Finding and retaining the right talent for the job is slowly becoming more and more troublesome. As Generation Z begins to fill the workforce, “job hopping” has become a recurring trend among today’s talent. A 2023 survey by ResumeLab revealed that as many as 83% of Gen Z workers identify as Job Hoppers¹. But what is job hopping, and why is it such a problem?
The Job Hopping Trend
Job hopping is a common practice today, and the core idea is based on taking your career growth into your own hands. Talent has little faith in climbing the corporate ladder in a company. Instead, they choose to be job-hunting for better opportunities constantly. Normally, this would be fine, but it becomes problematic when 83% of the workforce only stays at a job for a year.
Job hopping forces businesses to constantly spend on expensive hiring cycles. It also means that almost the entire team can be expected to have changed every year. Even senior professionals are known to job-hop for better opportunities. How can this problem be solved?
We believe the answer lies in internal hiring.
What is Internal Hiring?
Internal hiring is when a business offers new vacancies to existing employees. Rather than invest resources into the 44-day hiring cycle, the company tries to elevate existing talent to new roles and positions². Internal hiring can be an effective counter to job hopping. Most people work to get better opportunities, learn new skills, and expand their horizons.
With internal hiring, businesses can offer all these benefits to their employees. It eliminates the major reasons people have to job-hop. This boosts employee retention rates and minimizes the time needed to fill vacancies. Let’s explore the major benefits and challenges of internal hiring for more clarity.
The Benefits of Internal Hiring
Internal hiring is a solid alternative to traditional recruiting. It offers businesses new opportunities and a variety of benefits that are hard to resist. Here’s what you stand to gain if you leverage internal hiring in your company:
Improved Retention Rates
Josh Bersin’s Internal Hiring Factbook offers incredible detail on the benefits of internal hiring in the global marketplace³. According to the report, organizations leveraging internal hiring can improve retention rates by as much as 62%. This is great news for businesses looking to build a steady, solid team of reliable professionals without worrying about early exits.
Shorter Hiring Cycles
The same report also concluded that internal hiring can shorten the hiring cycle by as much as 20 days. Results will vary depending on the talent pool, but the bottom line is that internal hiring saves recruiters a lot of time. Time that can be invested into improving existing HR systems and enhancing the workplace experience. It also lightens the load on recruiters, who are already severely overworked.
Guaranteed Performance
Hiring internally means you are extremely familiar with the candidates you choose from. You have detailed insights into their performance and capabilities and can assess their suitability for the role. It lets you select candidates you know will perform well and deliver the desired results. This guarantee alone is worth using internal hiring strategies.
Cost Savings
The Josh Bersin report also included a cost analysis. The conclusion was that traditional hiring cost businesses triple, if not five times as much as internal hiring. Not only does internal hiring save recruitment costs, but it also saves training costs. The employee is already accustomed to the company and its culture. The only expense is providing training for skills related to the new role. It’s extremely cost-efficient.
Improved Employee Satisfaction
Employees would much rather stick with a company that offers them continuous growth. Job hopping is done out of necessity more than anything. If organizations give talent a solid chance at progressing their careers within the system, they will see heightened employee satisfaction. Productivity and morale will increase as everyone tries their best without fear of being held back.
The Challenges of Internal Hiring
While internal hiring is the smart choice from a financial perspective, it can also create roadblocks and challenges. Let’s review what challenges the strategy presents in exchange for its bountiful benefits.
Echo Chambers
If new vacancies are consistently filled internally, it can create a corporate echo chamber. The same people’s beliefs and ideas will be reflected across the business. This is very dangerous, as it drastically limits creativity and stagnates innovation. New people joining the team bring fresh ideas and perspectives simply absent from an insulated, internally hired company.
Complacency
While the promise of opportunities internally is great for employees, it is a double-edged sword. It can create a sense of entitlement within the company, with employees with longer tenures growing complacent. The assurance of growth can kill the motivation to learn new skills and grow professionally. A delicate balance must be achieved to keep employees on their toes and motivated.
Favoritism and Politicization
Internal job postings can be incredibly troublesome in the hands of the wrong management. While the strategy assumes complete fairness from the recruiter, the reality is not so ideal. There is a high risk that management will abuse internal hiring to promote favorites. This can negatively impact office politics and pollute the workplace. Team culture can fall apart if internal hiring is leveraged without proper oversight.
Smaller Talent Pool
The existing talent pool limits internal hiring. While we suggest internally hiring where possible, it is undeniable that not every position can be filled this way. Trying to force existing employees to take on new roles will not work. Businesses must recognize that internal hiring is meant to supplement traditional external hiring. It must be used strategically where possible rather than trying to use it for every job.
Unfair Power Dynamics
Internal hiring can result in an unfair power dynamic between recruiters and employees. Employees depend on the business to make a living. This puts them at a disadvantage in salary and other negotiations. Some bad apples may use this disadvantage to coerce employees into new roles without pay equity or satisfaction. Internal hiring demands strict checks and balances to avoid such issues.
