A 2014 survey of business leaders found that 71 percent prefer to develop their current employees’ skills and then move them into more-senior rolls versus hiring an external candidate for the same position. There are many reasons why this is so, from performance to improving morale and reducing turnover. However, there are also situations in which an external candidate might be a better option. The trick is determining when; you’ll need to consider the following factors to figure it out.
If you’re worried about hiring costs, you might want to look to internal candidates first. Outside recruiting fees can run as high as 25 percent of a position’s salary. And if you choose to recruit externally yourself, you’ll incur costs for posting job ads as well as promoting them. You’ll also need to spend more time screening and interviewing candidates you’ve never met versus reviewing the skills and performance of an employee who already works for you.
If you want to pay a lower salary, you might want to look to internal candidates first. According to the Society for Human Resource Management , external hires often get paid 18 to 20 percent more than internal hires do. If you have employees within your organization who are capable of the job, it may make more financial sense to promote them—and increase their compensation accordingly—than to hire an external candidate with the same skills and a much higher price tag.
If you want to reduce your onboarding and training costs, you might want to look to internal candidates first. In many cases, an external hire will require more training than an internal hire will. You’ll also have to devote time to communicating your organization’s policies, processing employment paperwork including retirement accounts and health insurance, and introducing them to the existing team.
If you’re interested in tax incentives, you might want to look to external candidates first. Federal and state governments offer many tax credits to help offset the costs of hiring and training new employees. For example, the Department of Labor Work Opportunity Tax Credit is available to organizations that hire workers from certain target groups including unemployed veterans, food stamp recipient and ex-felons.
If you’re expanding or diversifying and adding a brand new role, you might want to look to external candidates first. If you’ve created a new position that is unlike any other in your organization, you may not have any current employees who can successfully fill it without a significant investment in training and/or education. In this case, it likely makes more sense—financially and in terms of productivity—to seek an experienced candidate outside your company.