Strategic insights on external vs. internal hiring balance [The 5-step process]
The critical challenge companies face today is effectively bridging skill gaps to maintain increased competitiveness operational and cost efficiency. This necessitates a strategic approach to deciding when to hire externally versus promoting from within, which is the best.
Companies that excel at internal mobility retain employees for an average of 5.4 years, nearly twice as long as companies that struggle with it, where the average retention span is 2.9 years – Workplace Learning Report 2022
The process involves steps from skills assessment and internal skills matching to final decision-making, each requiring careful consideration and strategic planning.
This article will provide a step-by-step approach to overcoming this challenge with crucial insights and tips to help you make the best talent decisions. Here’s how we broke it down:
- Step 1: Skills assessment
- Step 2: Job recruitment analysis
- Step 3: Internal skills matching
- Step 4: Gap analysis
- Step 5: Decision making
Step 1: Skills assessment
The foundational step of this process is conducting a thorough skills assessment of the workforce. This initial phase is critical for pinpointing existing competencies and areas for improvement. At this stage, the company creates an inventory of all skills that will be a basis for further development programs and sets milestone objectives for each business unit, team, and individual.
Only 14% of business executives strongly agree that their organization uses the workforce’s skills and capabilities to their fullest potential. – Deloitte 2022
By undertaking this evaluation, organizations gain a detailed overview of their employees’ capabilities, shedding light on the strengths that can be leveraged and the weaknesses that require attention. To facilitate the process, businesses increasingly turn to advanced workforce management platforms.
These tools offer a robust mechanism for assessing and mapping current organizational skill sets, providing a comprehensive view of workforce capabilities. Such in-depth analysis is instrumental in guiding strategic decision-making for future hiring and workforce development.
TalentBoost – Skills Map
By understanding the skills overview within their ranks, companies can tailor their talent acquisition and development strategies to better align with organizational needs and objectives, thus enhancing their overall performance and competitiveness in the market.
Step 2: Job requirement analysis
In the second step of the process, job requirement analysis, the focus shifts to defining the specific skills and qualifications needed for the open position. This step is crucial as it sets the foundation for identifying the ideal candidate profile.
“56% of HR leaders believe that their current technology solutions need to be better aligned with the present and future requirements” Gartner.
Companies utilize specialized platforms designed to analyze job descriptions meticulously to ensure precision in this process. These platforms dissect the language and requirements stated in the job postings to extract and specify the essential skills and competencies required for the role.
This detailed analysis allows organizations to create a targeted recruitment strategy, ensuring that the candidates sourced and considered for the position possess the necessary skills and fit the job criteria accurately.
TalentBoost – Job Position Fit
This methodical approach streamlines the recruitment process, enhancing the efficiency and effectiveness of talent acquisition efforts.
Step 3: Internal skills matching
The goal of internal skills matching is to identify potential candidates from within the organization who meet the job requirements.
This phase involves a strategic search for internal candidates whose skills profiles align with the needs of the open position. Utilizing specialized talent management platforms, companies can efficiently match the skills and experiences of their current employees with the specified criteria of the job vacancy.
Uber is a great example of a company that has successfully rolled out a multi-faceted internal mobility program. They’ve invested in an internal mobility program where 20% of the company’s recruiters focus solely on internal recruitment. As a result, 30-40% of hires are from within, and those who moved into a new role at the company stayed over twice as long as those who didn’t participate. –Drenik
This process streamlines the internal recruitment effort and promotes employee retention and growth by offering career advancement opportunities to existing personnel.
TalentBoost – Internal skills matching
By leveraging these platforms’ capabilities, organizations can ensure that they fully utilize their internal talent pool before looking externally, thus optimizing their overall talent management strategy.
Step 4: Gap analysis
Skills gap analysis evaluates whether the skill gaps identified in internal candidates can be effectively closed through targeted training.
In this stage, the skills and competencies of internal candidates are compared against the job requirements to identify any discrepancies. This comparison helps determine whether the existing gaps are bridgeable through upskilling or reskilling initiatives.
Conducting a skills gap analysis is crucial as it informs the decision-making process regarding investment in employee development and training programs.
According to McKinsey’s research, nearly seven in ten respondents reporting reskilling say the business impact of the programs has been greater than or equal to the investment in them. What’s more, 48 percent say the programs are already enhancing bottom-line growth. Respondents also see other benefits: most say their organizations’ reskilling efforts have improved performance on seven other key performance indicators, including employee satisfaction and customer experience.
By identifying the specific areas where training is needed, organizations can strategically plan to upskill their workforce, thereby enhancing their capabilities and aligning them more closely with the organizational needs and goals.
