According to research from the Institute of Chartered Accountants in England and Wales and Grant Thornton professional services, although the UK economy is improving, many organisations are finding it difficult to recruit skilled staff. This presents an issue for many organisations: revenues may be looking healthier, but unless the right people can be found to continue this growth, it will undoubtedly slow. In an effort to tackle this, many organisations have looked not only at sourcing talent externally, but have also turned to internal recruitment to fill positions.

This internal recruitment can be integral to the success of an organisation. Cornerstone’s latest research revealed that 93 percent of companies have successfully used internal recruitment, keeping valuable team members within the organisation. At the same time, there are a number of potential challenges when it comes to recruiting internally. Although moving people around the business can be beneficial in terms of filling roles, supporting employee engagement and driving retention, it can create gaps in other areas of the organisation.

The benefits of internal recruitment can certainly outweigh any potential pitfalls, but these concerns can and must be overcome to help avoid leaving departments short-staffed. In addition to skills gaps, internal recruitment can occasionally cause problems with morale as highly mobile employees move around the organisation. However, all of these can be tackled by taking the right approach.

Gaps in the Business

According to Cornerstone’s research, 14 percent of organisations across Europe believe that creating internal vacancies is a barrier to internal recruitment. This is largely due to the fact that moving an employee from one part of the business to another will essentially leave a gap elsewhere. While this can be concerning, it can be addressed by maintaining visibility over succession planning, which is often neglected within large companies; research from Office Angels found that despite making clear the benefits of having a workforce plan in place, over half (51 percent) of those surveyed are yet to identify a successor for themselves. Whilst entry-level positions can be filled by external recruitment with reasonable ease, more skilled roles require more skilled successors.

This strand of workforce planning is vital and as HR managers promote internal recruitment, they must evolve their succession planning and upskilling programmes accordingly, understanding the implications of a member of staff moving from one division to another. Succession plans should include the skills, roles and responsibilities for each job, automatically tallying this with the existing skills in the workforce. This will help inform HR managers about whether gaps internally can be filled by other staff, whether they will need upskilling or whether external recruitment is needed.

Indeed, many organisations are already tackling this issue, with research from Manpower showing that nearly half (47 percent) of companies are already addressing talent shortages by adopting new people practices including providing additional training and development to existing staff. Furthermore, with the cost of hiring a new recruit in the region of £30,000 (source: Oxford Economic) hiring internally can be effective from both a morale and cost perspective.

The Year of Discontent?

A further worry when it comes to internal recruitment is that it will lead to discontent amongst employees; advertising a popular internal vacancy can lead to competition between staff – and there is usually only one ‘winner’. This can lead to disgruntlement among employees who are keen to stay within the organisation, but unhappy in their current roles.

Although creating jobs internally is beneficial to business success and encourages hard work, motivation does not always work in this way. Talent management staff should be transparent about what skills and attributes internal vacancies require, give prompt feedback to unsuccessful applicants and work closely with line management staff to find solutions for discouraged employees. This is crucial to keeping employees engaged, which has very tangible financial benefits – research from New Century Financial Corporation, a speciality mortgage banking company, found that 28 percent less revenue was produced by account executives that were ‘actively disengaged’ and moderately disengaged account executives generated 23 percent less revenue than their engaged counterparts.

Keeping employees engaged can also help to retain key talent; it is reported that people will now have around 7 career changes in their working life, so being flexible and making it possible for people to move around the business and try new roles will enable organisations to keep their most valued employees.

Finally, employers must ensure that all of their staff have a clear career plan and that they set realistic expectations of when they are ready for their next step, whether this is a change in role or a straightforward promotion. Regular catch-ups with employees, appraisals and constant feedback can help staff to consider where they see themselves in the next one to five years and how the business can facilitate this. It will help staff to fully understand their current role, where they can potentially move to and how the business will help them to get there.

Internal recruitment – the benefits outweigh the negatives

While internal recruitment may cause some disruption in the short-term, the long-term benefits can far outweigh these in terms of the opportunity it can present to employees in terms of development and trying new roles. Clear career paths and offering staff development can help to send out a strong message about employee retention and how passionate the organisation is to hold on to its people.

As long as organisations think strategically about recruitment, work closely together with line managers and consider both the long and short term impact of moves, they will be able to reap the benefits for many years.

By Vincent Belliveau, Senior Vice President & General Manager EMEA, Cornerstone OnDemand