Choosing Internal Versus External Hiring Candiadates

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When the application and interview process has whittled away the pool of prospective employees to an internal local candidate and an external out of state candidate, how do you decide which person to hire? When each candidate possesses the same traits, abilities, skills, and overall ability to hire you must determine how much effort your organization is willing to commit to the new employee. Following the selection of a candidate for hire, many steps must be completed to have a full functioning employee including; orientation, training, wage negotiations, contracts, and familiarizing the hired employee with the institution. The new employee process is further augmented when hiring an out of state employee. In addition to the normal training the employee must be relocated to a new city. As with every decision there are tradeoffs, pros and cons, and financial aspects to consider. When hiring a new employee you have to consider their morale and the effect they can have on their current employee's morale. Overall, when hiring a candidate, I will base my decision on relocation considerations, retention rates, and employee satisfaction.

Relocation Considerations

One of the most important factors effecting my decision to hire an internal candidate as opposed to an external candidate is the logistics of relocation. Time, money, and consideration for the employee and their family are all principle considerations when relocating an employee. Provisions must be made for temporary living expenses, house hunting costs, transfer of household goods, and numerous miscellaneous expenses associated with moving1. From a survey from Runzheimer's Survey and Analysis of Employee Relocation Policies and Costs, 8th Edition, the average cost of a lump-sum allowance for relocation was $8,2701. An internal candidate requires no such provision and the money saved can be allocated to training costs and possibly incentive pay for performance. By hiring an internal candidate, my institution will have already saved $8,000 dollars in relocation fees and the time to relocate the new hire.

Hiring an external client will lengthen the time required to have the employee working and training in their new position. The Mellon Financial Corp. conducted an in 2003 that showed an external client will require twice as long to reach full productivity as opposed to an internal hire3. This reflects the aspect of selling and buying a new home, relocation, and training the employee. In our current housing market the turnaround time for selling and buying a home has drastically increased, if not stalled. I must consider the possibility of the external hire not selling their current home and unable to qualify for a new home loan. Housing market woes and the relocation of an employee is likely to negatively impact the morale of the new hire, an outcome that should be avoided. An internal candidate has already established residency and familiarity with the community and would not be subjected to the same stress as the external hire. Additionally, the external hire may have a family that must relocate as well. Moving causes a great deal of stress for everyone involved, coupled with the stress of a new job, the external hire is off to a shaky start. New hires need to start their job with as little stress possible and a positive attitude toward the new job. Although there is no explicit method to identify the candidate that will get the best start, I can place more certainty in the new hire.

Employee Retention

Retaining employees is a major consideration for any organization especially with the aging "baby boomer" generation. In an article by Peter Cappelli, he discusses the aging generation of baby boomers. Typically the baby boomer generation occupies much of the management sector of the workforce4. He states that the current rate of retirement of these individuals is increasing and the positions of management will need to be filled. Although his research shows that there is no lack of labor to fill these positions, I am concerned with the talent of the labor field filling the positions. My goal of hiring an internal candidate is to reduce overall turnover, increase company loyalty, and sculpt the talent field to eventually fill higher level positions in the future. Research conducted by iLogos Research has shown that companies with internal-mobility policies have an average turnover rate of 11 percent compared to 15 percent of companies that do not have an internal hiring practice3. Internal hiring practices have been shown to increase employee retention and decrease recruiting costs3. By reducing employee turnover, I intend to keep top performers in my organization and available for higher level positions, if available. High turnover rates can negatively impact staff morale and prove costly to an institution.

An article that studied turnover and retention rates in remedial and special education institutions focused on the impact on staff due to turnover. Ghere stated that staff was negatively impacted due to miscommunications and changes in routines and practice from the addition of new hires5. In a collaborative work environment as seen in a hospital, changes in routines and practices can cause a major disruption to productivity and efficiency. High retention rates would harbor internal employees that were familiar with operational procedures of my institution. Internal employees would be more likely to alter procedures to improve operations, rather than change the entire procedure. In the study, personnel were required to redirect ongoing focus on education to focus on hiring and retraining due to the turnover rate5. In a hospital where the focus should be on patient care, focus on rehiring would negatively impact patient care and overall productivity. Through internal hiring practices I am able to develop an employee base that is familiar with procedural operations and promote retention to ensure continuation of the departments goals.

Employee Satisfaction

Employee satisfaction can have a major effect on retention and development of future leaders. Once again, retention and internal hiring practices becomes a factor when deciding which candidate to hire. In an article discussing development of nurse leaders and why nurses leave an institution, the author focuses on job satisfaction. The article states that satisfaction is not the sole reason for staying with an institution. Nursing satisfaction was found to be related to organizational commitment, empowerment, collegial relationships, and trust in management6. By hiring an external candidate, I believe that I will negatively impact the themes surrounding job satisfaction. An external candidate is a foreigner unfamiliar to my present staff. By hiring an external candidate I am forcing my current employees to develop a managerial relationship with someone unfamiliar to my institution. With the new candidate they lack the collegial relationship that an internal candidate may possess with the current employees. Although the internal candidate may not have any relationship with the current department, there is a common ground of institutional familiarity to set the framework for relationship development. Hiring an external candidate does not empower the current employees. With this action, I am displaying the notion that I am more willing to seek external candidates rather than promoting internal employees. The article states "When staff feel they have access to support, resources, and information to succeed in their role, they are more likely to feel that organizational policies are intended to benefit them and therefore be more committed to accomplishing organizational goals and stay in their jobs6." An external hire would only show my department and current employees that I am not vested in them and seek professionalism elsewhere. Through practices of internal hiring and sculpting individuals to develop skills for higher level positions, I am promoting institutional loyalty and developing long term employees.


My decision to hire internal candidates rests primarily on three areas of emphasis, employee satisfaction, employee retention, and relocation factors. The decision to hire an internal candidate is a cascading effect with one criterion affecting the next criteria. Primarily the cost and conditions associated with relocating an employee negatively impacts the retention and satisfaction of current employees. Through the hiring of an external candidate, I must incur additional cost, training time, employment delay, loss of staff cohesion, and abolition of internal hiring practices. My goal with my department is to promote internal development of staff to positively affect retention rates and job satisfaction in my department. With an internal candidate I am ensuring a familiarity with the community, the institution, staff, and operations. I will be able to promote managerial trust and collegial relationships through the familiarity of hiring an internal candidate. Overall, an internal candidate is a more cost effective hire, has a shorter training time, and promotes internal hiring practices that benefit retention rates.