new skills and take on new challenges
  • Leveraging workforce analytics platforms like FORE to gain insights into the skills and capabilities of existing employees
  • Offering competitive compensation and benefits packages that incentivize employees to stay with the company over the long term

By prioritizing internal hiring and investing in talent mobility, organizations can unlock significant cost savings, improve performance, and increase retention rates. As the war for talent continues to intensify, companies that focus on developing and retaining their existing workforce will be well-positioned for success in the years to come.

Share Post: