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The Advantages And Disadvantages Of “External First” Hiring Preferences?

by
Dr. John Sullivan
Sep 17, 1999

There is an ongoing debate among employment managers as to whether it is better to give preference to internal candidates before looking externally to fill vacancy. Older, more established firms traditionally give preferences to internal candidates while fast-growing and more innovative firms tend to focus more on external hires. Although most firms end up using a mixed strategy, the target ratio of internal to external hires is always a topic of hot debate. First let us focus on giving preferences to outside hires. GIVE OUTSIDE CANDIDATES A PREFERENCE! Reasons To Favor Outside Hiring:

  1. It helps you acquire competitive intelligence about other firms.
  2. New hires can help you identify other potential candidates to “poach” from their firm.
  3. The new ideas that applicants and new hires bring in stimulate the thinking of others.
  4. New hires ask “why we do things that way” so we are often forced to re-think the way we do things.
  5. It keeps our employees on the edge because they know they must compete against outsiders for jobs.
  6. Outside hires don’t have political alliances already set up. This can help them implement new ideas without the “baggage” of past political battles.
  7. Already trained external hires may give us “instant talent” for new products, programs, and skills.
  8. Some argue that hiring “already trained” people is cheaper than developing and promoting internal talent. This effect varies depending on the cost of a new hire.
  9. It allows other firms to train and weed out the “turkeys” so we can hire the cream of the crop. As a result it can lower training cost.
  10. In a stagnant culture, “outsiders” might help “shake things up” and help us evolve our culture.
  11. When you hire a great talent from a close competitor, you gain one and as an added benefit…the competitor also loses one.
  12. The outside recruiting and advertising for outside hires may tangentially help build your brand, send a message that you are growing and also help boost sales.
  13. Re-hiring boomerangs (former employees) may aid in retention efforts as they tell other employees that the “grass is not greener” on the outside.
  14. In a fast-growing company (or small firms) you might have no choice but the higher externally because there isn’t enough talent to go around inside the firm.
  15. If the firm has weak training or development, the inside talent will not have sufficient skill to do the job.
  16. If the firm has a weak hiring process promoting internally, is not a realistic option because of the lack of talent.
  17. In jobs where you absolutely require experience, there may not be enough experience in newly developing areas.
  18. External hiring forces are managers to stay up with trends and to benchmark as they interview search. This is the added impact of improving their learning.
  19. In most cases external hiring adds more to the diversity of the workforce than internal hiring.
  20. If the firm is going global, it will undoubtedly line that external “local” hires are superior and performance to internal promotions.
  21. The World Wide Web makes recruiting so easy and inexpensive the advantage has shifted towards external hiring.

Problems With Outside Hiring:

  1. Outside hires can weaken the corporate culture by bringing in counter culture people.
  2. The turnover rate for external hires is almost always higher than internal promotions because the candidates must both adjust to a new environment and they come to us as relative unknowns.
  3. External hires often have a longer “adjustment period” and orientation costs are higher.
  4. Customers may feel slighted if they don’t get one of the Firm’s current employees.
  5. In a tight job the (potentially) higher starting salaries of outside hires may cause internal equity issues and eventually increase all salaries.
  6. In a tight job market there may be little external talent available or the quality of the limited talent may be poor.
  7. Firms with strategic alliances may anger their partners by “poaching” their talent.
  8. Hiring talent away from customers and suppliers may harm your business relationships.
  9. Legal issues can occur when hiring intact teams, top technical talent with non-compete agreements.
  10. In a competitive market you can’t hire quality talent without a strong recruiting function.
  11. Learning internet recruiting and setting up web pages may be prohibitively expensive or time consuming.
  12. The world of external recruiting changes so rapidly and is so competitive that we might end up with lesser talent unless we can afford a strong recruiting function.
  13. The likelihood of lawsuits resulting from illegal practices by hard to control managers is high.
  14. External hires have already demonstrated their lack of loyalty by leaving their firm. They may have the same lack of loyalty at our firm, resulting and high turnover rate.
  15. In a cyclical economy, large-scale external hiring might just a mean future layoffs.

This article is provided for informational purposes only and is not intended to offer specific legal advice. You should consult your legal counsel regarding any threatened or pending litigation.

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