Internal Hires Are ‘In’ Again

The slate of candidates for the executive position looked typical—two women and four men, representing a range of backgrounds. But one trait stuck out: three of the candidates were internal. In previous years, a single token candidate would have been internal, but this year, half of them?

Organizations are making internal hires the norm again, rather than searching far and wide for the most qualified fits. As companies tighten their belts, experts say, it’s a financially prudent move—but also a dicey gamble. “The risk is that once internal candidates have a taste for that role, they know that there are external opportunities for which they are qualified,” says Deepali Vyas, global head of the FinTech, Payments, and Crypto practice at Korn Ferry.

Today’s rough economy is behind much of this trend. An external hire is typically paid 18 to 20% more, according to research from The Wharton School, not including sign-on bonuses. Recruiting one is often much more expensive, entailing not only marketing and travel expenses, but also the cost to the firm of pausing projects due to an open position. External hires also log training costs, then have higher exit rates—particularly unappealing amid tighter labor and financial markets. “At a gut level, clients are partially afraid to spend money on external hiring, and don’t feel that they have the luxury of time to go out and conduct a multi-month search,” says supply-chain expert Seth Steinberg, senior client partner at Korn Ferry, who has seen a big spike in internal candidates in his practice.

Experts say that internal candidates are most sought-after for roles where creating a diverse panel of candidates may be very challenging, and for positions where a fit with the culture, mission and way of doing things is essential. “There’s always risk when hiring someone new,” says David Vied, global sector leader for medical devices and diagnostics at Korn Ferry. “I almost always push for the internal candidate.”

Still, there’s a reason firms have traditionally looked outside their firms for talent. An internal staff may lack key expertise and skillsets, and upskilling has its own costs and risks. Plus, external candidates can often create forceful change. “If you’re looking for someone to shake things up, it’s easier to bring in a stranger, who by definition will have a blank page and all-new relationships,” says Vied. Internal candidates may tend to protect established corporate decisions because they likely participated in them.

To avoid alienating internal candidates who are ultimately not chosen, Vyas suggests that HR leaders frame the process as a realistic goal for which some further development is necessary. “It’s an opportunity for clients to assess internal candidates and offer them coaching and leadership around gaps,” says Vyas. 

For more information, contact Korn Ferry’s Human Resources experts.

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