Internal hiring vs external hiring free essay sample

When an organization announces a vacancy or an open job position then it can be filled by either someone internally from the company already working in another position or externally by somebody who is new to the business. For this firms need to consider different methods of hiring and try to create a pool of potential candidates with relevant skill level. There are pros and cons to both internal and external hiring. In the current economic scenario, companies look cut costs by hiring within their four walls rather than from the outside. it has been estimated that cost on finding and hiring someone externally is 1. 7 times more than internal hiring. Furthermore, as per the research 40 to 60 percent of external hiring is unsuccessful as compare to 25% for internal. The trend of hiring from outside is no longer frequently practiced due to the tight economic situation. Through internal hiring the respect and morale in employees is increased by promoting them to higher positions. We will write a custom essay sample on Internal hiring vs external hiring or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page when given the chance to apply for the position the company is trying to appreciate the worker for her/his hard work and services to the company. internal candidates are usually accustomed to the culture of the organization, and the network is already well developed. Moreover, they tend to show loyalty towards the organization for a longer time period. The cost of internal hiring is significantly low as compare to external. Expenses like advertising the job, attending job fairs, working and recruitment agencies. Both money and time is saved on things like training, paperwork drug testing them with basics and unlike new employees they do not need adjustment periods to acclimate to the work environment and the transition for the person actively working into an open position is instant. Bernthal et al. (2001, p. 1) Argues that â€Å"Indirect costs from lost productivity and reduced morale can affect other parts of the organization†. According to weak economy is forcing recruitment budgets to be slashed and organizations are very economical with their resources. Instead of hiring from external means, they have discovered that internal recruiting is cost-effective and more sensible. It is a gamble every time a company hires an external employee. to avoid that companies these days focus more on internal hiring and position someone from inside the firm whom they know is capable, has the required work ethic and job skills. Jackson et al. (1987, p. 207-219) had researched and came up with some interesting statistics where they claimed that companies that staffed 20% of their top three levels through external hiring exceeded their expected return on investment by around 10%. On the other hand those who relied on internal fell short by 10%. Moreover, they said that one out of 5 top management jobs exceed execrated returns by 20% even in a declining industry. Recruiting a top manager internally or externally as compare to lower level workers or managers can effect organizations differently. Since selecting the right top manager is a critical decision, the staffing of top mangers has to be aligned with the nature of the business because different aspects of business require different behaviour. Anyim (2011, p. 37)Insists on the socio-psychological factors affecting staffing system and argues that when employees are moved internally they heighten morale and pose a challenge which serves as a motivation source for employees. When they put in a good number of years in a single organization, the employee then feel that they have stake in the firm which ultimately makes them more loyal and committed towards the cause of the organization. Gender also plays a role in these hiring processes. Cejka et al.  (1999, p. 413-423) discovered backed by few other researchers that gender in particular may play an important part in employer’s inferences when job positions correspond to gender stereo types. Bidwell (2014, p. 369-407) Is convinced that women are more likely to enter new positions or jobs through promotions rather than hiring and are less likely to get to higher levels of hierarchy through external recruitment but the author also points out that this study might have im plications for overall gender inequality. Another factor which is considered by the employers while hiring is the wage differences between external and internal recruited employees. Hassink et al. (2008, p. 715-730) States that a risky external worker receives a much higher wage than a safe internal candidate of equal ability or productivity. Much of study shows apparently that externally hired workers get payed more but in fact the difference in wage between external candidates from other employers and internal candidates disappears if we consider the workers observable characteristics. Bassi (2000, p. 22-23)has concentrated on a fairly new concern regarding staffing and states that in political context, internal movers can create and ginger hostile atmosphere as a result of political wrangling which external candidates can minimize it. Furthermore, he insists that external employees may take time to fullfill staffing needs when an organization opens new branches and market outlets as compare to internals who will be much faster in adapting to the administrative machinery. DeVries (1988, p.749-462), defines succession as board’s choice of an internal and external appointment can be affected not just by rational organizational requirements but also through hidden political and psychological factors. Conclusion: In conclusion, we cannot lean towards any single approach as to which one is better. Every industry has its own requirement and some companies might look at their existing employees as capable enough to be positioned in a new or higher position while so me firms might think a candidate recruited from external sources would suite more. The advantages and disadvantages were discussed above and if we analyse, I have come to a conclusion that both internal and external hiring have their pros and cons. The important factor is that either of the approaches can be practiced as long as it is well initiated, implemented and more importantly we have to assess whether it is aligned with the organization’s vision and its strategic objectives.