By Anna Jordan on Small Business UK – Advice and Ideas for UK Small Businesses and SMEs

Business owners will find themselves in this place at some time or another. They have a job position to fill and they know just the person for it – but they feel like it’s worth advertising jobs anyway. Is it even necessary?

With the help of Kate Palmer, associate director of HR Advisory at Peninsula, we take a closer look.

Internal recruiting vs advertising jobs

For fairness’ sake, it’s best to advertise, shortlist and interview for every role available within your business.

This ensures everyone is given a chance as well as ensuring your decision is the best one that you can make in the circumstances and is demonstrably fair.

Though it is up to you if you choose to advertise. Simplistically speaking, you are not required to advertise a role and are free to appoint someone internally in the new role.

However, while no legislation exists to demand this is done, there are some risks to not advertising.

You could leave yourself open to a discrimination claim from someone both internally and externally, should they find out about the post and the lack of opportunity to apply.

If so, you should consider any application from them to avoid a grievance being aired from this employee(s).

Palmer reflects this:

“Employers that can demonstrate an objective and unbiased approach to advertising are more likely to be able to defend their recruitment decisions and practices on objective, fair and non-discriminatory grounds.

It’s important that, even if you don’t want to advertise externally, you have appropriate documentation.

“Employers may have written policies in place relating to how to advertise, where to advertise, and/or whether to advertise internally or externally. Employers should refer to these policies which must apply to all potential applicants in the same way to avoid claims of discrimination being brought against them.”

What are the pros and cons of internal hiring?

Inevitably, there are positive and negative aspects to hiring from within, one positive being that you don’t need to tackle a lengthy recruitment process. According to Inta People, it takes 65 days to fill a tech job vacancy.

Palmer says that this is because you don’t have to spend a lot of money on advertising the role on different job sites, nor do you need to enlist external recruiters.

“The lessened level of risk comes from the fact that the employer will already be familiar with the internal staff member/s who are interested in the new role and so will be able to determine their suitability a lot faster, especially when it comes to lateness, punctuality and work ethic,” she says.

It also promotes staff development. “Employees will be allowed to advance their careers and develop new skills which can enable them to increase their financial security and future job prospects, either within the business or externally.

Because hiring internally gives staff more motivation and opportunity for progression, it reduces employee turnover. As an employer, you can match job vacancies to employees’ personalities.

Hiring internally isn’t always smooth though. It could create avoidable problems within the workplace. Cornerstone On Demand says that 36 per cent of businesses reported that they didn’t want to go for internal hiring. This is because they didn’t want to show a preference to someone within the company when filling only one vacancy.

“Conflicts may arise where two or more employees apply internally for a role meant only for one person. This may occur where a healthy competition between two colleagues turns hostile, creating a bitter working environment for other colleagues in the office,” says Palmer.

Keeping the same talent in-house can become stuffy, restricting new ideas and viewpoints.

“Internal recruiting may only offer limited options for employers. The candidates who apply may not be the best fit for the role and thus the employer may be losing out on quality candidates if they choose only to advertise internally.”

Palmer points out that this could also play into potentially discriminating suitable candidates. Employers need to make sure that they’re generating interest from diverse backgrounds, including protected characteristics, such as:

People of different ages who have the relevant qualification or skills level necessary for the role

People of different abilities

Those who have undergone gender reassignment

People of different races, religion or beliefs

Hiring internally potentially leaves a gap in your workforce to fill in, leading you back to the same dilemma to fill that newly vacant role.

And finally, if somewhat less common, the situation could be demoralising if an employee is promoted and subsequently demoted because they’re either not up to the job or something goes wrong within the company.

What about the pros and cons of external hiring?

Many of the advantages of external hiring will be the reverse of the weaknesses of internal hiring. However, you’ve got a couple of other things to consider.

“New employees who are hired into a role externally will have to undergo training, not just on the role itself (which is likely to be rolled out to all employees starting in the role, whether internally or externally recruited) but also new starters training themselves on adjusting to the company’s culture, which arguably shouldn’t be an issue for internally recruited candidates,” says Palmer. “Secondly, depending on the company’s policy, the recruitment process may take longer than if the company were to hire internally.”

Unless, she says, the company’s recruitment policy stipulates that the same recruitment process should be used for both internal and external candidates.

“Another disadvantage of hiring externally is the longer onboarding process that comes with it. This may include the putting together of the employee’s employment contract, setting up of various IT systems, signing the new starter for health and safety and other training and obtaining the employee’s personal information and references.

“Finally, current employees may feel overlooked. Current employees who have been awaiting the opportunity to get a promotion or move to a different department within the business may lose morale if they feel they have the overlooked for the new role by not being allowed to interview or be considered for it. This could lead to retention issues. To mitigate the impact of a drop in staff morale, employers could think about advertising both internally and externally, rather than choosing one or the other.”

You don’t know the external employee and they may not understand the company culture either, which could bring about all kinds of conflict. A significant number of external hires are subsequently let go because they either aren’t as they appeared in interview or cause trouble within the workplace. External new hires are 61 per cent more likely to be fired from their jobs than those who were promoted, according to HR Daily Advisor.

What protocol should you follow if you’re interested in hiring someone you’ve interviewed previously and liked, but didn’t give the job?

There isn’t a lot in law around this area.

“Our HR advice,” says Palmer, “Would be that the employer advertises and interview for the role in question as normal. The employer can give the ‘unsuccessful’ candidate a call to let them know that another opportunity has come up that they may be better suited for and ask them if they are interested in applying.

“It is not advisable to offer them the new role straight away as doing so could be somewhat risky. This is because, once they start the role, it may be that they are not the best fit for it after all – an interview process will allow employers to determine whether the individual will be a good fit for the role and indeed the wider business. Furthermore, interviewing the candidate before offering them the job will allow other candidates to be vetted, who may turn out to be a better fit for the role.”

So, should I hire internally or externally?

 This is really down to your business as well as the position you’re hiring for.

With your staff, assess how many employees you have (and if you’re looking to grow), how diverse your team is, what expertise your current team has and if you’re looking for a recent graduate or a more experienced candidate.

Next is a question of budget. Take account of what would work best for your business but if you really need a specific skillset, it’s better to look further afield.

Ultimately, most of your decision is down to what you feel is right.

Further Resources

Temporary staff: how online recruitment platforms are changing the hiring process – TempRocket’s Andrew Johnston explores the changing world of temporary hiring and the role that online recruitment platforms play.

7 hiring strategy dos and don’ts for high-growth SMEs – Hiring with growth in mind is essential for your business. Hannah Dawson of Futrli explains how you should go about recruiting staff.

What job advertisements must include – The rules explained by .gov.uk.

What you need to know when recruiting for the first time – Ruth Hayward looks at the business and legal considerations small businesses should make when recruiting their first member of staff.

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