This process not only aids in filling the current job vacancies more efficiently but also contributes to the long-term development of the workforce.
Step 5: Decision making
The critical task is to make an informed decision on whether to hire internally or externally. The action involves leveraging insights from the platform to assess internal candidates’ skills and analyze job requirements.
This process enables your organization to systematically weigh the advantages of upskilling internal candidates against the potential benefits of external hiring.
It involves evaluating the time, cost, and effectiveness of training internal candidates to meet the job requirements versus the immediacy, potential innovation, and fresh perspectives that an external candidate might bring.
This decision-making process is pivotal as it affects the immediate staffing needs and has long-term implications for the organization’s talent development strategy and overall business goals.
The critical decision points should be driven by the short, medium, and long-term skills that impact revenue growth in each time horizon category. Companies often focus on immediate needs or categorize all of them with short-term objectives only without visibility of the other skills that must be acquired for more extensive and more fundamental shifts driving their industry or the overall market.
In the short term, companies often prioritize skills that yield immediate benefits, such as enhancing efficiency or meeting current market demands. This approach, while necessary, can lead to a myopic focus if not balanced with a vision for the future. Short-term skill development should be integrated with medium- and long-term objectives to avoid the pitfalls of stagnation and irrelevance.
For medium-term skill acquisition, organizations should focus on competencies that bridge the gap between current requirements and future aspirations. This might include investing in emerging technologies or methodologies that are expected to become mainstream. This proactive approach not only prepares the workforce for upcoming changes but also positions the company as a forward-thinking leader in its industry.
TalentBoost – Employee Skill Profile
Long-term skill development requires a visionary approach, identifying and cultivating skills that anticipate major industry transformations or disruptive market trends. Companies must foster a culture of continuous learning and adaptability, ensuring that employees are not just equipped for today’s challenges but are also prepared to innovate and lead tomorrow’s changes.
By delineating skills across these time horizons and aligning them with strategic business objectives, companies can create a robust talent development program that not only drives immediate revenue growth but also secures long-term sustainability and competitiveness. Ignoring this balanced approach can result in missed opportunities and an inability to adapt to an evolving marketplace, ultimately endangering long-term success.
Internal hiring: Benefits and limitations
Benefits – Cost and time efficiency
Internal hiring reduces costs related to recruitment and onboarding. Employees familiar with the company culture and operations can transition more smoothly into new roles, accelerating the time to productivity.
“The cost of replacing one salaried employee can range up to 200% of that person’s salary” Culture Amp.
Enhanced employee morale and retention
Promoting from within significantly boosts employee morale and loyalty and allows for the creation of tailored career paths, demonstrating the organization’s commitment to individual growth and professional development.
By recognizing and nurturing the potential of existing employees, companies can foster a culture of continuous learning and advancement. This approach signals to employees that the organization values and invests in their career trajectories, leading to enhanced engagement and reduced turnover.
Tailored career paths ensure that development opportunities align with the employees’ aspirations and the company’s strategic goals, creating a mutually beneficial environment.
TalentBoost – Career paths
Limitations – Limited talent pool
Relying solely on internal hiring can restrict an organization to its existing talent pool, potentially leading to skill gaps or a lack of innovation over time. Software like DevSkiller TalentBoost offers a solution to this dilemma.
DevSkiller TalentBoost Skills Map
DevSkiller TalentBoost goes beyond traditional internal hiring practices by mapping skills outside of established skill sets after completing the onboarding process. This approach enables the identification of hidden or underutilized talents within the organization, thus uncovering areas of skill that the company may not have been aware of.
By doing so, DevSkiller TalentBoost helps mitigate the risk of skill gaps and fosters an innovative environment, ensuring that the organization can evolve and adapt to changing market demands while maximizing the potential of its existing workforce.
Risk of internal politics
Promoting primarily within the organization could create an overly competitive environment or exacerbate internal politics. Its heightened competition for advancement opportunities might lead to a culture where employees feel they must outperform their colleagues at all costs to gain recognition or promotion.
This can strain relationships among team members, leading to increased tension and potential conflicts. Over time, such an atmosphere can negatively affect team dynamics, staff creativity, and quality of work, as collaboration and mutual support may give way to rivalry and mistrust.
Consequently, this shift in workplace culture could erode employee morale, with staff becoming more focused on individual achievements rather than collective success. This could impact the organization’s overall performance and cohesion.
External hiring: Risks & Benefits
Risks
Higher costs and longer ramp-up time
External hiring often demands higher salaries than internal promotions. The process also incurs recruitment and training costs, and new hires take longer to reach total productivity.
