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Topic:

An insight into the relative strengths and weaknesses of internal and external
recruitment

INTRODUCTION:
Employee recruitment is a specialized activity of identifying and soliciting
individuals, either from inside or outside of the organization. The sole purpose of
the recruitment process is to fill the vacant positions inside the organization and
to provide the company with competent human resource that enables the
organization to meet its strategic goals. Recruitment is one of the key roles for
human resource professionals. Normally the human resource process starts with
the recruitment process. Effective employee recruitment is one way companies
can remain competitive in a changing and increasingly global marketplace. Today
the competition is on its extreme among the companies so in order to compete in
tough market conditions the companies need to have competent and capable
human resource.

DEFINITION OF RECRUITMENT:
Wikipedia Says:

“Recruitment refers to the process of attracting,


screening, and selecting qualified people for a
job at an organization or firm.”

According to Society for Human Resource Management (SHRM):

“The practice of soliciting and actively seeking


applicants to fill recently vacated or newly
created positions using a variety of methods (i.e.,
internal job postings, advertising in newspapers
or electronic job boards/sites, utilizing search
firms, or listing position with trade and
professional associations, etc).”
There might be several definitions of recruitment but all experts and definition
sources agree that it is a process of getting the most competent workforce inside
the organization to meet its strategic goals.

RECRUITING FUNDAMENTALS:
Employers generally use some combination of internal and external recruitment
tactics. Both approaches have certain basics in common:

• A foundation in rigorous job analysis and well-crafted job descriptions.


• Compliance with applicable laws, especially equal employment opportunity
laws.

The Chartered Institute of Personnel and Development (CIPD) is Europe's largest


HR development professional body. According to a study conducted by CIPD in
2004 in UK and Ireland, there are some very helpful findings as far as the internal
and external recruitment is concerned. These findings are also stated below.

TACTICS OF INTERNAL VERSUS EXTERNAL RECRUITMENT:


The criterion whether to use internal recruitment source or external recruitment
source varies company to company. Usually organizations with have a strong
commitment to their employees often use internal strategies along with external
strategies for identifying key talent. Such companies give priority to fill the key
positions by offering promotional roles to internal candidates. Employers foster a
sense of loyalty, engagement and long-term satisfaction by allowing growth from
within.

When internal talent is not available, employers turn to external recruitment to


attract individuals with the necessary skill sets. According to the survey of CIPD in
2004 in UK and Ireland 84% of companies looked internally first then they go for
external options.
INTERNAL HIRING
FUNDAMENTALS OF INTERNAL RECRUITING:
Internal recruiting will typically consist of one or more of the following
approaches:

• Job posting procedure


• Nomination by manager
• Knowledge, skills and abilities database
• Succession planning

Regardless of which approach—or combination of approaches—an employer


adopts, it is critical to craft a policy that is fair and equitable to internal applicants,
and is implemented consistently and communicated openly throughout. Showing
an inequitable policy or procedure will result as backfire of internal recruitment.

The survey conducted by CIPD in 2004 showed that 87% of UK survey participants
have a policy of advertising all vacancies internally as compared to 77% in Ireland.

Let’s discuss each of the above mentioned approaches of internal recruitment


one by one.

JOB POSTING:
Most companies adopt a job posting approach as a way to encourage internal
employees to identify internal promotional opportunities and respond to those
for which they have skills and interest.

NOMINATIONS:
Some companies have a more closed approach to internal recruitment and may
ask managers to nominate high performing individuals as candidates for internal
roles. This tends to be an informal system, yet it may be highly effective, in
smaller organizations where individuals are familiar with the work of employees
in other departments. However, this approach may appear or in fact involve
favoritism, or unlawful discrimination. The consequences of any of these may
offset any benefits that may be gained by promoting from within, so large
organizations try to avoid this kind of approach for internal hiring.

KNOWLEDGE, SKILLS AND ABILITIES DATABASE:


Many organizations have human resources information systems (HRIS) or human
resource management systems (HRMS) to track and identify various personnel-
related issues. These may include a database of employees’ knowledge, skills and
abilities (KSAs) as well. While hiring new employee, the companies typically create
a KSA profile in the HRIS or HRMS that details their background, experiences and
career goals. The profile should be updated periodically, usually in conjunction
with a performance review or career development discussion. Using this profile
the HR managers can have the idea about the KSAs of particular employee
working in the organization and so can offer him/her another job opportunity
within the company.

SUCCESSION PLANNING:
Some organizations have developed succession planning strategies to identify not
only the potential talent in the organization, but also to establish developmental
plans to help prepare individuals for promotional roles. Succession planning is a
process to continuously develop the employees and make them ready for future
tasks. By pursuing the succession planning process the employees are trained and
developed for new high level jobs inside the organization.

Following is the chart that shows the methods used to advertise vacancies
internally in UK and Ireland as per the survey report of CIPD in 2004.
Advantages of Internal Hiring
1. HIGH MORALE:
The morale of employees is improved when they know that they may be
considered for internal promotions or new opportunities. In today's highly
competitive economy, the more incentives you can provide for employees to stay
with your organization, the better the results will be from them. Opportunity for
advancement is a strong motivator for many employees. The employee who has
been promoted for an upper level position will surely give better results.

