How To Create an Internal Hiring Process in 7 Steps

Updated February 3, 2023

A company’s hiring strategy is a set of policies that determine which candidates secure positions at the company. Many companies use a combination of external recruiting and internal hiring to ensure that it has skilled, experienced employees at every level. If you’re an HR professional, learning about internal hiring can help you develop a hiring strategy that fits your company’s needs.

In this article, we define internal hiring, explain how to create an internal hiring process and share the benefits and challenges of this recruitment technique.

What is internal hiring?

Internal hiring is the process of filling job vacancies within a business with candidates from its current workforce. In contrast to external recruiting, which involves looking outside the business for suitable candidates, hiring internal talent might involve moving an employee from one team to another or promoting them to a newly created position. Businesses of all sizes might use internal hiring to place experienced employees in key positions.

How to build an internal hiring process

Here are seven steps that a hiring manager or HR specialist can take to create an effective internal hiring process:

1. Design an internal hiring process policy

The first step in a successful internal hiring process is creating an internal hiring policy. This policy outlines the internal recruitment process and includes all the parties that may be involved in internal hiring.

The policy might also set clear communication rules as these are vital for internal hiring success. An internal hiring process policy may include guidelines for managers to ensure employees feel free to apply for internal positions that interest them. It may also describe what internal applicants can expect during the selection process.

2. Develop a job posting system

The hiring team might develop an internal job posting system to publicize open positions. Job posting systems differ from business to business based on the resources available and the size of the company. Message boards dedicated to promoting internal positions are a useful tool and provide a channel for questions and updated information.

If you have an internal company newsletter or blog with a high employee readership, these can also be effective tools for communicating open positions. Notices on bulletin boards, all-staff email announcements and internal social media groups are other ways to build awareness.

3. Post a customized job description

Facilitate the internal job application process with a detailed, customized job description. Job descriptions for internal candidates can provide insights that external candidates might not understand, like key products that the employee might sell or customer bases they might support.

Sharing information on the hiring manager, position supervisor and office location for the new position can help you find a good fit. Along with a customized job description, your job posting might also highlight employee eligibility criteria, directions for applying and expected response timelines.

Related: How To Write a Job Description

4. Encourage employees to apply

Managers and supervisors can engage their employees and encourage them to apply for open positions within the company. Promoting the idea of moving up within the business motivates employees, and interest in their growth and success makes them feel valued.

Since managers often have more experience in the company than the people they supervise, they might be able to identify roles that are ideal for members of their team. They can also talk to other managers about open roles in their departments. Employees with support from managers or supervisors may be more likely to apply.

Related: How To Be a Good Manager

5. Screen employees carefully

When internal hiring, it’s still important to screen candidates as rigorously as external candidates. Evaluating them carefully can indicate whether they might be the right professional for the new position. If all candidates receive the same evaluation, the hiring manager can compare them to identify strong contenders for the role.

One of the advantages of internal hiring is having access to the applicant's manager, supervisor and colleagues for references. If policy allows, you may also be able to look at employee files to learn more about their past performance and behavior.

6. Conduct fair interviews

Once the screening is complete, you can schedule interviews for the shortlisted internal candidates.The human resources department, managers and senior leadership may all be involved in the interview process.

To prevent negativity and accusations of bias or favoritism, make the internal interview process fair and transparent. Having multiple stakeholders involved is beneficial and helps to ensure you select the best candidate for the position. Some businesses use outside experts to assist with the interview process, as they don’t have personal connections with the candidates.

7. Give constructive feedback

Throughout the screening and interview process, it is crucial to give unsuccessful candidates positive and constructive feedback. Offering advice can help them grow and develop in their careers by suggesting skills to work on or additional certifications.

You can also ease disappointment by suggesting other roles that may be a better fit. Constructive feedback is an essential part of the internal hiring process as unsuccessful candidates are still employees and part of the team.

Benefits of hiring internal candidates

Hiring internal candidates instead of looking for talent outside a business has several key benefits including:

Shorter onboarding time

The onboarding process is when the HR department asks new hires for key paperwork and administers training in sensitivity, workplace conduct and internal systems. Since internal hires have already gone through onboarding, they may not have much more training in this stage.

They might learn new procedures if their new role involves management responsibilities or greater intranet privileges, but they’ve already submitted their documentation and understand how the company functions.

Reduced training costs

Since internal candidates need less general training, their training usually costs the business less money than an external hire’s training might. External candidates might learn about the company’s history, organizational structure and major projects.

If they shadow other employees, it can reduce the team’s productivity. When internal candidates undergo training, they can usually start their work sooner, increasing revenue.

More efficiency

Efficiency is a valuable benefit of hiring from within a business. When a hiring team focuses on internal candidates, the team can take less time screening and interviewing candidates, since they already know that the candidate is a good fit for the company’s culture.

Internal hiring also reduces the amount of paperwork the team does since they might only update the employee’s title and salary details in their file after securing the position.

Lower recruitment costs

Looking for job candidates within a business costs less than advertising for an external hire. With internal hiring, the hiring team doesn’t have to pay to advertise on job boards, hire external recruiters or pay for background checks, since job candidates have already passed all the requirements to work for the company. It also eliminates the work that goes into creating an external job listing and posting it on different websites.

Proven candidates

When hiring externally, it is impossible to know for sure that a candidate is a good fit until they're working in their role. However, internal candidates are already familiar with the day-to-day operations and culture of the business.

They’ve also demonstrated their work ethic and skills in previous positions. As their work habits and values match the company’s mission, they have a greater chance of being the right person for the role.

Increased employee morale

Promoting from within shows talented employees that the company values their experience and provides opportunities for career progression and growth. Engaging employees, making them feel like they matter and putting them in roles that excite them can boost employee morale.

Increased workplace satisfaction can encourage skilled employees to stay longer with the company, reducing turnover. As experienced employees are often more productive, the company can increase revenue by increasing morale.

Potential drawbacks of internal hiring

Although the benefits of internal hiring are plentiful, it may not always be the best option. Here are some of the potential drawbacks of internal hiring:

Fewer fresh perspectives

Hiring external talent with fresh ideas and perspectives provides new insights that can stimulate innovation and development. Only hiring internal candidates may reduce opportunities to access outside information and knowledge, which can cause stagnation in the company.

To mitigate the risk of stagnation, leadership teams can foster open discussion and creativity by providing access to new ideas and methodologies. They might host guest speakers who present new and innovative ideas to employees. Company leaders can also send employees to professional development programs or industry conferences, where they can learn new information and gain insights into their business.

Smaller candidate pool

Internal hiring limits the pool of candidates for a particular position. If the job requires fewer specialized skills and more industry knowledge, then an internal hire might be a good idea. For positions that require specialized skills, an external hiring process might be appropriate.

For example, if a hiring manager wants to fill a software developer position, the company might not have an employee who has the required skills ready to take the role. In that case, an external search might provide more suitable candidates.

Effect on work environment

If an employee’s colleague gets promoted to a senior position through internal hiring, they may feel some resentment that they didn’t get the job. This feeling can increase if multiple colleagues get internal promotions. Managers can overcome this drawback with a transparent internal interview process and an open communication policy, so employees feel that they can ask questions about the process.

Job vacancy

Internal hiring can be a faster way to fill open positions, but when someone receives a promotion or transfers to a new position, there’s often no one to fill their previous role. To fill the employee’s previous role, a hiring manager might have to find another current employee or recruit from outside the organization. In cases where an entry-level employee earns a promotion to a more skilled position, it may be easier to fill their previous role with an external hire, lessening the impact of this drawback.