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Hiring Internally vs Externally: Pros, Cons & Which is Best?

Choosing between hiring internally or externally is a strategic decision that balances nurturing talent from within and gaining fresh perspectives. Hiring externally and internally refers to the two methods of hiring used by corporations. A successful hiring method may ensure that a company is appropriately staffed and that its employees are qualified and capable of performing their job obligations. It is critical to understand both internal and external hiring processes when deciding whether to promote internal personnel or hire fresh professionals to fill roles within a company.

In this post, we outline each hiring technique and present a review of its benefits and drawbacks to help you balance the pros and cons of internal vs external hiring.

Definition of Internal Hiring and External Hiring

The internal hiring process is the process of filling job openings within a company with candidates from its present personnel. In contrast to external recruiting, which entails looking outside the company for qualified individuals, hiring internal talent may entail shifting an employee from one team to another or promoting them to a newly formed job. Internal recruiting can be used by businesses of all sizes to place experienced personnel in important positions.

External hiring is when a corporation seeks to fill an available position with someone who does not work for the company. External sources are used by recruiters and hiring managers to identify available candidates.

Definition of Internal Hiring and External Hiring

Pros and Cons of Hiring Internally vs Externally

Here are the pros and cons of hiring internally and externally that employers need to consider:

Advantages of Internal Hiring

  • Cost-effectiveness: Since internal candidates are already part of the company, there are no additional expenses involved in recruiting, advertising, and interviewing external candidates. The company also saves money on training since internal candidates are already familiar with the company’s culture and procedures. By promoting from within, the company can avoid the high costs of external recruitment and focus on investing in its existing employees.
  • Faster onboarding process: The employee can quickly transition to the new role without requiring extensive training because they are already familiar with the company’s culture, policies, and procedures. Furthermore, internal hires frequently have connections with other staff members and may take less time to integrate into teams. This may result in increased productivity and a smoother transition.
  • Employee morale and retention: Employees are more likely to feel valued and invested in their work when they perceive opportunities for growth and advancement within the organization. Longer tenure and higher productivity may result from this sense of commitment and loyalty to the company. Each of these elements helps to create a productive workplace and increase employee retention.
  • Utilizing existing talent: Promoting from within allows employers to find top performers who have already proven their abilities and dedication to the business. In addition to saving the time and money that would have been used for training and recruitment, this also improves employee morale by showcasing and rewarding internal talent.
  • You retain corporate knowledge: You ensure that valuable knowledge about accounts, clients, processes, and other critical information stays within the company. By promoting from within, you leverage their accumulated knowledge and experience, preventing the loss of valuable insights that could occur when hiring externally.

Disadvantages of Internal Hiring

  • Limited talent pool: Companies should weigh the benefits and drawbacks of internal hiring carefully to determine the best strategy for their specific needs. One disadvantage of internal hiring is a limited talent pool. When a corporation solely looks within for new hiring, it may overlook outstanding individuals who could offer new perspectives and abilities to the organization. As a result, there may be stagnation and a lack of creativity.
  • Potential for resentment and conflicts: Existing employees who are passed over for a promotion or job opportunity in favor of another internal candidate may feel undervalued and frustrated, leading to resentment towards the chosen candidate or even management. To mitigate these risks, it is important for employers to communicate transparently about their hiring decisions and provide opportunities for feedback and discussion.
  • Inadequate skill sets: While existing employees may have the necessary experience and knowledge for the position, they may not possess the specific skills required for the role. Hiring internally can sometimes result in a limited pool of candidates with inadequate skill sets. This can lead to problems down the line if the employee struggles to meet the job requirements, leading to dissatisfaction and frustration for both the employee and the employer.
  • Reinforcing an organizational culture: While hiring from within can help to maintain the current culture, it can also limit the diversity of thought and perspectives. Without new ideas and approaches from outside applicants, the organization risks becoming stagnant and resistant to change. To foster growth and innovation, businesses must find a balance between preserving their culture and bringing in new viewpoints.

Advantages of External Hiring

  • Access to a diverse talent pool: Access to a diverse talent pool is a significant advantage of external hiring. Companies that cast a broader net can access a more extensive and diversified pool of talent that may not be available internally. External candidates provide different perspectives, experiences, and skill sets to the organization, which can add value and drive creativity.
  • Fresh perspectives and ideas: External hiring can bring in fresh perspectives and ideas that can benefit the organization in numerous ways. External candidates often come with a diverse set of skills and experience from different industries or companies, which can infuse new capabilities and innovation and stimulate growth within the company.
  • Competitive edge: This can provide the business with new ideas, views, and inventive solutions. Companies that hire externally have access to a larger talent pool that includes people from a variety of backgrounds, skill sets, and experiences. Which can provide valuable insights and know-how about the competition, potentially giving the company a competitive edge.
  • Opportunity for organizational change: By hiring externally, organizations can challenge their existing norms and potentially lead to positive change and growth. The prospect can motivate existing employees to improve their performance to secure their positions or vie for promotions.

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hiring externally

Disadvantages of External Hiring

  • Increased costs: Increasing costs in the external hiring process are inevitable, which is a drawback that companies should consider. Job posting advertising, analyzing resumes, holding interviews, and checking references can all be time-consuming and costly. Furthermore, if an external hire is not the appropriate match for the organization, additional costs to recruit and train a replacement may be paid.
  • Longer onboarding and adjustment period: To fully acclimate to the corporate culture, policies, and procedures, new hires from outside the company will probably need more time and resources. They might also need additional training to acquire the specialized abilities required for their position and to discover how to collaborate successfully with their new team members. The employee’s ability to contribute to the success of the company may be delayed by this prolonged adjustment period, which could affect productivity.
  • Potential cultural misfit: External hiring can bring in fresh perspectives and new talent, but it also comes with the potential risk of a cultural misfit. Every organization has its own unique work culture and values, and it’s important to ensure that new hires are a good fit for the company’s culture. When hiring externally, there is always a risk that the new hire may not be aligned with the company’s values, leading to issues with teamwork, communication, and overall morale.
  • Risk of unsuccessful hire: Even with a rigorous hiring process, it is still possible to hire someone who does not perform well or fit into the company culture. This can lead to additional costs, including the time and money spent on recruitment and training. In addition, it can create a negative impact on the team morale and overall productivity.

Disadvantages of External Hiring

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In conclusion, both hiring internally vs externally have advantages and disadvantages and deciding which strategy is best for your organization will largely depend on its unique requirements. The secret is to develop a balanced hiring plan that caters to the demands of your company and its culture.

Boulo Solutions can assist you in attracting and keeping the best talent for your organization that fits your needs and culture. Call us today.