Hiring An Internal And External Candidate

When faced with choosing between two applicants with the same traits and work experience, the decision making process must begin by determining the company’s or department’s objectives, ranking those objectives by importance, evaluating the alternatives (internal vs. external), and then assessing the risks of each possible decision. This process is described by Kepner-Tregoe, Inc. in the form of KT: Decision Analysis.1 This decision making tool will be how I approach the candidate selection.

When working through the decision analysis, one must weigh-out the advantages and disadvantages of an internal vs. external candidate. What makes them different? How are they the same? How do these differences impact the decision making process? And ultimately, which candidate poses the least risk?

First, from a manager’s perspective, I will identify the objectives or goals that I would like to be met when making this decision. I will also differentiate between the “must have” and “wanted” objectives.

The Objectives Statement: I am looking for an applicant that will perform proficiently in their job role, have a low risk of leaving the position/company, and have the most success in slowing the turnover rate of the staff. I am also looking to fill this position with a candidate that is going to transition quickly and with the least amount of cost involved. It would also be ideal to find a candidate that brings a fresh perspective to the table while integrating well with the existing team.

Other factors to consider: If the internal applicant is hired, where does this leave the remaining RT staff experience wise? Will the promotion place the RT department at risk? There will be subsequent additional cost in filling the RT position and possible overtime pay until the position is filled.

The Basis for the Decision

Measuring the Objectives

I will begin by categorizing the objectives into “must haves” and “wants”; however, in this scenario, I cannot irrefutably distinguish between “must haves” and “wants.” “Must haves” should be immediately measurable; whereas, these objectives are not absolutely measurable at this time. We can only predict to our best ability the likeliness of their occurrence. Therefore, the “must haves” I will list are those of highest importance to me as a hiring manager.

“Must haves”

“Wants”

Proficient performer

Quick transition

Long-term position stability

Least cost

Turn-over reduction

Fresh perspective

Integrates well with existing team

Since the “must haves” are non-negotiable, they will not require ranking. I will then rank the “wants” from most important to least important and assign a weighted percentage of importance:

Quick transition – 40%

Integrates well with existing team – 30%

Fresh perspective – 20%

Least cost – 10%

Making Predictions

In order to establish which candidate will pose the least risk, I will derive a prediction for each objective I have established in relation to each candidate. Understandably, each candidate has some form of risk when appraised against each objective; however, I will concentrate on which characteristics are more favorable or more risky.

Performance Prediction. According to Susan Lang, author of Researchers Find Hiring Internally Has the Edge over Hiring Externally, “past-performance records….. are much better predictors of future performance than other recommended, but less valid, selection tools, such as structured interviews, cognitive-activity tests and job simulations.” She goes on to establish that this is accurate for professional positions which include managers, supervisors, and many others.2

Long-term Position Stability Prediction. Due to the already high turnover rate, it is imperative that the applicant has a high probability of success in the position. According to Barry Leskin, Balancing Promotion vs. Hiring, external applicants have a lower rate of success than their internal applicant counterparts. External applicants generally lack the support from and connections with the existing staff members, may be unable to adjust to the existing culture, and there is generally a lack of information regarding the prior performance of the external applicant.3

On the other hand, it may be anticipated that the internal candidate may hold false expectations in the new position which may lead to subsequent resignation or positional failure. Yet, it is unlikely that this will actually pose an issue if the individual has been within the company for some time and understand the internal working environment.

Turn-over Reduction Prediction. How would one go about reducing the turn-over rate of employees? There could be many ways of doing this – ranging from more employee incentives, forms of employee engagement, and possibly even simply possibility of promotional opportunities.

One such way is discussed in the website HRM Advice. They state that “internal recruitment can build a strong loyalty with the organization as the employees have a chance to change their position after a period of time. The employees are not pressed to look for opportunities on the external job market.”4

Therefore, it may be expected that “promoting from within” would lead to a reduction in employee turn-over within the organization, improved morale, and engagement of workers that may have been considering going elsewhere.5

Another article also provides a good view as to why internal promotion improves employee retention. It states that a company is perceived as “caring for the needs of their employees and putting their opportunities for advancement ahead of someone from the outside.”5

Other ways of improving employee retention such as increased incentives and employee engagement can be accomplished by either candidate; therefore, each candidate has equal opportunity in this arena.

Quick Transitioning Prediction. It would only make sense that the internal candidate would transition more readily than an external candidate. Although each candidate has the same resume and work experiences, we can safely say that the internal candidate is acclimatized to the workplace environment, its policies and procedures, and the existing staff. 5

Although an external candidate may acclimate rather quickly, I believe that due to the current instability of the department, it is necessary to have the quickest transition as possible to re-establish the internal workings of the department.

Integration Prediction. Again, I would anticipate that the internal candidate has already established a good working relationship with the staff and the department/company; although, in some instances, there may already be some problematic relationships built by the individual. In regards to an external candidate, they will be consumed with building all new relationships with the staff and with the company as a whole.

Fresh Perspective Prediction. It is well documented that the internal recruitment process limits the ingress of new ideas, insights, and attitudes6; whereas, external recruitment promotes opportunities to cultivate competitiveness, different experiences, and facilitate cultural change.7 Therefore, I would predict that hiring the external candidate would be more likely to achieve this objective.

