An organization is only as strong as its workforce.
Each hire contributes to or corrupts a company’s culture, productivity levels, and overall employee satisfaction. Hiring managers carry the weight of choosing well when filling vacant roles.
Instead of risking onboarding a bad fit, the talent a recruiter needs might already work at the company. Hiring an already-vetted internal candidate who contributes excellent work and collaborates well with coworkers quickens the process and eases hiring concerns.
What’s an internal candidate?
An internal candidate is an employee applying for a new position within the same company. That position might be on the same team, in a different department, or at another location.
A sales representative may want to change their career path and take on a marketing-focused role. Likewise, an employee might apply for a more senior position rather than wait for a promotion.
Companies regularly hire from within. According to Jobvite, an estimated 36% say internal candidates are the best source of quality talent. But the same study found that 65% of workers rarely look at internal job postings, so most of this talent is recruited by internal hiring managers.
What’s the difference between internal versus external hiring?
The difference between internal and external hiring is a candidate’s relationship with an organization. Internal candidates are already employees, so they won’t go through as extensive an onboarding process as external candidates.
They may need to learn new role requirements and gain access to different tools and technologies, but an external candidate requires a more thorough onboarding process that includes signing payroll and health care documents, receiving and setting up work equipment, and learning company-wide policies and procedures.
Types of internal recruitment
Employees shift within an organization because they’ve caught someone’s attention — be it a manager, coworker, or HR rep. Here are five of the most common types of internal recruitment:
Promotions: This is the most common way an employee embraces a new internal role. A manager might reward an excellent performance review with a promotion or the employee might apply to their next-step role to advance their career.
Sometimes promotions are automatic and defined during onboarding, meaning no one has to apply.
Transfers: Talent mobility can be a great tool for growing companies. Employers might transfer an employee across departments at their request or to redistribute talent. The move might be promotional or lateral.
Reorganization: If a company gains or loses funding or needs to create a new team or department, they might reorganize roles and responsibilities, which could lead to promotions and transfers.
Employee referrals: Staff might recommend coworkers as replacements when they’re promoted or for roles noticed on internal job boards or discussed in meetings.
Temporary to permanent: Instead of hiring more transient workers, recruiters might promote temporary employees to permanent roles.
Advantages and disadvantages of hiring internal candidates
The labor market is shifting, and record numbers of workers are quitting. Internal hiring motivates staff to stick around, but a poorly handled rejection can profoundly impact an employee’s job satisfaction. This attitude or low morale might affect other employees.
Here are a few more pros and cons of internal hiring:
1. Cost savings
According to a study by Glassdoor, the average American business spends $4000 and 24 days hiring a new employee. This estimate is conservative: large companies using recruiters and advertisements, conducting background checks, or offering signing bonuses accrue substantial hiring expenses.
The risk is significant, too: Harvard Business Review (HBR) found that 33% of new hires start a new job search within six months, and 22% leave their jobs within the first year. And when an employee is let go or quits, the company stands to lose between 100-300% of the employee’s salary.
That means someone who makes $100,000 annually leaving could cost a company up to $300,000.
Internal hires also typically receive smaller salary offers. External hires are paid 18% more than internal promotions, despite being 61% more likely to be terminated.
2. More development opportunities
In 2022, 46.2 million workers voluntarily left their jobs. One of the main reasons workers leave a workplace is because they don’t feel there’s room to grow.
Internal hiring tells staff advancement opportunities exist, and employees who see coworkers’ loyalty and productivity pay off might be motivated to work harder.
3. A simplified onboarding process
Employee onboarding is time-consuming and costly. New hires must learn everything, from team names to complex internal procedures to tools and software. It makes sense that it typically takes eight months for a new hire to reach full productivity levels.
Internal candidates save human resource staff and direct managers time teaching new hires from scratch. And if a company has to hire a replacement in a pinch, internal hires already know many of the ins and outs and can hit the ground running.
