Key Differences Between Internal and External Recruitment

Khyati Sagar

Senior Writer

key differences between internal and external recruitment guide

Want to hire the best candidates for your organization’s vacancies but are skeptical about the ideal recruitment type–internal or external? Understanding the differences between internal and external recruitment can help.

Interestingly, 77% of hiring managers say that attracting the right talent is the biggest challenge. Prevent from falling prey to this by adopting the right recruitment type.

That’s exactly why we’ll explore internal vs. external recruiting in this comprehensive guide!

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Once you understand the key differences, you'll be better equipped to nurture internal talent and strategically attract external hires. Make sure you capitalize on proven recruitment software to start optimizing your recruitment processes immediately and gain a competitive edge.

What Is Internal Recruitment?

Internal recruitment is the process of assigning a new job position to an existing employee by promoting them or transferring them from a different department. In the internal hiring process, the company doesn’t publicize the vacancy in the job market but rather asks HR to advertise the newly opened position internally among the current workforce.

types of internal recruitment by softwaresuggest

This way, employees are motivated to apply for the new position. Internal recruitment takes a fraction of the time and money of external recruitment. (major difference between internal and external sources of recruitment).

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Advantages of Internal Recruitment

Internal recruitment is easy for companies due to its simple process. Here are the four major advantages of internal recruitment –

1. Cost-effectiveness

Internal recruitment helps you save hiring costs significantly by cutting out most of the costly processes involved in a typical hiring process. Some of the indispensable costs that internal recruitment eliminates are training, creating job boards, role marketing, interviewing potential internal hires, and developing resume databases.

In addition, you are free from the burden of bearing a drastic spike in salary, which often happens in external recruitment methods. In fact, an external hire’s salary is 18-20% more than an internal hire.

2. Shorter induction

Induction refers to the part of the hiring process where you welcome new employees and help them understand your business’s policies, rules, and roles. As existing employees are well aware of the company’s workflow, teams, tools, and culture, they do not require time to gel in.

Internal hires are well aware of their new job position responsibilities and can start working productively in no time. Hence, the training and onboarding process for internal hires is quite shorter than for an external hire.

3. High employee morale

Internal hiring involves promoting high-performing employees to a better position, both skill and finance-wise. This makes existing employees believe that their organization values their efforts and is committed to their career advancement.

Employees (internal hires) are then motivated to perform better to keep rising.

This is significantly helpful as 63% of people quit jobs that lack career advancement opportunities.

4. Saves time

Internal recruiting doesn’t require you to invest hours in attracting, identifying, and engaging skilled candidates. There’s no need to spend time developing job boards for vacancy marketing, reviewing hundreds of resumes, or interviewing a bunch of candidates.

In this process, you already have pre-screened employees with a proven record of contribution toward the organization. So you can easily gauge whether or not they have the experience and skill to ace the new role.

Disadvantages of Internal Recruitment

Now that you are aware of the advantages of internal recruitment, it’s time to understand its drawbacks to make an informed recruitment decision. Let’s dive in –

top 3 barriers to internal recruiting by softwaresuggest

1. Limited talent pool

As internal recruitment involves hiring from within the organization, you may limit your choices. Your existing employees might be highly qualified with years of experience but may not have the appropriate skills needed to fulfill the vacant position’s requirements and demands.

In such cases, external recruits are a better fit with relevant knowledge, skills, or experience for that specific role.

2. Company culture stagnation

Existing employees have often followed the same company practices for years, which makes them comfortable. They usually fail to spot operational inefficiencies due to comfort in current practices and are reluctant to bring forth a fresh perspective. All of this adds up to the stagnation of company culture.

However, hiring externally welcomes talent that can bring in new ideas, insights, and knowledge, which ultimately transforms the company’s policies.

3. Workplace conflict

Internal recruitment indirectly promotes conflict within the organizations among managers and employees. The selected candidates are likely to feel demotivated or resentful if their colleagues are given a higher position instead of them.

Managers, on the other hand, are often not willing to let high-performing employees leave their team due to its negative impact on the team’s performance.

What is External Recruitment?

External recruitment refers to the process of hiring external candidates from outside the company to fill the vacant job positions, giving you a wider talent pool. This is possible through advertisements, career fairs, online hiring platforms, and recruitment agencies.

external sources of recruitment by softwaresuggest

But before adopting this recruitment method, you must keep in mind that the process takes one to three months, depending upon the kind of talent you’re looking for.

Advantages of External Recruitment

External recruitment brings in a high quality of talent to choose from and fill the vacancy. Here are some other major advantages of external recruitment –

1. Better qualified candidates

When you go beyond your existing employees to hire for the new vacancy, there are higher chances of finding a better candidate as you get access to a larger talent pool. In this wider pool, there will be more individuals with relevant skills and talent to transform and expand your business.

