Internal vs. External Recruitment: Pros, Cons, and Strategies

From the Great Resignation to the recent trend of quiet quitting, HR leaders often face challenges with workforce management. According to Mercer's 2024 Global Talent Trends Report, creating better employee experiences to attract and retain talent is the #2 priority for HR this year.

Added to shifting talent needs and expectations is the fact that recruiting doesn't look the same today as it did before the pandemic. Skills-based hiring, the fine-tuning of AI recruitment tools, a greater emphasis on professional development, and the evolution of hybrid work all stand ready to affect internal vs. external recruitment strategies in 2025.

But before digging into the technical aspects of recruiting, perhaps there's an even more basic question HR leaders should ask. Is internal recruitment or external recruitment a better fit for this role?

What Is Internal Recruitment?

Internal recruitment is the process of filling roles with current employees rather than recruiting outside the organization. It may take the form of a planned promotion or involve posting open roles internally and encouraging employees to apply. Well-executed internal hiring can work hand-in-hand with employee advancement, learning and development programs, and skills training, but it may limit your talent pool.

What Is External Recruitment?

External recruitment refers to the traditional process of hiring new employees from outside the organization. It is often an effective way to bring new ideas and skills to your teams, but it typically involves extensive recruitment and onboarding processes.

Internal vs. External Recruitment: Key Differences

Both internal and external recruitment involve posting jobs, screening resumes, conducting interviews, and extending an offer. The difference is that internal recruitment targets those activities toward current employees, while external recruitment looks outside the company.

Best Scenarios to Recruit Internally

Internal recruitment can reduce hiring costs and time-to-hire and often makes it easier to fill the role since (hopefully) a current employee already works well in your culture. Internal recruitment may be a good fit if:

• You have a small recruiting budget
• You have limited time to onboard and train
• You have high-potential employees who can easily step into the role
• Someone on your team already has the skills you need
• You have an established succession planning process

Best Scenarios to Recruit Externally

On the other hand, external recruiting can expand your talent pool and give you access to skills and expertise you don't currently have. You may want to hire externally if:

• You are growing your business
• You need someone with experience in a particular area
• You need fresh perspectives or strategic vision
• You need a change in direction

Effective Internal Recruitment Methods

When managed well, internal recruiting can boost employee engagement by creating paths for career advancement and growth and showing that you reward hard work.

Here are some practical ways to create effective, equitable internal recruitment.

• Promotions: A promotion moves an employee into a new position with more responsibility and rank, and it typically includes a pay increase. To avoid the appearance of favoritism, set up transparent promotion processes that apply to everyone. Some organizations may use a succession planning strategy where senior employees identify potential replacements and prepare them for the role.
• Lateral Transfers: A lateral transfer is a move to a different role at the same organizational level. Lateral transfers may be helpful if you need to ramp up productivity or volume in a certain department or want an employee to develop new skills.
• Employee Referrals: Employee referral programs encourage current employees to recommend qualified candidates for open positions. Your employees know your company best, and they can typically recommend high-quality candidates who will be a good fit.
• Temporary-to-Permanent Hiring: When temporary employees and interns prove to be a great fit for your company, offering them a job might make sense. This try-before-you-buy approach reduces the risk of a bad hire and paves the way for a smooth transition.
• Internal Job Postings: Posting open roles internally gives all employees an equal opportunity to apply, providing fair access to advancement opportunities. It may also help you discover employees who have skills you weren't aware of.

Effective External Recruitment Methods

When people talk about recruitment, they typically mean external recruitment. Traditional recruiting methods are still effective, but today's recruiters also use advanced technology to recruit quality talent faster. Here are some of the most common external recruitment methods.

• Job Postings and Career Sites: Third-party job boards boost visibility for your job post and make it easy to broaden your candidate pool. Alongside these posts, create a career page on your website with dedicated landing pages for specific roles.
• Staffing Agencies and RPO Firms: Recruitment agencies match qualified candidates with your open positions and may specialize in specific industries or roles (such as executive search). RPO firms take this a step further by managing your entire recruitment process, including searching, screening, qualifying, and interviewing candidates.
• College and University Career Programs: Many institutions offer career fairs and work with businesses to help students find jobs after graduation. They may also help match students with internships or provide opportunities for businesses to recruit and interview on campus.
• Social Media Recruiting: Social media hiring is a standard part of recruiting methodology for today's workforce, especially on LinkedIn. Posting jobs on social channels can help you target and reach more candidates with the skills you need.
• Inbound Recruiting: Inbound recruiting focuses on attracting candidates through content and engagement rather than actively searching for them. It is an important supplemental strategy since many candidates may encounter your brand in places other than job boards or recruiting agencies.
• AI Recruiting: AI-supported recruiting can help streamline and accelerate the candidate selection process, creating positive experiences for candidates. Searching, screening, skills matching, and automated communication can be great ways to integrate AI with your external recruitment efforts.

