Internal or external recruitment: Which is better?

Joe Caccavale

23

July

2020

|

5

minute read

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Your ideal candidate can come from literally anywhere. Regardless of who they are, where they’ve studied, or how their application has arrived in your inbox, they can still have the skills and values you’re looking for. That’s why we’ve developed an entire process based on the idea of blind hiring

When you don’t apply blind hiring processes to your recruitment, however, the choice of focusing your search internally or externally can have significant repercussions. In this post, we explore what these are, and explain how either approach can be improved through removing unconscious biases.


What’s the difference? 

Put in the most basic terms, internal recruitment is when you hire for a position from within your organisation, whilst external recruitment is when you reach out to the big wide world. 

Advantages of internal recruitment 

  • It’s faster – Given that you already know an internal candidate, you may think that you have a better understanding of their abilities, character, and flaws. Whilst this might mean you spend less time assessing them (the average time-to-hire is 36 days), it can also lead to serious oversights. The ‘likability’ of known candidates, for instance, can influence how favourably you assess their ability (something that’s been known in assessments of political candidates for a while). 
  • It’s cheaper –  According to Glassdoor, the average cost-per-hire in the UK is around £3,000. Internal recruitment, however, is likely to be cheaper. This isn’t only because it takes less time, but it has fewer direct costs. Whilst external recruitment requires job sourcing, background/eligibility checks, pre-hire assessments, outsourcing, job boards, and marketing, internal recruitment generally only incurs costs for in-house recruiting staff and referral rewards. 
  • It benefits from existing knowledge – Depending on how long they’ve been with your organisation, it’s likely that internal candidates have accumulated a wealth of knowledge and experience. This so-called ‘human capital’ is hard to quantify, but is undoubtedly a huge asset for companies (UK energy business, SSE, for instance, valued their ‘human capital’ as an intangible asset worth £3.4 billion). 


Disadvantages of internal recruitment 

  • Smaller candidate pool – There are some wildly varying statistics on the average number of candidates per job vacancy in the UK, with an article from Forbes putting it at 118. Whilst the value of this might be contested, what’s certain is that internal recruitment will generally lead to fewer candidates. With fewer people submitting an application, there’s less chance of finding the person that fits the bill. 
  • Maintain the status quo Company culture is incredibly important to the success of your business. It affects the motivation, satisfaction, and retention rates of employees, and ultimately impacts your company’s bottom line. If your organisation has room to develop in terms of company culture, hiring internally might not be the best decision. An internal candidate may replicate existing bad habits, and maintain a negative status quo. 

Advantages of external recruitment 

  • increased capacity to understand customers and a wider workforce skill set to name just a couple. Recruiting externally opens the doors for experience from different backgrounds and sectors, and allows your organisation to benefit from skills developed elsewhere. 
  • Larger candidate pool – Making your job advertisement open increases the number of applicants, and the probability of finding your ideal candidate. If you choose the right job board, moreover, you can make your talent search much more targeted (for specific skills).

Disadvantages of external recruitment 

  • It can be slower – External recruitment requires you to delve deeper into the skills of candidates, which can ultimately increase your time-to-hire. This doesn’t necessarily need to be the case, however; if you ditch CVs (which, by the way, don’t really tell you anything) and incorporate work-related activities into the initial stages of your process, you could actually end up saving time. 
  • It can lead to lower productivity in the short-term – Despite their fresh ideas and enthusiasm, external candidates may take longer to get up to speed than internal ones. Lacking experience in the company and their specific role, it can be a matter of months before a candidate gets into their stride and starts adding real value to your organisation. Is this a reason not to employ them? Most definitely not – investment in any new employee, whether through training or experience, will add to your ‘human capital’. 

How blind hiring can help 

There’s no simple, straightforward answer to the question ‘is internal or external recruitment better?’ It depends on the current priorities and resources of your organisations, and should be informed by the pros and cons outlined above. 

Regardless, either would benefit from blind hiring processes. Without going into the nuts and bolts of it, blind hiring is simply a recruitment method that cuts out arbitrary factors that feed our various unconscious biases (such as race, religion, or even attractiveness, and focuses purely on the ability of candidates to perform the role applied for. The benefits of such an approach are increased diversity, higher retention rates, and most importantly, a more capable workforce.  



If you’d like to learn more about what blind hiring looks like in practice, request a free trial of our platform. Applied’s software, powered by AI, helps to remove unconscious bias from recruitment processes and pave the way for a more streamlined, cost-effective, and fair hiring system.