Internal Recruiting: Best Practices for Hiring From Within

Quick look: Finding the right talent at the right time can be challenging. One thing that can make it easier? Hiring internally. Here, explore the different types of internal recruitment, the business benefits of hiring from within, tips on developing an internal talent pipeline, and how a professional employer organization (PEO) can help busy small businesses do it all.

An organization’s most important asset is its employees. Talented, hardworking personnel help companies develop innovative offerings, cultivate a strong company culture, and can serve as a pipeline of talent.

Small businesses face significant hiring challenges. They may have limited resources to devote to recruiting, and their larger, well-known counterparts could more easily attract candidates. Leveraging internal recruiting is one potential solution to help small- and medium-sized businesses (SMBs) achieve their talent acquisition goals.

What is internal recruitment?

Internal recruitment, also known as internal hiring, is a human resource (HR) strategy that involves filling vacant positions within a company by considering current employees, including staff from different teams, departments, job functions, locations, and lines of business. Approximately 30% of positions are filled by internal candidates.

Common internal recruiting methods include:

• Promotions: Involves a talented employee progressing in their career and shifting from a more junior role to a senior one. Promotions often include a pay raise, and it’s common for businesses to fill leadership positions with internal promotions.
• Transfers: Often a lateral move, a transfer involves transitioning from one position to another without a rank change. Transferred staff may or may not receive a pay increase and change locations.
• Contractor to full-time: Some organizations employ non-full-time workers, including part-time employees, consultants, contractors, and freelancers. Businesses may recruit interested individuals for open full-time positions that align with their skill sets.
• Former employees: Also known as boomerang employees, former workers who return to the organization are likely still aware of the company’s procedures and can be a cost- and time-efficient recruiting channel.

What are the advantages of internal recruiting?

There are several advantages of hiring internally, especially for SMBs, from saving time and money to boosting employee engagement.

1. Enables skill-based hiring

Many companies are adopting a skills-based approach to hiring and professional development. LinkedIn’s The Future of Recruiting 2024 report states that 73% of recruiting professionals believe hiring based on skills is a priority.

Reskilling and upskilling employees can enable skills-based hiring and help small businesses fill skills gaps. There tends to be a small talent pool for emerging skills like artificial intelligence (AI). In this case, developing and hiring current staff for needed roles makes sense.

The LinkedIn research demonstrates that recruiters agree with this sentiment, as there has been a 6% year-over-year increase in recruiting professionals who believe talent acquisition and learning and development need to work more closely together.

2. Reduces costs

Internal recruiting can help organizations trim expenses in multiple ways.

According to the Society for Human Resource Management (SHRM), organizations spend an average of nearly $4,700 on recruiting each new hire. However, when a current employee fills an open position, a business can eliminate certain recruitment expenses, like the cost of posting job advertisements. Additionally, companies may be able to enhance their workforce without increasing their headcount.

3. Saves time

The average time to fill a position is over 42 days, or longer, depending on the position and industry. Internal recruiting can help accelerate and streamline this process by:

• Reducing time spent creating and posting job advertisements, reviewing resumes, and conducting interviews
• Minimizing required paperwork, as the “new hire” is already an employee
• Simplifying onboarding, since the employee is already familiar with the company’s industry, operations, culture, and mission
• Enabling fast, smooth training of the promoted employee’s replacement, if applicable

4. Boosts employee engagement and retention

Employees want to know internal mobility exists within their organization. LinkedIn’s most recent Workplace Learning Report found that 7 in 10 people feel that learning helps them feel more connected to their employer, 8 in 10 believe learning adds purpose to their work, and a strong learning culture results in 57% higher retention rates.

Helping staff grow their skills and hiring them for open positions also helps SMBs avoid the trend of new hires being the most likely to quit: approximately 30% of employees who have been with their employer for less than six months plan to leave within the next 12 months.

5. Preserves institutional knowledge

Institutional knowledge is a corporate treasure trove. The information your workforce possesses about the company’s history, values, and operations is crucial to in ensuring an organization’s long-term success, resilience, and sustainability.

