4 Reasons The Smartest Technology Companies Hire From Within
From the Great Resignation to economic ups and downs, the world of work has never been more uncertain. For technology companies, one thing remains the same: the ability to find, keep, and grow top talent still ranks among your greatest competitive advantages. This is why tech companies must prioritize the question of where to find the next generation of talent. But it might be right under your nose.
Let’s explore how and why some of the world’s top tech companies have found the talent they needed among their existing workforce.
The Great Reassessment
We already know that people are thinking differently about work today. The best technology companies are thinking differently too. Leaders have their work cut out for them when it comes to building the workplace of the future, with the workforce that the future will require. For many companies, the missing link is internal mobility: the importance of looking within your business to find the talent that your company needs to thrive.
Why is hiring from within such a good idea?
1. Find Hidden Treasure (and Efficiencies)
Recruitment is generally narrowly focused on net-new candidates that seem to fit the bill, often thanks to a perfunctory LinkedIn search. Granted, it wasn’t always this way. Until the 1970s, around 90% of roles were filled through internal promotions and lateral assignments. Today? Only one in three positions are filled by a current employee.
What if you thought of your existing employees as potential candidates? Suddenly you have a greater pool to fish from, a more detailed understanding of their skills and experience, a better sense that they’re a good fit, and (crucially) a much shorter time between identifying and hiring the right person for the job.
You can also save money on training and development by hiring internally. Research by Wharton professor Matthew Bidwell finds that external hires will take three years to get to the same level of performance as internal movers who come into their new jobs with the skills they already need.
Finally, external hires generally command a higher salary. 2011 research by Bidwell found that internal hires took seven years to reach the same pay as external hires (and more recent research confirms external hires are commanding 8% more money in the US). As Wharton’s Peter Cappelli points out in Harvard Business Review, “Outside hiring also causes current employees to spend time and energy positioning themselves for jobs elsewhere. It disrupts the culture and burdens peers who must help new hires figure out how things work.”
Of course, few organizations understand their workforce as deeply as they should.
To ensure your top talent is uncovered, and presented with opportunities to progress, move, and upskill, you may need to take a new approach. New technologies allow you to match internal ‘candidates’ with roles (or gigs or projects) – and gives employees a ‘Talent Marketplace’ which allows employees to source themselves for roles they are interested in internally.
Rather than tapping the same set of people to participate in team tasks, AI allows the hidden gems to come to light. As Wagner Denuzzo, Head of Capabilities for Future of Work at Prudential Financial, said on The Talent Blueprint podcast: “Imagine if all this comes to fruition through AI and machine learning… we don’t really need anybody to tap on my shoulder and say, ‘Hey, you’re top talent.’”
Denuzzo further explains, “We’re missing all the hidden figures; all the hidden jewels of people, who might be a little shyer, who’ve never had the exposure, but actually are brilliant people. And especially when you think about diversity and inclusion; you’re going to find diversity in every corner.”
2. Build the Workforce of the Future
The skills requirements in businesses are changing all the time. Even in technology companies – perhaps especially in technology companies – the digital skills gap widens in the face of exponential technological change, while essential ‘soft’ skills like critical reasoning, creativity and adaptability go largely untapped. So, smart businesses are planning to upskill and reskill their existing employees, and hire from within.
As a starting point, existing employees already know the business, have demonstrable track records, and can start adding value in a fraction of the time it would take to source, interview, and onboard new candidates. On top of that, offering opportunities for employees to move around the business gives them the best possible learning and development scenario: to learn by doing.
Moreover, by offering existing employees new roles you are retaining people who might otherwise have left, and helping your own people achieve their full potential. This is a true win-win.
When you hire externally, you bring one new person on board at a time. When you make it a practice to hire from within, you create an environment that allows many employees to progress and develop their skills over time.
3. Stop the Leak: Retain Your Best People
High employee churn rates can mean that businesses are constantly chasing their tails when it comes to recruitment.
In the sixth edition of the Beamery Talent Index, 50% of people said they planned to leave their job in the next 12 months. That percentage rose to 62% amongst those working in IT/Technology. The reasons? In addition to higher salaries and better perks, people seek meaning, flexibility, and opportunities to develop. But this survey also revealed that 45% of people (53% in the tech sector) who had left a company due to feeling unhappy or unfulfilled later regretted doing so.
This means that your business has an opportunity: retain your people by allowing them to move internally.
That is to say, by offering opportunities inside your company, you help people to develop and use their skills, feel encouraged to stay, and feel valued by the business. Crucially, you’ll also be able to efficiently address and fill the skills gaps in your organization.
One approach to ‘hiring from within’ is to create internal careers communities where employees at risk of leaving can apply for and be offered relevant jobs, tailored learning routes, and growth opportunities.
You might say: “Yeah, but hiring from within just means shuffling people around. We still need to backfill roles.” Remember, if someone feels unfulfilled, is eager to learn, and wants a new challenge, preventing them from leaving their team will likely lead to them leaving your organization altogether.
4. Strengthen Your Company Culture
A healthy culture makes the difference between an organization thriving or not. As former McKinsey senior partner and current Beamery board member Mary Meaney has noted, it’s crucial to build a “healthy” culture of learning, innovation, and excellence; one where talent can thrive. Doing so relies on understanding the skills you have internally, allowing people to move around, and having the right technology to make this all possible (a Talent Marketplace).
While it has always been true that people are your biggest asset, the focus has shifted: customers are increasingly making purchase decisions based on the perceived culture of your business. And this isn’t just a case of clever hiring. You need to look at how you retain your best people and help them unlock their full potential. After all, this is what it takes to help your organization reach its full potential.
By investing in your people and offering opportunities for internal mobility, you give employees a chance to see where they fit in and to imagine where they might go next. This visibility and empowerment is not only a route to retention, but a method for ensuring greater engagement (which we know makes companies more successful).
People leave when they think they have nowhere left to grow. You have a proportion of your workforce that may not actually leave (for various reasons), but has mentally checked out and needs new stimulation; a vision for the future; a reason to believe and to stay.
Hiring internally not only increases employee engagement, but people tend to refer others more frequently when their own career has grown within the organization. The positive ripple effect of internal mobility cannot be overstated: it allows many employees to progress and develop their skills, in turn boosting morale, loyalty and productivity. This won’t just be felt on one team, but can be experienced throughout the company.
A smart approach to internal mobility ensures that vacancies and opportunities are clear and shared with employees, so that they are empowered to plot their own career paths.
Talent Marketplace: Doing Internal Mobility Properly
Of course, you may already be open to lateral moves in your business. What we find, though, is that employees are often not aware of internal opportunities because their companies don’t have a comprehensive, systematic way to present those opportunities.
At Beamery, we advise tech companies on how to implement internal mobility programs as part of a holistic, skills-based approach to talent management. This means looking at your talent as individuals with a living, evolving set of skills with dynamic levels of proficiency, as opposed to static collections of requirements that fit an existing open role on paper. Companies will soon be able to look at an individual and understand not only the skills they have today and the value they currently bring to the business, but how they can and want to grow, and how they might grow with the business over time.
Building a talent-first tech company involves reaching your full potential as an HR leader for your business, and investing in the right tools to unlock the true potential of your people. And when it comes to getting ahead of the digital skills gap and winning the war for talent, the smartest technology companies understand that some of their greatest advantages come from the people inside the business.
Are you ready to tap into the talent already inside your tech company? Learn more about building a Talent Marketplace, and how Beamery can help.