2. IT’S SAFE TO HIRE INTERNALLY:


Management already knows the job history and capability of internal employees,
so hiring an internal candidate can often be a safe route to take. You're dealing
with a known commodity (existing employee) and there is less likelihood that a
bad decision will be made. The existing employees are familiar with the culture
and systems inside the organization so they can adjust in the new position easily
within the matter of days and start giving the results soon.

3. LESS TIME CONSUMPTION:


Less time is needed for recruitment and then for employee orientation and
training. As there is nothing to do with the job posting on various channels and
getting CVs and conducting interviews, so the internal hiring process takes lesser
time as compared to external hiring process. Internal candidates know the
organization, already have contacts within it and are able to hit the ground
running in a new position.

4. BETTER HUMAN RESOURCE:


The organization is able to make better use of its human resources. The company
that internally hired a candidate has made a major investment in its employees.
Developing that investment through training, education and, eventually,
promotion into more challenging positions makes sense from a business
standpoint. With the trust that the company showed on its employees by
internally hiring for a vacant position will give a boost to the confidence of the
current employees as company trust on them.

5. COST EFFECTIVE:
Internal hiring is considered as the most cost effective approach to fill a vacant
position. Organization does not need to publish the job ads, putting valuable time
to screening the CVs and then calling the candidates for interviews, interviewing
them and finally making a hiring decision. By hiring the person internally saves the
many valuable resources of the company in terms of money, time, and efforts.

Disadvantages of Internal Hiring


Everything in this world has certain advantages and disadvantages, so same for
the internal hiring as well. The company that makes a better trade off of the
advantages and disadvantages of internal hiring will be able to get most of the
process. Following are some of the prominent disadvantages of internal hiring.

1. LIMITED POOL OF CANDIDATES:


The number of potential job candidates is limited in the company. A decision to
limit a selection process to internal candidates can help to accelerate the hiring
process, but also limits your pool of qualified candidates. There may be times
when this is appropriate but exercise caution in being too quick to look internally
only. Sometimes the companies might get more competent individuals outside of
the organization. So the companies should also consider the external hiring while
running recruitment process.

2. OPPORTUNITY OF FRESH BLOOD IS LOST:


The introduction of new blood is minimized, sometimes resulting in internal
hiring. There is a danger in allowing an organization to become too internally
focused. An arrival of new ideas and new viewpoints is important for any
organization. But when the organization totally emphasizes on hiring the
candidates internally, there is a chance to miss the available fresh minds from
external environment.

3. DEFINITE NEED FOR EXTERNAL HIRING:


Internal recruitment frequently involves a ripple effect in terms of hiring. As one
person leaves a position to take another, a new vacancy is created. This effect
continues down to the lowest level jobs, which must then be filled through other
means. While this may be appropriate (because it is generally easier to fill entry-
level positions than higher-level management positions), it depends upon your
organization, your industry and the job market you draw candidates from. So any
organization cannot cut the wing of external hiring.

4. BIASNESS:
This is one reason that makes the internal hiring not much suitable for some
organizations. Sometimes the managers hire internally any person of their own
choice. What happens in this case is other potential employees may feel treated
inequitably. This might cause negatively their quality of work as well. On the other
side the person who is hired on the base of nepotism or favoritism may not
provide the quality work on new position as he was not eligible for the new post.
EXTERNAL HIRING
FUNDAMENTALS OF EXTERNAL RECRUITING:
Many organizations of the world realize that the recruiting function is very similar
to the marketing function, in that the organization is promoting both itself and
employment opportunities to potential candidates. Adapting marketing principles
to employee recruitment is considered an effective way to bring discipline to the
process. With the passage of time there are many new ways being introduced to
hire employees. Such new ways looks just looks like marketing any product e.g.,
putting job opportunities in yahoo groups, or on www.linkedin.com or making job
blogs.

Companies can be most effective in recruitment when they identify their


potential markets, then create specific messages and activities to reach them.

TARGETING PASSIVE OR ACTIVE CANDIDATES:


Before deciding which recruiting method to use, first determine whether the ideal
candidates are passive or active job seekers. Those who are unemployed or
extremely unhappy in their current employment are generally active job seekers,
and those who are happy and successfully working at another place of business
are generally passive job seekers. Most employers, because they are looking for
candidates who have a positive record of employment and are satisfied in their
work, target passive job seekers.

MANAGING EMPLOYER BRAND AND IMAGE:


The organization’s reputation as an employer will affect its ability to attract top
candidates. The more renewed the company will be, the more competent
candidates will be willing to join the company. When employees are satisfied with
the organization, they will tell others about their employer, whether or not there
is a referral program or bonus. Word of mouth communications about the
organization can either help or hinder formal recruitment strategies. So making
the company’s name as a well known employer will surely give an edge while
recruiting from outside.
DEVELOPING RECRUITMENT PARTNERS:
Many HR professionals juggle the staffing function with many other duties:
employee relations, compensation, benefits, and training and development. In
order to best meet their staffing needs, effective HR professionals seek out the
assistance of those who can best support these needs. For this purpose the
companies can outsource their recruitment functions or can contact with other
companies of the industry that is lay off their employees.