Hiring from within safeguards this knowledge. Internally recruited staff retain the experience gained from previous roles. This continuity ensures crucial information is passed on to subsequent employees.

Tips for internal recruiting success

Business leaders should keep the following factors in mind when sourcing staff from their current workforce:

Identify who—and what skills—are out there

A fundamental first step for internal recruitment is to identify existing employees (and their unique skills), so you have an idea of who can fill positions when they open.

Focus on succession planning

Succession planning can help your company develop internal talent pools to fill prospective roles. A succession plan should include job descriptions, required skills, and an ongoing list of potential internal candidates.

Define the process

Before recruiting internally, business leaders should determine criteria for employees to be considered for a promotion or transfer (i.e., minimum time in their current role, performance standings, etc.).

Next, positions should be clearly communicated to current staff via email and the company intranet when they become available.

After selecting an employee for the role, hiring managers should communicate with candidates who were not chosen. “Ghosting” job candidates can harm your company’s reputation as they are important employer brand promoters. This is also an ideal time to provide interview feedback and tips on how they can develop for future roles.

Always be fair and equitable

Treating internal and external candidates equally is critical. Employers should:

• Onboard internal “new hires” the same as they would external ones to set them up for success in their roles
• Promote staff fairly and maintain transparency during the process
• Establish a consistent set of criteria for all internal candidates to ensure hiring managers avoid bias and candidates are chosen based on their qualifications
• Treat all candidates the same, whether they’re sourced internally or externally

Prioritize employee development

Internal recruitment success relies on a talented candidate pool, making employee development a mission-critical venture. To foster the skills of their staff, organizations may consider:

• Adopting a learning and development portal featuring immersive, on-demand training on various topics
• Developing a mentorship program in which experienced employees (mentors) provide guidance, support, and advice to less seasoned colleagues (mentees) to help them develop their skills, knowledge, and careers
• Building career paths for workers to identify the skills required to move into new roles
• Encouraging a culture where employees can openly communicate their career aspirations with their managers
• Offering knowledge-focused employee benefits, like tuition reimbursement or student loan assistance

Internal vs. external recruitment: when external recruiting may make more sense

The ideal recruiting process looks different for each role and organization. Sometimes, it’s best to strictly recruit internally or externally, and other times, a combination of both is needed.

Instances in which external recruiting may be the best choice include when there is:

• A limited internal talent pool for the role: If current staff does not possess the necessary skills and the position needs to be filled promptly, external hiring may be wisest.
• A need for fresh eyes: Sometimes a fresh perspective is advantageous for staying competitive and innovative (professional development can also help nurture this within the organization).
• A potential lack of diversity: If your workforce is quite homogenous, hiring internally could hinder diversity, equity, and inclusion (DEI) initiatives.

In most cases, balancing internal and external recruitment can help companies create a dynamic, successful workforce.

Perfect your internal hiring process with a PEO

Small businesses can save time and money, increase employee engagement and retention, and maintain institutional knowledge by hiring internally.

Unfortunately, the organizations that could benefit the most from internal recruiting may also be the most time-strapped. A professional employer organization (PEO) can help them take advantage of developing and hiring their current staff without losing sight of other valuable projects.

PEOs are a type of HR outsourcing solution that manage various aspects of other businesses’ human resources, employee benefits, payroll, risk and compliance, and other employee-related tasks.

Some PEOs, like ExtensisHR, offer complimentary full-cycle recruiting services, including:

• Phone consultations with a recruiting specialist
• Full-cycle recruiting for most staff-level positions
• Job advertisement creation
• Salary surveys
• Skills and talent pool assessments
• Interview assistance
• Offer letter consultations
• Multistate compliance for remote workers

Additionally, ExtensisHR provides comprehensive HR and policy guidance, and access to both a learning and development platform and a DEI Dashboard that delivers real-time data on pay equity, salary trends across gender and race demographics, employee turnover, promotions, and more.

Ready to discover your current talent’s potential? Learn more about ExtensisHR’s recruiting services, or contact us today to get started.