Cost Prediction. Cost is a heavily weighted decision making factor when contemplating the two candidates. Research has found that there is extensive loss (2.5 to 3 times the manager’s annual salary) when a manager fails in a position. Therefore, if there is a high risk of failure within the position, I would lean towards the lower risk applicant.3

Large costs are also involved when an external candidate is brought into a company – approximately 20 to 30% more due to more HR involvement and training time/costs. 3

Alternately, the promotion of an internal candidate will leave a vacancy in the department. 6 Additional cost will be involved in overtime until the position is filled, training for the filled position, and subsequent costs.

Risk Assessment

Risk Prediction and Analysis

To analyze each candidate’s so called “risk,” I will list each objective in its negative state then assign a status of low, medium, or high risk for each objective as I perceive the risk. For example, instead of stating high risk of good performance – I stated high risk of poor performance so that the risk factor is considered to be negative.

Internal Candidate

External Candidate

Poor performance

Low

Medium

Position instability

Low

Medium

Turnover rate increase

Low

Medium

Slow transition

Low

High

Stagnant perspective

High

Low

High cost

Low

High

Poor integration

Low

Medium

First, I assigned a low risk of poor performance for the internal candidate. I would anticipate that the internal candidate has a prior record of above average performance; otherwise, this candidate would not have made it through the screening process. Objective review of this candidate’s performance ratings would help me identify if they demonstrate a consistent performance record. As for the external candidate, the interview process and testing would possibly give us a look into the person’s performance and motivations. However, it is difficult to actually capture this in such nominal evaluations.

Position instability can be gauged by the support the candidate has within the organization and prior performance appraisals. With the internal candidate, they have existing relationships within the organization and we have access to prior performance throughout employment with the company; therefore, I assigned a low risk of instability. It is very difficult to discern stability with an external candidate – they have no to minimal organizational relationships and prior job performance is hard to measure; therefore, a medium risk has been assigned.

Turn-over rate increases are more likely to occur with the hiring of an external applicant. With the perception of promotional opportunities, employees are more likely to remain. Although, an external candidate does have the capacity to initiate other measures to reduce turn-over – I have assigned a medium risk to the external candidate rather than a high risk.

Again, transition will occur more quickly for an internal applicant; therefore, risk is low for the internal and high risk of a slow transition for the external candidate.

The stagnant perspective is where the external candidate surpasses the internal candidate. There is definitely a lower risk for the external applicant in this category with a variety of different experiences and attitudes.

Higher cost is involved with the external candidate strictly due to the external recruitment process, additional baseline training, and slower transition; therefore, high risk has been assigned.

Depending on the personality of the external applicant, there may be minimal risk of poor integration; however, the internal candidate his a lower risk of poor integration.

Conclusion

From the objectives identified, the internal candidate presents a lower risk than the external candidate in the majority of categories. Also, from the list of “must haves,” the external candidate does not meet low risk criteria in these areas; therefore, eliminates the external candidate as an option. Subsequent rankings also do not need to be involved in the decision making process because the “must have” objectives could not be met. However, outside of this list of objectives, there are other factors that play into the decision although they do not rank as high as those listed: With the promotion of an internal candidate, where does this leave the RT department? Would this promotion actually improve the department’s position or hinder it? – Although the department would be left with a hole to fill, the benefits gained by the department would surpass that of the loss of a clinically practicing RT.

In summary, I would select the internal candidate to fill the position of the hospital administrator for the reason that this individual poses the least risk. The candidate also has an established work ethic and relationship with the current community and would have a higher likelihood of success in the position.

References Cited

Kepner-Tregoe, Inc. The New Rational Manager – KT: Decision Analysis. 1996-2006. Reference materials.

Lang S. Researchers find hiring internally has the edge over hiring externally. Cornell Chronicle. December 5, 2002:16. http://www.news.cornell.edu/Chronicle/02/12.5.02/hiring_internally.html. Accessed June 10 2010.

Leskin B. Balancing promotion vs. hiring. Silicon Valley/San Jose Business Journal. July 28 2006. http://sanjose.bizjournals.com/sanjose/stories/2006/07/31/newscolumn7.html. Accessed June 10, 2010.

HRM Advice. Internal or External Recruitment. 2008. http://hrmadvice.com/hrmadvice/hr-processes/recruitment-and-selection/internal-or-external-recruitment.html. Accessed June 11, 2010.

BusinessKnowledgeSource.com. Promoting from within vs hiring from outside – when is each one better? 2003-2010. http://www.businessknowledgesource.com/blog/ promoting_from_within_vs_hiring_from_outside_when_is_each_one_better_027588.html. Accessed June 5, 2010.

Indian Express Newspapers Limited. The benefits of hiring from within. 2001. http://www.expresscomputeronline.com/20061023/technologylife01.shtml. Accessed June 9, 2010.

Williams T. Internal vs. external recruitment – which is best? 2009. http://www.articlesnatch.com/Article/Internal-Versus-External-Recruitment—Which-Is-Best–/793181. Accessed June 5, 2010.