External VS

Internal
Recruitment
How it helps organizations to
achieve their strategic goals?

Presenters
Haider Raza Naqvi
Sarmad Ali
Rabia Siddique

Internal Recruitment
Promoting employees from within an
organization

To fill upcoming positions

Firm doesnt have to reinvent wheel
with internal employees

Employee adapts faster a new position

External Recruitment
HR systematically search for new
employee pool

Inflow of new ideas and skills

New practices that can be integrated into
organizations best practices

It also diversifies teams and creates a

balance

At companies large and small

Talent Hunt never ends
To cut costs and time
Companies are now looking at what have
been previously over-looked

Within the company itself

Vitality of External Recruitment is

undeniable

Induces new blood

Creates a competitive environment
Existing workforce put in more efforts

But, firms are now more inclined

towards
Internal Recruitment

Literature Review
Article 1: External Recruitment as an
Incentive Device by KongPin Chen

Article 2: External Recruitment VS

Internal Recruitment by William Chan

Source: Journal of Labor Economics

A hunt for talent never ends

Companies seek employees
Who can give maximum benefits to firm
Due to high costs and time consumption
Firms mostly recruit internally

Two choices for employer

Recruitment is an economic contest
Opening up external recruitment opens up
a competition

Chances of internal employees to win

decrease

Because of incoming new skills and talent

Can be avoided by setting the prize of
incentive high

Firms recruit externally for special and

superior skill sets

But, Internal Recruitment has its own

reasons

1 Human Capital Accumulation

2 Risk aversion of choosing a wrong
person

Even if reliability of external candidate is

known

Firms prefer to recruit internally

If the relative significance hiring
externally is not strong enough

Firms also use promotion as an incentive

device along with monetary rewards

How it helps
Organization?
It ensures loyalty and commitment
Creates a completive environment
Employees strive to win the prize
New employee rejuvenates organization
Organization better knows an existing
employee

Critical Analysis
Instable economy has forced to cut
budgets for attracting new employees

Hiring externally costs 1.7 times more

than hiring internally

40% to 60%eternal hires fails

Compared to 25% failiure rate in internal
recruitment

Figures Source: Saratoga

Institute

Another concern is to find someone who

can fit-in

Because hiring a wrong person can have

drastic consequences

It also costs so much and takes a lot of

time to make a new person to adopt
firms culture

Conclusion
We can conclude that
Crunch economic situations and
Required flexibility of an employee

Organizations are more inclined towards

hiring internally

Only when the need to fill in highdemanding position or require some

significant talent they look outside the
organization