Current employees are a significant talent resource to fuel growth.
Organizations typically focus on external recruiting to fill open roles. But this approach ignores a major talent source: current employees.
Responding to growing skills shortages and low unemployment rates, Deloitte's 2019 Human Capital Trends report asserts that, to fuel growth, businesses should funnel their existing workforce through internal recruitment programs. In fact, according to the study, internal talent mobility has become a C-suite-level topic, with 76 percent of survey respondents rating it important and 20 percent rating it one of their organization's three most urgent issues.
It's easy to see why. Current employees likely already have the core capabilities a company needs, not to mention knowledge of the firm's infrastructure and culture. What's more, according to the Trends report, internal mobility is one way to embed collaboration and agility into an organization's culture. Thanks to more cross-functional teams and networks, internal mobility takes on greater significance. Managers need access to diverse skills among all employees. Staffing projects and programs becomes difficult if the company lacks an active and open internal mobility process.
Overall, recruiting from within equates to reduced time to hire and lower costs per hire. According to Glassdoor, the average cost of hiring an employee for a U.S. company is approximately $4,000. Research also shows that the average cost of finding and hiring someone from outside the company is 1.7 times more than an internal hire. Investments add up quickly, considering that businesses fill 66 million jobs each year in the United States.
But the real costs are much bigger than that, contends Peter Capelli, professor of management for the Wharton School, during a recent HBR Ideacast. "The real costs include the amount of time it takes people to figure out how to do the job well, and how they're not performing well along the way," he says.
No mobility strategy
Unfortunately, a 2017 LinkedIn survey found that only 28 percent of talent-acquisition leaders report that internal candidates are an important source for filling their vacancies. Virtually all U.S. hires "come about by backfilling vacancies, and nearly all of those come about because employees leave for opportunities elsewhere, especially when they cannot advance internally," Capelli says. He adds that the main reason people apply for jobs in new companies "is because they feel they're blocked in their current job."
"The sad and maddening reality is that employees generally find it easier to find new—and more attractive—opportunities in another organization than to explore and move to new roles at their current employers," claims Deloitte, noting that only 6 percent of those in its study believe they are excellent at moving people from role to role.
The problem with an internal mobility strategy is that there is a lot of data telling companies to pay attention to this trend but little advice on how to address people, process, technology, and culture challenges. For instance, most organizations are modeled around hierarchical structures. Deloitte found that only 32 percent of the 2019 study respondents believe their organization's employees have opportunities to move between operating divisions. Nearly half (49 percent) claim a lack of processes to identify and move employees is a top barrier to internal talent mobility.
Equally problematic, 46 percent of survey respondents told Deloitte that managers resist the other departments' efforts to recruit team members. This is often referred to as talent hoarding—when managers cling to their star employees rather than providing opportunities for career development. According to the Institute for Corporate Productivity's research, talent-hoarding managers exist at half of the 665 global organizations it surveyed.
To overcome these challenges, organizations will need to overcome long-held norms about internal mobility. For instance, inside moves have been limited historically to the executive ranks or focused primarily on geographic transitions. Deloitte recommends recoding mobility governing structures to include all levels and types of roles.
Also, companies should streamline and communicate the recruitment process for current employees. For example, Kaiser Permanente sends email announcements about new job openings to its employees one week prior to public posting. Another tactic is for organizations to hold regular internal networking events for employees to learn why—and how—others in the firm have successfully made lateral and functional career moves.
Further, they should reward and recognize lateral and functional moves just as they would a promotion. Offering incentives can encourage managers to hire from within. Team leaders who are rewarded for producing results but not for promoting internal mobility have no reason to welcome the prospect of losing a high-performing team member.
"Unless hiring managers are actively encouraged and rewarded for hiring internal candidates, they may pass over existing employees looking for development," Deloitte explains.
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