Companies are in a talent crunch and they won't escape that shortage anytime soon. Many companies are missing out on a great opportunity for finding new employees. It's called internal sourcing (or internal recruitment), and it's like looking for a needle in a haystack. The ability to identify internal talent is a moat. It allows companies to hang on to their best talent and strengthen their employer brand, which will help source new talents.

Hiring from within is something HR managers love and companies say they love.

  • It's a better cultural match. You'll be hiring from a candidate pool already used to the culture and processes of your organization.
  • Since you have actually seen these candidates in action, you usually have a much better understanding of their capabilities.
  • It's more efficient - They already know the people, the processes. They already have most system permissions and can hit the ground running.
  • It forces the company to ensure its workforce is learning new skills.
  • You also rarely have to pay the premium typically required to lure in external candidates.
  • More importantly, hiring from within signals to other employees that they too have a future in the organization.

Sounds wonderful right? But it's not easy to pull it off. Internal sourcing can be a smart hiring strategy for any organization, but it needs a lot more work and attention than most people realize. A lot of things can go wrong if you don't know what you're doing and the consequences of screwing up can be severe.

One size doesn't fit all

The first trap is to believe you should have a single process for both your internal and external sourcing initiatives. Shoving your employees down into the same hiring funnel you have your other candidates is setting yourself for failure.

Imagine your employee applied for a role in their department and didn't get the job. They are notified about this by email via a do-not-reply mailbox of your company. There isn’t a call, nor a 1-on-1 with the hiring manager - it’s just that same generic email outside candidates are receiving.

Let’s add some more color to this imaginary employee’s life. Last week they got their performance review with nothing but positive feedback. They got a 95% rating which is very rare for their manager. And yet there were no explanations in the rejection email they received. There was nothing about the reason why they didn't get the job. There was nothing about how could they improve or a path forward.

Resignations happen in a moment, and it’s not when you declare, “I’m resigning.” It’s weeks or even months before that. For this imaginary employee, that moment just hit and now they are glimpsing potential different futures, without you as an employer, in their mind.

High-stakes feedback

This circles back to the biggest drawback of internal sourcing: it forces you to reject your employees. The very people who will still work with you day in, day out.

For the candidates, it’s a sensitive subject. It’s one thing to be rejected by a company that has never employed you. They don’t know you - and you don’t know them either. But when an organization where you’ve been investing your time and career for the past years rejects you, that’s a whole new ballgame. Handled poorly, that rejection will damage their morale and make it harder to retain them in the future.

For the company, it’s already hard to reject candidates in a positive, professional way when they're outside candidates. Rejecting members of your team is even harder. Many managers struggle with this concept. They fail to separate the individual from his or her work performance. Even worse, they have a hard time separating what's currently being required from the candidate, what the new job will need, and how the candidate will bridge the gap.

To the candidate, this translates into this common - and yet frustrating - feedback: "you are not ready yet".

Any candidate sees through this as a diversionary tactic. It tells them not only that the company is not challenging them enough, but also that it wasn't planning to. The immediate question will be: will I become ready if I leave the company?

There are two instances any hiring manager should be particularly careful.

  • When the dejected applicant knows the successful candidate. Especially if it was their direct manager who made the call.
  • When the successful applicant now has authority over the dejected candidate.

To dissolve any feelings of envy that might disrupt the team's performance, it's essential to come up with a follow-up plan.

Employees may decide not to stick around after a bad rejection experience - Photo by mentatdgt from Pexels

The future is still bright

Never forget to discuss a follow-up plan with the rejected candidates. Especially if they had applied to a role within their own teams.

Now that the candidate has made their ambitions clear, we must sit with them to plan how they will be able to achieve them. What skills must they learn? What challenges they must take? How will they become ready when the next opportunity arises?

If the company doesn't partake in their employees' career plan, they will plan it on their own - and as often as not, that plan will involve leaving.

Some candidates are not entering the recruitment process because they’re desperate for a new job. They enter it to understand how they can advance their careers.

It's hard for employees to understand how far they can go when companies are fuzzy about the possible career paths. One easy way to do so is to apply for opportunities available inside their organizations.

Companies that don't act on that signal risk losing talents. Companies that do can revigorate the candidates' careers with a new sense of purpose.

In some cases, there's a clear path forward — an existing role or one that needs to be created. In others, there isn't anything readily available in your organization, but there might be in another part of your company. The path forward is rarely crystal clear, which is why coming up with a career strategy matters. HR can work with the manager to identify a roadmap that helps move the employee from where they are today to their long-term goal.

Identifying ways for employees to grow and thrive is one of the main responsibilities of leadership. It shows the team that you want to see them succeed. Engaged employees are more likely to feel confident about learning new skills and taking on new responsibilities.

Engage your employees to learn new skills and take on new responsibilities. - Photo by Tim Mossholder from Pexels

Self-selection bias

But what about your other employees? The ones who didn’t - and usually - don’t apply to internal opportunities? Internal job boards suffer from self-selection bias. Many factors can prevent a potential candidate from applying: a poorly-worded job posting, lack of time to engage in the selection process, the risk of sending the wrong impression to their managers, distrust in the interview process, etc.

Candidates can ofter assume that they need to be approached by a recruiter or hiring manager before they can apply. There’s also a significant amount of friction in the application process, which dissuades employees from applying if they feel like they can’t convince an interviewer to consider them based on their qualifications.

Most companies don’t have a mechanism to identify employees with the right skills for a particular job unless those employees come forward and either ask for the opportunity or apply to it. This means that you are still missing out on many employees who would be great for the role but didn’t know about it or don’t want to create the perception that they are not happy in their current roles.

The answer is to actively recruit employees to internal opportunities instead of waiting for them to come to you. But the risk of doing so without having full visibility into both the skills and passions inside the organization is to end up with a selection limited to referrals from the hiring team’s network - which is another sort of bias.

Actively recruiting employees also helps reduce the candidate-to-position ratio, which means fewer potentially damaging rejections. Using an internal job board, however, has the benefit of allowing employees to take control of their careers. In the end, both tactics should co-exist in other to cancel each others’ blind spots.

Sure it’s not easy, but it’s certainly worth it. The employees you already have can turn out to be some of your best hires. It’s how you approach the process that can have a huge impact on company morale, your employer brand, and your near and long-term productivity.

Fernando Cordeiro

Fernando Cordeiro

I'm a Lego aficionado. Also, I'm the founder of Pluckd, a tool to help companies discover which skills and talent are available to them in real-time.