Advantages and Disadvantages of Internal Recruitment

Internal recruitment is a cost-effective way to fill open roles with quality people who already know your company. However, it's not the right strategy for every situation. Let's look at some advantages and disadvantages of internal recruitment.

Advantages of Internal Recruitment

The advantages of internal recruitment impact both employers and employees, and may include:

• Faster Time-to-Fill: Communicating open roles to your current team members may take less time than posting to job boards, advertising, and sifting through external applicants. Existing employees also understand your company culture, processes, and team dynamics, which means you can spend less time onboarding and training.
• Lower Hiring Costs: Hiring costs like advertising, recruiter fees, and relocation packages aren't necessary for internal recruitment. And because you can fill roles faster, you experience fewer indirect costs like lost productivity and new hire ramp-up time.
• Improved Employee Morale: One in three workers say they are unsatisfied with opportunities for promotion in their current job, and only 26% say they are highly satisfied. Visible career advancement pathways show employees that you value them and want to invest in their career growth, which boosts morale and engagement.
• Higher Retention: When employees feel valued and see pathways to advancement, they are likely to stay with your company longer.

Potential Disadvantages of Internal Recruitment

Despite the benefits, filing roles internally isn't the best move in every case. Disadvantages of internal recruitment include:

• Limited Talent Pool: Your current team may not have the skills or experience you need for specific roles.
• Potential Internal Conflicts: If you don't have an established, transparent process, promoting internally may be seen as favoritism. Even when handled well, internal recruitment can result in resentment among other team members.
• Stagnation: Hiring internally may limit diverse perspectives and lead to change resistance over time.
• Domino Effect: Moving an internal employee to a new role leaves their current role empty, creating a chain reaction of positions that need to be filled.

Advantages and Disadvantages of External Recruitment

Despite higher costs, external recruitment brings in new talent, fresh ideas, and expanded skill sets.

Advantages of External Recruitment

External recruitment is a foundational talent strategy for most companies, and with good reason. Advantages of external recruitment include:

• Access to a Broader Talent Pool: Depending on your needs, you can focus your recruitment efforts locally, regionally, nationally, and even globally to find the right people.
• Diverse Perspectives: Diversity of perspectives is critical for your business's health and growth. Hiring externally helps you diversify your workforce, avoid groupthink, and encourage new ideas.
• Specialized Expertise: External recruitment allows you to add specific technical skills, industry knowledge, or niche expertise to your team.
• Competitive Insight: External candidates may bring valuable insights about strategies, industry best practices, and alternative methodologies that can give companies a competitive advantage.
• Cultural Growth: Considering cultural fit and impact when selecting new talent can help you develop a stronger culture that promotes inclusion and belonging.

Potential Disadvantages of External Recruitment

Alongside its many benefits, external recruitment also comes with some disadvantages:

• Longer Hiring Times: It takes time to source, screen, interview, and onboard new talent. Some roles may require months of recruiting to find the right person.
• Higher Costs: The same costs you save when hiring internally become expenses for external recruitment. Job posts, advertising, recruiter fees, and candidate relocation packages all add up.
• Morale Impacts: While a role stays unfilled, current team members will have to cover that work. If the role is a senior position, teams may also feel overlooked or resentful about not being considered for the job.
• Turnover Risk: According to the Bureau of Labor Statistics, job tenure in 2024 dropped to its lowest since 2002. Hiring externally can increase your risk of turnover since the new hire may not adapt well to the new team, manager, or culture.

Deciding Which Recruitment Strategy Is Right for Your Business

There is no one-size-fits-all recruitment model that is right for every business or every role. As you consider your options, examine the pros and cons of internal and external recruitment strategies in light of the following factors:

• Role Complexity: Does the role require specialized expertise or skills? Is it a leadership role that will need more education, certification, or experience than your current team can offer?
• Urgency: How quickly do you need to fill the role? Does the vacancy create a critical gap in your core business function? Do your current employees have enough capacity to cover the role until it is filled?
• Company Culture: How important is cultural fit to this role? Are you hoping to introduce a culture shift with the new hire?
• Succession Planning: Do you have a succession plan already in place? Are you training current employees to step into future roles?
• Internal Talent Pool: What skills are available on your current team? What skill gaps do you see? Is there someone with the expertise you need to fill the open role or who could be trained quickly?