Internal vs. External: The Ongoing Debate

Author: Courtney Robinson | Source: HCI | Published: May 2, 2012

As businesses emerge from the recent down turned economy the need and ability to hire new talent is presenting itself. Organizations have the resources they need to fill new positions to start growing again. One of the challenges with this process is deciding where to source candidates from, internally or externally? A recent article from Human Resources Executive Online, Do Outside Hires Perform Better, looks at the difference between internal and external hires in regards to performance and cost. Seeking external candidates allows organizations to seek out candidates with higher skills sets, education, and experience. These external applicants might have more credentials than the current staff, but do these additional skills result in higher performance?
“Probably the most important development in corporate life over the last generation or so has been the decline of lifetime careers and the rise of outside hiring,” author Peter Capelli states.
Even though external candidates are brought into an organization due to their higher skill sets, it can take them up to 3 years to perform at the same level as internal candidates. Three years is a long time to wait for results, and costly. External candidates are typically paid more comparative to their internal counterparts, only adding to the cost. While there are some circumstances that require the skills and ideas of outsiders, the time and money it takes to bring external employees up to speed is a good argument for HR to push towards internal development.
Outside hires aren’t entirely bad. They can be a breath of fresh air, bringing new ideas and experiences. They can change the organizational culture if it has turned into a negative environment. Capelli highlights, external candidates who were unsolicited or an employee referral performed better than those brought on by external factors. On the other hand, internal promotions can motivate individuals to perform and build loyalty within the organization. While it is tempting to buy the shiny new talent, polishing up what you already have can be a great investment towards the organization’s future.