Human capital resources provide a vital means for many organizations to achieve a competitive advantage. A company enjoys a competitive advantage when it can generate above-normal returns from a resource relative to competitors. With a properly trained team whose skills and experience align with the needs of the job, it is possible to enjoy this benefit. There are two general ways a firm can obtain top talents from the market; internal recruiting and external recruiting. With internal recruiting, the company hires from within by prioritizing its existing employees. On the contrary, external recruiting relies on employees outside the organization. This paper aims to discuss the advantages and disadvantages of internal recruiting and the legal risks associated with this strategy.
Advantages of Internal Recruiting
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Internal hiring sends a positive signal to the employees that they can move up the organization. This potential elevation within the organization is a motivation tool and a reward for good performance. Higher control of one’s career development increases motivation to perform, resulting in higher productivity. On the contrary, positions that get predominantly filled externally send a message to employees that their performance will get overlooked and they are not good enough for higher duties and responsibilities.
Internal recruiting motivates efficiency by facilitating better use of skills, experience, and qualifications. Individuals recruited from within already have the necessary information about the organization, including its mission and culture (Mudashiru et al., 2013). This information is crucial because it increases the likelihood that the promoted or elevated employees will succeed in their new positions. It massively reduces training expenses associated with recruits.
Internal recruiting is cheaper than external recruiting. The reduction in expenses emanates from reduced processes and fewer complexities in hiring from within. For instance, the employees already understand the firm’s operations. Thus, socialization and learning needs are minimal. Additionally, it is cheaper because the organization avoids expensive advertising and recruitment consultancy fees (Bach, 2009, p. 121). With less reliance on external sources, the company saves expenses caused by high turnover because employees are more satisfied and feel secure in their jobs.
Job security – measured using the perceived risk of job loss – is a crucial determinant of job satisfaction. Internal recruitment offers existing employees more job security because they believe they have a chance for promotion. Employees feel comfortable with the tenets and approaches of the association and focus on their best performance to increase job security further. Despite the drawbacks of internal sources, this recruiting strategy can be a significant force behind higher performance and productivity.
Disadvantages of Internal Recruiting
This strategy protects internal candidates from the competition by not giving the opportunity to otherwise competent candidates from elsewhere. In the long run, employees may take promotions for granted and feel entitled without showing extra performance. “Spurred by the performance of other team members and the possibility of rewards based on their relative success, workers are motivated to exert high effort” (Brown, 2011, p. 2). Internal recruitment hinders within-firm contests that fuel employee efforts, hence decreasing the overall productivity and competitive advantage.
Internal sources decrease the extent of discovering gifted and increasingly proficient candidates because it prioritizes the ability accessible inside the association. Apprateny, organizations prevail by bringing new blood into their human capital resource. New candidates may come with new skills and spur innovation. However, focusing on internal recruitment only limits this choice. With time, the organization’s workforce can barely compete in a dynamic and ever-evolving business world.
Internal recruitment may cause the stagnation of skills. The feeling that internal candidates will surely get a promotion, employees’ skills, and their urge to learn new skills may become stagnant or obsolete. When this happens, productivity and efficiency decline within the organization, endangering its profitability and sustainability. An organization must continuously improve talents and increase productivity. Doing this by using a strategy that poses fewer legal risks could be vital.
Legal Issues that may Rise from Recruitment Strategy
Several federal laws prohibit employment discrimination based on age, race, disability, religion, sex, and citizenship, among a few other protected classes. The employer must craft a policy that is fair and consistent to everyone and communicate it openly. If there is a vacancy that needs to get filled by an existing employee, the criteria by which such candidates get selected must be fair and not exhibit unlawful discrimination.
If the employer decides to use the internet or social media in selecting the best candidate for a position, they must ensure the process is lawful. Companies that misuse information from candidates’ profiles to pre-screen the applicants may violate the Title VII of the Civil Rights Act and other federal and state laws. Human Resources must check and audit online networking content to ensure an impartial procedure. Additionally, during testing and assessment of the candidates, the type of tests used can result in legal consequences. For instance, the Americans with Disabilities (ADA) prohibits the use of pre-hire tests that might qualify as a test of mental health in a pre-employment setting (Hersen, 2005, p. 30). An employer must avoid these issues because they can cause significant effects.
Talent management that uses internal sources is inexpensive, increases motivation and job satisfaction, improves the efficiency of skills, and increases job security. Yet, it limits the choice of candidates, reduces the ability to identify more competent individuals from outside the organization, and may lead to a stagnant workforce. Organizations are incorporating recruiting strategies to match their needs, as long as these strategies do not discriminate or pose other legal risks. Internal recruiting will remain one of the most employed strategies by companies as every employer strives to reduce turnover.
Bach, S. (2009). Managing human resources: Personnel management in transition. John Wiley & Sons.
Brown, J. (2011). Quitters never win: The (Adverse) incentive effects of competing with superstars. Journal of Political Economy, 119(5), 982-1013. https://doi.org/10.1086/663306
Hersen, M. (2005). Psychological assessment in clinical practice: A pragmatic guide. Routledge.
Mudashiru, M. A., O.A., I., & M., A. (2013). The impacts of well planned recruitment and selection process on corporate performance in Nigerian banking industry (A case study of first bank plc 2004-2011). International Journal of Academic Research in Business and Social Sciences, 3(9). https://doi.org/10.6007/ijarbss/v3-i9/251
Muhereza, I. J. (2019). Internal recruitment and employee performance in security. https://doi.org/10.13140/RG.2.2.17831.70568