Internal Recruiting Strategies
There are many ways to handle internal hiring. Rather than simply repeating external hiring methods with an internal talent pool, special strategies can be used to transform recruiting. Here are eight unique ways businesses can leverage internal hiring in their recruitment efforts:
1. Succession Planning
Succession planning focuses on grooming talented employees with the potential for critical roles. C-suite and senior management roles are often filled using succession planning. Team leaders select their best internal candidates and teach them everything about their job. The planned successor can take over once they retire or choose to exit. Succession planning maintains organizational continuity and ensures competency.
2. Promotions
Promotions are fairly standard within organizations. Promotions in the context of internal hiring are slightly different. These promotions expect the candidate to take up responsibilities that would otherwise go to a new employee. They may have stricter requirements for promotion, such as obtaining degrees and qualifications or learning new skills.
3. Job Rotation Programs
Some companies create job rotation programs to cultivate talent and expand internal skill sets. An example of such a program would be a company offering finance professionals a chance to venture into the sales department for 6-12 months. Such job rotations keep mundane work life fresh and organically promote internal talent. This form of internal hiring prepares the team for filling in diverse vacancies as needed.
4. Transfers
Transfers are a form of internal hiring that involves moving professionals from one department, location, or division to another. This is primarily used to promote entry-level talent to more advanced roles. A rookie bookkeeper can be transferred over to the finance department and similar situations. Transfers often happen to adjacent, compatible roles.
5. Role Changes
Role changes are exactly what they imply. The company offers employees a new job description and asks them to shift roles. This type of internal hiring is used to laterally shift talent across the business to where it is needed. Role changes do not always entail pay upgrades or a rise within the ranks.
6. Contractor to Full-Time
Another interesting strategy is to convert contracted or freelance employees into full-time hires. Businesses can offer any previously leveraged contractors a chance at joining the team. Since performance reports are available from prior experience, the best contractors can be onboarded directly to the team. Many businesses offer job listings for contractors with the opportunity of a full-time role based on performance.
Let’s review the strategies discusses with this illustrative summary:
| Hiring Strategy | Description |
| Succession Planning | Grooming employees for critical roles by preparing them for future leadership positions. |
| Promotions | Advancing employees to higher roles with more responsibilities, often with stricter requirements. |
| Job Rotation Programs | Rotating employees across different departments to expand their skill sets and keep work engaging. |
| Transfers | Moving employees to different departments or locations to fill more advanced roles. |
| Role Changes | Shifting employees laterally within the company without necessarily offering a promotion. |
| Contractor to Full-Time | Offering contractors or freelancers full-time roles based on their performance in prior projects. |
Enhancing Internal Hiring with Recruitment AI
Recruitment AI is a fantastic addition to the HR department. For internal hiring, it can be a game changer.
- Recruitment AI can monitor employee performance in real-time.
- It can analyze skill sets across the organization and recommend candidates to hire internally.
- It can also automate internal job posting.
- Advanced recruitment AI can even forecast future talent requirements and let you cultivate talent for the role.
AI recruitment tools are also a solid defense against the major challenges presented by internal hiring. They are entirely data-driven and, with unbiased, heavily vetted datasets, can recommend promotions for the most deserving candidates. Requiring performance data and justifications for promotions and role changes eliminates favoritism and keeps a leash on power abuse.
Conclusion
Internal hiring is the best solution to the current job-hopping trend. Businesses looking to improve retention and maintain a steady workforce must leverage internal hiring. Be careful, however, not to over-rely on it. Not every vacancy can be filled with internal hiring. Leveraging recruitment AI platforms like Talentino.ai is a great way to assess when internal hiring is appropriate.
Speaking of which, Talentino-AI’s recruitment platform is a great tool to add to your toolbelt as you start making waves in the recruitment space.
FAQs
- What is internal hiring?
Internal hiring is when a company fills job vacancies by promoting or transferring existing employees. - How does internal hiring reduce hiring costs?
It eliminates external recruiting expenses and minimizes training costs since employees already know the company. - Can internal hiring limit innovation?
By continuously hiring internally, the company risks stagnating creativity due to a lack of fresh ideas from external hires. - How can AI help with internal hiring?
Recruitment AI can assess performance, recommend promotions, and forecast future talent needs without bias. - What is succession planning in internal hiring?
It involves grooming employees for critical roles to ensure smooth transitions when senior staff leave. - Is internal hiring always the best option?
Internal hiring should supplement external hiring, as not all roles can be filled internally. - Can internal hiring create favoritism?
It can, especially if management promotes favorites without fair oversight or performance data. - How do job rotation programs help with internal hiring?
They help employees gain new skills across departments, preparing them for diverse roles in the future. - Does internal hiring lead to employee complacency?
Yes, it can if employees feel too secure in their advancement, potentially reducing their motivation to learn new skills. - How does internal hiring impact company culture?
It can create a sense of stability. However, it may also lead to echo chambers, limiting diverse perspectives and innovation.
References
1: ResumeLab, 83% of Generation Z workers are job hoppers, 2023
3: Josh Bersin, Talent Climate Series: Internal Hiring Factbook, 2023
