When it comes to a company's most valuable resource—its people—a buy-build-borrow lens can be helpful when finding the right balance. “People allocation is as powerful as financial allocation,” said Aon CEO Greg Case, whose close partnership with his CFO and CHRO ensures the company has the right talent to meet the challenges of the future.
Start By Defining Each Tactic
Buy: This refers to the sourcing, recruiting, and hiring of external talent, including the acquisition of full-time employees as well as contingent workers.
Build: This is the development of employees through upskilling and reskilling initiatives.
Borrow: This is internal hiring and career mobility initiatives, including job rotations, stretch assignments, and internal gig work.
It shouldn’t be surprising that external recruitment commands the lion’s share of resources at most companies. According to data from SHRM, an estimated 66 million roles are filled per year, with the majority of the $20 billion going toward talent acquisition. On a per-employee basis, that equals an average cost of more than $4,400 per external hire, almost double that of internal candidates, and more than three times the average annual investment in learning programs.
The costs of hiring externally don’t stop with recruiting. A growing body of research suggests that compared to alternative strategies such as internal hiring or upskilling, hiring external candidates requires more compensation, takes longer, and carries more risk.
Compensating External Hires Is More Expensive: They make 18 to 20 percent more than internal hires, partly because external hires often have more experience. But that’s not necessarily a recipe for success.
External Hiring Takes Longer: The average time it takes to get through the interview process is about 22 days. It takes between 39 to 43 days to hire an external candidate.
External Hiring Carries More Risk: External new hires are 61 percent more likely to be fired from their jobs than those employees promoted from within. People hired from outside often realize the job’s not what they signed up for, develop a poor relationship with their new managers, or never get onboarded, trained, or assimilated well. This is less likely to happen when someone internal, who already knows the company and its people, takes on a new role.
A closer look at how the world of work is evolving sheds light on why companies are putting more emphasis on creating a more balanced approach to their talent strategies.
Opportunities for growth and development have increased in importance for employees, even more than compensation in some surveys. This is especially true among millennials, a majority of whom prioritize opportunities to learn and grow on the job, differentiating them from other generations at work. The lesson for employers? They need to be more proactive about employee development. In part two of this post, we will show you how.