When this process is automated via applicant tracking software, you are bound to have a higher reach, attract relevant candidates, and engage individuals without much effort.

2. New skills

External recruitment ensures that you identify and attract fresh talent with new-age skills and business ideas, accelerating business success. This process also helps you reach fresh graduates with updated knowledge of the best industry techniques, software, standards, and tools.

In addition, you can choose to hire candidates with distinct work experiences to get insights into innovative business practices.

3. Know your competitors’ moves

Externally recruited candidates not only bring in their previously gained experience and skills but also knowledge about your competitor’s ideas and operations. You can then view your company in a new light from the point of view of the freshly hired employee.

why you need to know your competition by softwaresuggest

This helps you better compare your business’s position in the industry with your competitors.

4. Minimal internal disruptions

When you hire talent from outside your organization, there are no vacancies created in other positions. This ensures that no department or employees face any problems in working due to a new vacancy. There are no disruptions in any business process, allowing for a smoother overall functioning.

Disadvantages of External Recruitment

Although external recruitment gives you a large talent pool to choose from, it brings its own set of disadvantages. Let’s explore them –

1. Highly expensive

To externally recruit employees, you need to advertise vacancies on different hiring platforms and adopt systems to communicate with candidates, screen resumes, host interviews, and more.

You also need software to organize and automate applications, training programs, and onboarding processes. These hiring steps and solutions add up to significant costs.

2. Time consuming

When hiring employees from outside the organization, you receive hundreds of resumes, and selecting one of them after screening can take days or months. Once selected, you need to train, mentor, and constantly check on external candidates for smooth and successful onboarding.

All of this is highly time-consuming. To reduce your application screening time and niche down your talent pool, adopt an applicant tracking system.

3. Employee turnover risk

Externally recruited employees are sometimes underqualified, misfits for the company culture, or struggling to fulfill the job requirements. In either of these cases, freshly hired employees tend to leave the job, compelling you to recruit again. Hiring for the same position again within a few months strains the company’s time and resources.

employee leave stat

Main Differences Between Internal and External Recruitment

Internal recruitment involves hiring from within the organization, whereas external recruitment refers to finding a relevant candidate outside the organization. Here are some other major differences between internal recruitment and external recruitment.

Let’s dive into the points under internal recruitment vs. external recruitment –

Internal recruitmentExternal recruitment
Focuses on exploring and promoting individuals who are already working with the company.Focuses on exploring and promoting candidates who are not working with or employed by the company.
Promotes development, career growth, and retention of current employees.Promotes innovation by introducing diverse skills and fresh perspectives to the organization.
Requires less resources and time as the candidates (current employees) are acquainted with the company’s processes and culture.Requires more resources and time as it involves vacancy advertisement, candidate screening, and rigorous training.
Enables the organization to retain and capitalize on existing skills and knowledge.Enables the organization to enjoy innovation, new ideas, and fresh perspective to decision making and problem-solving.
Organizations turn to friction-free communication channels and robust internal job posting systems to alert employees about new vacancies.Organizations turn to recruitment agencies, job advertisements, and online hiring platforms to attract candidates.
Assesses candidates based on their proven performance record and skills.Assesses candidates based on their experience, qualifications, and alignment with the company’s values and culture.
Offers limited candidates for higher-level positions, especially if existing employees are not appropriately developed.Offers access to a comprehensive talent market, which improves the chances of finding appropriately skilled and qualified candidates.
Improves job security and loyalty and minimizes the risk of talent loss or turnover among employees.Inspires existing employees to improve by introducing new ways, ideas, and talent.
Requires established talent identification and performance management processes to accurately identify and nurture skilled candidates.Requires established candidate selection process to gauge a candidate’s fit for the company.
This may lead to internal conflicts and competition among employees to grab advancement or promotion opportunities first.This avoids internal conflicts by bringing new hires that are not competing with existing employees directly.

Wrapping Up

Towards the end of this comprehensive external and internal recruitment difference guide, we hope you understand internal and external hiring better than before.

You may adopt internal recruitment if you think your employees are skilled enough to perform the higher-level jobs or if your company isn’t ready to onboard new hires. Opt for external recruitment if you want to explore a fresh talent pool and have effective training or onboarding processes.

Remember to automate your internal hiring and external hiring processes regardless of your recruitment type to accelerate the onboarding process. For that, you must explore and choose the best recruiting software now!

Frequently Asked Questions

The best recruitment type (internal vs. external recruitment) varies with your organization’s talent requirements and established hiring processes. Hire internally if you have limited resources and skilled employees, and hire externally to fulfill the lack of the required skills.

Internal recruitment methods and external recruitment methods are distinct. Popular methods of hiring internally: promotions, former employees, referrals, and transfers. Major external methods of recruitment: advertising, search firms, job fairs, and social media.

Internal candidates are the current employees working with your company, whereas external hires are individuals outside the company who apply for a vacant job position at your company.

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