To address the risk of higher costs and longer ramp-up time, we propose implementing DevSkiller TalentScore, a solution designed to streamline recruitment. This solution could reduce the time spent on hiring by up to 95%.
TalentScore employs our RealLifeTesting Methodology™ that accelerates the screening process and rigorously evaluates candidates to ensure they possess the necessary skills to begin work immediately after approval.
This approach enables companies to swiftly identify and onboard competent candidates, ensuring a seamless transition and integration into their new positions.
Cultural fit and retention issues
External candidates may have difficulty assimilating into the company culture, leading to potential mismatches and higher turnover rates.
DevSkiller’s solution offers anti-bias mechanisms to minimize retention risks and the lack of a cultural fit.
Benefits
Diverse perspectives and skills
External hiring offers several advantages and comes with certain risks. One significant benefit is the infusion of fresh perspectives and skills, which can foster innovation and drive growth within a company.
External hires can also swiftly fill gaps in expertise, especially in industries where specific knowledge or skills are in short supply internally.
However, this approach carries risks, such as potential cultural misalignment, where the new hire may struggle to adapt to the company’s values and work environment.
Filling skill gaps
It is particularly beneficial for acquiring specialized skills not present within the current workforce and essential for addressing immediate business challenges or strategic goals.
Strategic approach to hiring
A balanced approach to hiring, integrating both internal and external recruitment strategies, can leverage the strengths and mitigate the weaknesses of each method:
Assess organizational needs and goals
Understand the current and future skills needed to achieve business objectives. This assessment guides hiring externally for fresh skills and perspectives or leveraging existing talent and internal cultural fit.
Develop a robust succession planning program.
Effective succession planning, facilitated by the career pathing features in DevSkiller TalentBoost, prepares for future vacancies at all organizational levels.
This strategy minimizes the need for external hiring by ensuring a continuous talent pipeline, allowing companies to identify and develop internal candidates for upcoming roles proactively.
TalentScore – Choosing and sending an assignment
With the TalentBoostShow Report builder, organizations can gain insights into their talent pool, making it easier to manage and plan for future staffing needs. Thus, a seamless transition and sustained organizational growth are promoted.
Foster a strong company culture.
A culture that emphasizes growth, learning, and internal mobility, supported by the Learning Materials feature in DevSkiller TalentBoost (TB), significantly enhances employee engagement and loyalty, making internal recruitment more effective.
Providing learning materials helps employees continuously develop their skills, aligning them with their career aspirations and the organization’s objectives.
Targeted communication in DevSkiller TalentBoost ensures that employees are informed and engaged with potential internal opportunities that match their career growth plans.
This combination of educational resources and strategic communication fosters an environment where internal talent is nurtured and prepared for advancement, ultimately strengthening the organization’s recruitment strategy.
Implement a comprehensive onboarding and integration process
Whether hiring internally or externally, a structured onboarding process is crucial for integrating employees into their new roles and the company culture efficiently.
Regularly review and adapt talent strategies.
Your talent strategy should be dynamic, reflecting changes in the business environment, industry trends, and organizational growth. You can read more about our partnership with Orange and how they adopted our solution to fuel their internal mobility strategy.
The balance between external and internal hiring is dynamic and should be aligned with the organization’s strategic goals. By understanding the advantages and limitations of each recruitment approach, companies can formulate a more effective and sustainable talent strategy that underpins their long-term growth and success.
Organizations can build a robust culture of continuous learning and development through initiatives like reskilling and upskilling. This enhances the workforce’s skill set and fosters greater awareness and internal understanding of the company’s products and services.
TalentScore – Candidate report
By investing in the development of their employees, companies can ensure that their workforce is skilled and deeply aligned with the organization’s goals and values, leading to a more dynamic, knowledgeable, and committed team.
Final word
The complexities of talent management require a sophisticated and strategic approach to hiring. Organizations must balance internal and external recruitment to effectively bridge skill gaps, enhance operational efficiency, and maintain competitive advantage.
The journey begins with a comprehensive skills assessment to understand the workforce’s current capabilities, followed by a precise job requirement analysis to define the role’s needs. Internal skills matching also plays a critical role in leveraging existing talent, while gap analysis helps determine the feasibility of upskilling to meet job requirements.
Ultimately, the decision-making process must weigh the benefits of nurturing internal talent against the fresh perspectives and innovation that external hires can bring. By adopting a holistic and flexible talent strategy, companies can align their talent acquisition efforts with broader organizational goals, nurturing a dynamic and resilient workforce capable of adapting to business challenges.
This balanced approach ensures the immediate fulfillment of skill needs and the long-term development and retention of a skilled and engaged workforce, driving the organization’s success in the competitive market.
