What’s behind the decline of internal hiring?

Internal hiring across the globe spiked to around 40% during the COVID-19 pandemic, but has since slumped to just 24% despite the global skills shortage

Amid restricted market conditions, the COVID-19 pandemic forced employers to think laterally when embarking on recruitment drives. 

Many companies looked to their existing teams to plug gaps in the workforce, resulting in internal hiring spiking to 40% of all hires – up from a more typical proportion of 30-32%. 

However, according to data analysed by The Josh Bersin Company, in collaboration with AMS, that figure now slumped to just 24%, one of the lowest internal hire rates seen for several years. 

That’s despite external recruitment becoming an excruciating process for businesses across multiple industries, caused in large part by the well-documented global skills shortage

“Organisations that want to succeed in this post-industrial era, where talent is scarce and hiring times are extended, have no choice but to think laterally about approaches to hiring and career pathways,” says Josh Bersin, Global HR Research Analyst and CEO of The Josh Bersin Company.

“Now, more than ever, there needs to be a culture of movement inside the company, whether those moves are part time, project based or full time.”​​​​​​​.

‘Perfect storm’ for talent acquisition

The benefits of keeping it in the family and hiring internally are numerous.

Firms looking within can not only address chronic labour shortages, but expedite spiralling time-to-hire rates given it is taking employers substantially longer to find, attract and appoint new recruits from the external market.

What’s more, The Josh Bersin Company points out that increased employee retention, improved company culture and the collective impact these factors have on bottom-line costs are further reasons to refrain from launching exhaustive external recruitment efforts. 

The human capital advisor unearthed a host of supporting evidence while producing the latest instalment of its Talent Climate Series, which draws on almost 600,000 hire-related data points spanning five years of global HR and recruitment records.

Researchers found that employees promoted to new roles within their existing organisation were 70% more likely to stay there in the long term. 

It’s all the more astonishing, therefore, that companies appear to have lost momentum when it comes to productive internal hiring, especially given the potential financial savings that adopting such a policy can bring. 

Jim Sykes, Global Managing Director, Operations at AMS, says 2023 has the makings of a “perfect storm” for talent acquisition. 

He adds: “In the face of reduced hiring volumes, continuing skills shortages and increasing time to hire, it’s all the more surprising to see that organisations are relying more on external talent, rather than moving their existing employees into new roles. 

“You could be forgiven for thinking this trend has been driven by highly specialised hiring within niche skills sets, but it’s clear from our data that this is a much broader issue.”

Sykes also emphasises that, while seeking external talent will always be important in providing companies with fresh perspectives, they must also be mindful that talent can often be found right under their noses. 

Read the full report: The Talent Climate Series – Internal Hiring Factbook

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