Do you decide to recruit Internally or Externally?

Picture the scene – a key member of your team has resigned and they can’t be persuaded to stay. You know you must replace – the dilemma is whether to “play it safe” and go with an internal candidate or look externally.

Internal promotion can be seen to encourage loyalty, build morale and send out a powerful message about career prospects – assuming, of course, that the internal candidate has the right skills  – but the drawback surrounds the missed opportunities of bringing someone new into the organisation.

Many companies are adept at creating internal pipelines of talent recognising the need to retain good people and provide business continuity. These businesses strive to offer people a vision of where and how their careers may develop, instead of having to leave to move upwards. Furthermore, the creation of continuous development opportunities for home grown talent sends out a strong and powerful message.

Some companies always promote from within first only bringing in new people at junior level. By doing this, they tend to have good retention at lower and middle levels and keep recruitment costs low. Employees can rise from junior ranks fairly quickly before progression slows due to a mix of limited opportunities or their inability to progress further.

Succession planning runs through the talent management process from recruitment to how employee performance is managed and building a culture of internal promotion gives people aspirations. However, it is critical that expectations are managed and when an internal candidate is unsuccessful for a role, they deserve honest feedback so they can re-set their goals and aspirations based on reality. 

However, if the business is venturing into new markets or sectors, the likelihood is that the required skill set will not be available internally. Also, there are benefits to be gained by bringing in a fresh set of eyes with best practice knowledge and skills gained elsewhere. Rightly so, much is written today about the value of transferable skills and skills can transfer successfully between industries, sectors, markets and functions.

Whilst it could be perceived that external recruitment stifles the development of internal staff by cutting off promotion avenues, the counter argument is that promoting internal talent prevents the opportunity to inject fresh ideas into the business. Conversely, recruiting a manager from outside may mean that talent is unearthed in the business that the previous management had failed to identify or chose to overlook and new management gives these people new opportunities.

New blood into an organisation, specifically at senior level, brings new ideas, innovation, creativity, and different ways of working. It rarely comes without pain because new senior managers will challenge the status quo, ask pertinent questions and shake people out of their comfort zone by getting people to up their game or leave.

Business growth can also be a factor in the internal v external recruitment debate. Some employees are ideally suited to smaller businesses (invariably these are family based) and as the business grows and possibly the family influence begins to take a back seat; there is greater need for formalised management structures, process, procedure, controls and disciplines. Some people will find the growth transition uncomfortable and in simple terms, the business out grows the individual and a new/different skill set is required.

In these situations, bringing in someone new will bring much needed ideas, energy and vision whilst challenging those that say “but we’ve always done it this way”.

If it comes down to cost, on paper external recruitment will cost more and external recruits will need to be given an on-boarding process to familiarise them with the business. However, over time the right candidate will be able to make a significant contribution and make a step change for the business through new methods of working, accountability and the identification of new opportunities. Inevitably, change and improved performance are what all companies are looking for!

Every business needs to manage the balance between internal and external recruitment but at senior level, sometimes it takes an outsider to come in and make that change happen.

Written by Adrian Berwick. 

Adrian is an experienced HR Professional who works exclusively with Macallam on the delivery of their Personal Career Transition service.