TACTICS FOR EXTERNAL RECRUITING:


Following can be the tactics for external recruiting.

Third-Party Recruiters – Outsourcing the recruitment activities or hiring


consultant for recruitment.

High Schools, Technical Schools, Colleges and Universities – Going to schools,


colleges and universities to get the fresh pool of candidates. Job fair conducted by
the educational institutions is a best example of external hiring.

Public Relations – Various seminars, training programs, and social parties give a
chance to managers to communicate with others and enhance their public
relations that, in future, may help in external hiring.

Media – Using internet, TV, radio, billboards, posters and newspapers to pursue
the external recruitment process is a very renowned way.

Employee Referrals – It is one of the most commonly used external hiring


sources. The existing employees are asked to refer any person they think can be
candidate for any vacant position. According to the CIPD survey in 2004 70% of
commercial companies and 66% of manufacturing companies use this mean of
external hiring.

Own Website – Companies also use their own websites for job posting. This is
also one of the efficient means getting applications for external environment.
According to the CIPD survey, 72% of companies use their own websites to
publish their job vacancies.
Advantages of External Hiring
1. LARGE POOL OF POTENTIAL CANDIDATES:
One of the superb advantages of external hiring is to have a large number of
applications for a particular job. The recruiter can have a huge selection of
candidates who applied for a particular job. So the recruiter has more choice to
pick the one best competent candidate. Also the external candidates are from
various backgrounds so there is a diverse pool of applicants available for
selection.

2. Opportunity to Inject the Fresh Knowledge in Organization:


Through this kind of hiring process, the organization has a chance to bring the
persons from external environment that has fresh and some extra knowledge
about the things. Internal candidates are not very much familiar with the current
knowledge and latest concepts of the industry while the external candidates are
supposed to equipped with the latest knowledge of the industry.

3. LESS CHANCES OF BIASNESS:


At the time of hiring internally the recruiter may be, alleged for showing the
biasness. But this objection can also be eliminated by pursuing external hiring
process. The job applications which are gotten externally will be checked as per
the hiring standards and then the selected candidates will be called for various
selection methods (written tests, interview, and group discussions). One, who
fulfills the requirements, will be selected.

4. INCREASE DIVERSITY:
Increase in diversity is one of the well-known advantages of external hiring. When
an organization hires externally it gets a chance to induct new persons from
various different backgrounds. This will enhance the diversity inside the
organization. Through other policies and procedures the company can take
advantage of such diversity inside the organization. Diversity in the organization
means broad and diverse ideas, more effective implementation of policies and
enhanced efficiency of the company. According to CIPD survey the majority of
organizations surveyed have a diversity policy (94%).

5. MORE REFINED RECRUITMENT PROCESS:


With the external hiring, the recruiter will have a chance to perform all the basic
activates involved in hiring process (posting job ads, screening the resumes,
interviewing the candidates and others). So if there is any deficiency found in the
process then it can be identified and rectified to make the hiring process more
effective.

Disadvantages of External Hiring


Following are the potential disadvantages of external hiring:

1. MORE TIME CONSUMING:


One of the biggest disadvantages ever of external recruitment is its huge time
consumption. Companies want to get new employees hired as soon as possible.
But the process which includes posting job ads, conducting tests/interviews, and
reference checks, takes much time that some companies cannot afford.

2. HIGH COST:
As compared to internal hiring, external hiring costs a lot to the companies. Some
studies indicate then external hiring costs 90% more than the internal hiring
because in internal hiring there is not job posting externally or any other
connection to the external environment. The cost of external hiring is high both in
terms of money and time. So companies where turnover is high, it is
recommended to use internal hiring process primarily.

3. CURRENT EMPLOYEES MAY NOT FEEL WELL:


Sometimes there are better options available inside the organization but still the
recruiter goes for external hiring. So the potential insider employees may feel to
be treated inequality as morally they had the right to be offered this job first. This
may cause their output as well. So the companies first must see inside the
company if they can find good potential employees for the vacant position.

4. OUTSIDER MAY NEED MORE TIME:


It is obvious that new employees from outside the organization will take much
time to adjust in the new environment as compared to an internal one. They will
require more time to be trained, understanding company’s policies and
procedures, and to be familiar with the norms of the organization. Unless and
until they are fully known with the company, it is hard to expect 100%
performance from them.

CONCLUSION:
There are many other advantages and disadvantages associated with both
sources of hiring new employees. It is the ability of HR manager to choose the
best source of hiring for his/her organization. For this purpose Human Resource
Planning is conducted in order to ensure that only best available human resource
is hired and inducted in the organization. This is because ultimately these are the
people who will lead the company to the success or failure. If an organization has
competent workforce then obviously it is going to accomplish its goals and
objectives but with less efficient or incompetent workforce, the dream of
achieving the set objectives will remain a dream.