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External Hiring vs. Internal Recruitment: How Companies are Doubling Down on Upskilling Employees

As technology continues to transform the way we live and work, companies are on the hunt for the right skill sets needed to thrive in the digital age. When searching for your next hire, internal recruitment may be the optimal approach. 

In a 2011 study, University of Pennsylvania Wharton School professor Matthew Bidwell outlined various benefits to promoting from within – finding that external hires receive much lower performance evaluations for the first two years in the position than internal workers who are promoted into similar roles. These hires, he pointed out, also have higher exit rates. 

Employees seem to favour this approach – in a recent survey of 1,000 full-time workers, Joblist found that 71 % of employees believed hiring from within is better for scaling a business, and 56 % believing that promoting from within is better for morale.

Helping new hires adapt to a company’s culture

Robust company culture is crucial in attracting and retaining talent and is important to employees. Research suggests that up to 50% of employee engagement stems from one’s sense of being a good fit with a company’s culture.

One benefit to internal recruitment is that internal candidates are prescreened for cultural fit, as they are already fully ingrained in the workplace. Yet while such candidates already have a strong grasp of a company’s culture and processes, external candidates may struggle to acclimatize. So how do you support and build engagement with employees from the get-go? 

In a move to enhance its employee onboarding experience, global cosmetics company L’Oréal introduced the Fit Culture App in 2017. Available in 11 languages, the mobile app helps newcomers maneuver and become acquainted with the company culture, as they discover “Insider Secrets” through videos, employee testimonials, quizzes and games. 

Recognizing the company’s tight-knit culture, L’Oreal had a formal global integration program for senior leaders joining as lateral hires, with an individual program tailored to each person. Each new hire was assigned a buddy, mentor and coach – the buddy to assist in navigating the company culture, the coach an external professional with whom they could strategize and consult during the first few months. 

But how are companies responding to the changing desires of employees? 

Flexible working arrangements that foster internal recruitment

In the world of work, 2020 was a year of change. Now more than ever, employees are looking for workplace flexibility, and companies are taking note, providing existing employees with the opportunities to flex their skill sets, and discover new ones. 

Employees in Unilever’s U-Work program do not have a fixed role. Rather, they work on varying assignments, between which they are free to pursue other areas of interest to them. Additionally, managers have access to skilled workers who are familiar with the company, thereby not having to source freelance workers and help get them up to speed. A “responsible alternative to the gig economy,” the program offers both the flexibility and freedom typical of contract roles and the benefits and security of permanent roles. 

Unilever is also letting employees try on different hats – exploring different projects and roles across the organization. By posting on an internal platform, managers can solicit help for projects from anyone in the company. For instance, with an engineering background and experience in technical research and development (R&D) roles, employee Vanessa recently made a move into the HR sector, as a diversity and inclusion lead overseeing gender equity.

In addition to helping the company better understand the capabilities of its existing talent pool, productivity, engagement, and skill development are among the benefits to this approach. 

Upskilling and strengthening existing pools of talent

With rapid advances in technology and a shifting job landscape, there is a need for new skills to keep up with the current demands. According to the World Economic Forum, at least 54% of all employees will require reskilling and upskilling by 2022, due to AI and automation. 

A 2021 study from Deloitte and The Manufacturing Institute revealed a skills gap in U.S. manufacturing, the industry expected to have 2.1 million unfilled jobs by 2030. Moreover, 77% of those surveyed forecast that there will be ongoing struggles in attracting and retaining workers in 2021 and beyond – filling entry-level positions and discovering skilled talent two of the main hurdles the industry faces. Manufacturers “should balance the need to cultivate innate human capabilities while reskilling their workforce with digital skills,” the study advised. 

Aware of such challenges, and the digital transformation that is underway, large companies such as Verizon, JPMorgan, Accenture, PwC, and Amazon are investing in employee upskilling initiatives. 

On a quest to retrain 100,000 employees by 2020, AT&T designed its Workforce 2020 program (‘WF2020’), as research showed that approximately half of the company’s 250,000 employees had the necessary science, technology, engineering, and math (STEM) skills needed. Moreover, thousands of workers were working with hardware functions that likely would not exist in the next decade.

Using the Career Profile tool, employees could complete a career profile page, which would identify any relevant job opportunities, offering a list of the skills required to transition into any of these roles. When looking to fill an opening, the company would use this tool to first evaluate internal candidates. 

The program also included a simplifying and reinventing of roles, consolidating 250 roles into 80. For instance, 17 types of programming-related roles were grouped into the single role of “software engineer,” while those in various positions of leadership, such as team lead and tech director, became “people leaders.” 

Investing heavily in education and training programs as part of its employee upskilling efforts, AT&T teamed up with Udacity to offer an online Master’s Degree program in Computer Science at The Georgia Institute of Technology – with annual tuition less than 20% of the cost of the on-campus program. 

To date, this large, multi-year effort has largely been a success  – between 2012-2015, internal sourcing of jobs in STEM increased more than 20%. By December 2015, the company had handed out 117,000 digital certificates of achievement (‘badges’) to 53,000 employees.  

AT&T also embraced a new model for agility – a shift from corporate-ladder to corporate-lattice thinking. While the former has commonly been the standard metaphor for talent development and career paths whereby the ‘only-way-is-up’, the latter refers to paths that continually alter through movements that are more ‘zigzagging’ and multidirectional. 

By taking a hard look at existing roles, ensuring a welcoming company culture, and cultivating a culture of learning for their employees, companies are looking within and taking new steps to upskilling their current talent. “We’re shifting to employees because we’re starting to see the talent inside,” said John Donovan, CEO of AT&T Communications.  

By looking within their current talent pool, focusing on workplace flexibility, and investing in employees’ development, companies can thrive in the modern era of work and prepare their workforce for the demands of tomorrow. 

Discover how Rallyware can help you boost productivity and ROI, using a tailored approach to employee upskilling and reskilling. To learn more, request a demo today!