4. Familiarity with the employee
New recruits are a mixed bag, no matter how thorough the interview process is. A new hire could seem perfect on paper and interview well and still struggle to collaborate with the team or pick up new software.
Internal hires are already vetted, so you know what you’re in for and can promote confidently.
1. Stale air
Diverse teams that encourage unique perspectives thrive from better problem-solving and more innovative and creative ideas. If employees shift roles internally too often without hiring external replacements, your company culture might grow stale.
External candidates provide fresh perspectives that shake up established, inefficient norms.
2. Potential resentment
Nobody likes rejection. Unhired internal candidates are more likely to notice workplace inequity, feel less loyal, and become more absent than their peers. And employees competing for the same role might develop competitive attitudes counter-productive to teamwork and collaboration.
All of this could lead unsuccessful candidates to feel resentful and dejected — which might cause them to leave the company entirely.
3. Increased turnover rate
While providing advancement opportunities by hiring internally increases employee loyalty, HBR found that internal candidate rejections can increase turnover rates by 10%. The reason isn’t spite toward leadership — internal candidates likely quit because they feel career development isn’t possible.
Three ways to mitigate turnover are giving detailed feedback regarding why a candidate didn’t get a promotion, outlining professional development opportunities to address weaknesses, and encouraging them to apply for other positions across the company.
Understanding the internal candidate interviewing process
Interviewing internal candidates is similar to interviewing external candidates, but a good manager understands the conflict potential involved if an internal candidate isn’t a good fit.
Consider the following to avoid issues:
Don’t post unless necessary
If you already have an internal candidate in mind, keep the new job post off internal job boards. Ask the candidate to interview directly to avoid disappointing other employees.
And if you must post the job, make the description and requirements very detailed to avoid irrelevant applications and disappointed employees.
Perfect the job description
Write a clear job description to attract the right internal candidates and avoid interviewing employees that aren’t a good fit. Be as specific as possible when defining necessary experience and skills and role responsibilities, and reference this information when providing feedback to a rejected employee.
Interview all internal applicants
The HBR study mentioned earlier found that employees are twice as likely to quit if they’re not interviewed for an internal position, so if you post a job to internal boards, interview every internal applicant.
This tells employees you think they’re valuable and have potential, even if you don’t move forward with their application.
Interview questions for internal employees
Hiring managers already know an internal employee’s basic information, so questions don’t have to be general. Here are a few good internal interview questions:
Why are you interested in shifting positions?
If you could change anything about your current role, what would it be?
I saw you worked on [project] with [coworker’s name]. Why do you think it was such a success?
Tell me about a time you addressed an unforeseen complication at this company.
What areas do you think you’ve improved most while working here?
What’s a project you’ve most enjoyed working on and why?
Why do you think you’d shift roles well?
What transferable skills do you bring to this new role?
How to reject an internal candidate
Internal candidate rejection is tricky and can make or break company turnover rates. Here are a few ways to improve the candidate experience and this process and enjoy increased employee retention:
Do it in-person
An internal candidate rejection email isn’t ideal because candidates can’t read your friendly body language and tone of voice.
Recognize how tough internal job rejection is by letting candidates know in person — this shows respect and appreciation for the time they took to apply and interview. If your company has a fully remote work environment, opt for a video call.
Provide constructive feedback
Help employees nail the next internal role interview by providing detailed application and interview feedback. Include positive feedback so they don’t feel deflated but instead motivated to improve.
Employees often quit post-rejection because they stop seeing career growth at the company. Outline internal opportunities, like other great-fit roles or company-financed certifications, to emphasize their professional growth is a top priority.
Employees that aren’t quite qualified enough for the next step might benefit from career coaching or professional development courses for upskilling.
Finding new talent is nerve-wracking. It takes time and resources, and you can’t be sure you’ve chosen right until the employee’s comfortable. As long as you reject internal candidates sensitively and constructively, hiring internally increases the chance you’ll find a great fit.
Internal interest is a great sign: it means employees like their workplace. Make sure employees feel valued by giving great feedback, recommending them good opportunities, and investing in their future.