Hiring and retaining the best talent is key to your business's progression. Which is why you should consider how effective your hiring process is. This means assessing whether you should use an external recruitment process - or recruit internally.

Internal recruitment may be the best option for your company. Not only does it save time and money, it can also increase employee engagement and job satisfaction. But you should ensure you manage the process effectively.

Otherwise, you may face high levels of mistrust amongst your employees. As well as poor job performance and a negative impact on your company culture.

In this guide, we'll discuss how to recruit internally, the advantages of internal recruitment, and its cons.

How does internal recruitment work?

Internal recruitment is when a business advertises a vacant position. But only to its existing employees. Only current employees are able to apply for the position.

The process works by reviewing the skills of existing employees from multiple teams and departments. Or they might advertise an internal position via a job posting on the employee intranet. This will encourage qualified staff to apply.

The difference between internal and external recruitment

Unlike internal recruiting, external recruitment is when a business looks to fill job openings with applicants outside the company. Companies may choose to advertise a new position to external candidates on job boards or use resume databases.

What are some internal recruitment methods?

Whilst most internal recruitment methods are more cost-effective than hiring an external candidate, they still require the right management.

There are several types of internal recruitment to choose from. These include:

Dedicated hiring managers

You may wish to hire dedicated recruitment specialists when looking to employ internal hires. This type of manager is responsible for finding an internal applicant to fill a new role. They initiate the recruitment process and define the job description for an open position.

This includes establishing the job requirements, screening unqualified candidates, and performing a background check if necessary.

Employee referrals

You could use an employee referral scheme to form your internal recruitment process. Employee referrals are a structured program, in which staff endorse internal employees for open positions within a company.

Unlike recruiting externally, employee referrals are a less time-consuming method of talent acquisition. Internal hires are already aware of your company and its requirements. And are therefore more likely to adjust to the new role than an external hire.

Internal promotions and transfers

If you choose to hire internally, you could implement an internal transfer and promotion process. This is where employees transfer between departments when a role is available.

For example, should you promote one employee, their old position will become vacant. And instead of external recruiting, you could use an internal transfer to fill the role.

This consists of weighing up the skills of your employees. And comparing them to the job requirements to find the right fit.

Advantages of internal recruitment

Whilst it may not suit every business, there are several advantages to hiring internally. These include:

Less time consuming

An internal hire can save your business time and money. This is because external recruitment means spending more time finding candidates. As well as interviewing them and conducting background checks.

Hiring internal candidates takes less time as you’ve already gotten to know your employees and their skills. So it's easier to match them to a suitable role than a brand-new hire.

Faster onboarding process

Using internal recruitment also means faster onboarding. With brand new hires, you spend time informing them of your business and company culture. But your existing staff will already be aware of this - so you won't need to spend time and resources onboarding them.

Boosts employee morale

Your employees are the focal point of your business. And by using internal recruitment, you can boost their engagement and morale.

This is because employees will be encouraged by the potential of climbing the career ladder. And promoting their progression and development will only make them more engaged in your company.

More knowledge of internal candidates

Another advantage of hiring internal candidates is that you have more knowledge of them. You know exactly how they perform, what skills they have, and how they handle difficult situations.

Moreover, you already have a working relationship with them. So you wouldn’t have to spend time building rapport and trust.

Whereas hiring a brand new employee can be risky - as they may not perform as well as you thought they would.

Disadvantages of internal recruitment

However, hiring internal candidates can have its own set of challenges. These include:

Limits candidate pool

Relying solely on internal hiring means you could miss out on more qualified candidates. Whilst you already know how your existing staff perform, you might find new skills from external candidates. Which may be more beneficial to your company's growth.

Produces stagnant culture

Internal recruitment may also produce a stagnant culture. This is because employees may become too comfortable in their positions and the processes of your workplace.

Whereas, external candidates might provide fresh perspectives that could improve your company.

Creates resentment among other team members

Hiring internally could also create resentment amongst your staff. For example, if a team member is put up for a role multiple times and doesn't get it - they may feel as if the company doesn't value them.

This can create a tense work environment where employees feel like they are in competition with each other. Consequently, it could reduce employee engagement, productivity and job performance.

Creates gaps in the workforce

Using internal recruitment may also create gaps in your workforce. For example, if you promote an employee, their position will then become vacant.

If they are a more junior team member, there may be no internal candidates that could fill the open role. And you then may have to recruit externally. Which would defeat the purpose of using internal recruitment in the first place.

How to manage internal recruitment

You should manage the entire hiring process effectively when recruiting internally. And there are several actions you could take to ensure this.

These include:

Set up an intranet or recruitment page

You may wish to set up a recruitment page or advertise job postings on your employee intranet. These should include the skills and qualifications you require for the role. So your staff know which positions are suitable for them to apply.

It might also be useful to establish policies when hiring internally. Such as only accepting applications from qualified candidates. You should inform them of these guidelines before you begin the recruitment process.

Avoid favouritism

You must also ensure you don't favour any of your employees for a position. This means interviewing all qualified candidates who apply - and not providing special treatment.

For example, if you decide to do a task as part of the process, you should ensure everyone has the same task and time to complete it.

Track the skills of your existing workforce

When a position becomes available in your business, you should make a note of all the skills you require for it. And compare them against your existing staff members. However, all staff should have the opportunity to apply for the role.

This will make it easier to find a qualified candidate that fits the job description. As well as limiting the time it takes to recruit.

Consult multiple stakeholders

You should also consult multiple stakeholders when starting internal recruitment. This includes former managers, referees, and even colleagues.

This will give you a better idea of whether an employee is the right fit for the role - and if there is anything you need to be aware of before hiring.

Have a transparent process

If you choose to hire people internally, you must ensure transparency with your employees. This means being clear about which candidates you will consider for the role. And giving honest and constructive feedback to unsuccessful applicants.

Get expert advice from Peninsula UK

You should consider all factors when using an internal recruitment process. This includes assessing what hiring process would work best in your company, how to promote the position internally, and whether you should employ a hiring manager.

Without the right preparation, recruiting internally may negatively impact your company. It could even create resentment among employees, as well as lead to staff mistrusting you as an employer.

Peninsula offers you expert 24/7 HR advice and support, to help you manage internal recruitment in your business, employ the best talent and fill open positions. Contact us on 0800 0282 420.