We’re facing a significant challenge—hiring. We don’t have enough people, and finding new talent is getting harder. And in a few short years, it’s going to be even worse. As labor economist David Autor points out, all the people who turn 30 in the year 2053 have already been born, and we can’t create more individuals in that age group. On top of that, the workforce is graying: Some 64% of all new workers are under the age of 34, only 5% are in their fifties, and only 3% represent the baby boomer generation.

While so much is understood about this hiring challenge, there is something we can do—start to look at internal mobility and flexible work as the way to grow the company.

During the peak of the pandemic, organizations leveraged internal hiring for their business needs. Although many employees did join new companies virtually, companies were forced to look internally to fill workforce needs. Companies increased their internal hiring rates, spiking in 2020 at 40% of all hires, a notable increase from the typical range of 30% to 32% for internal placements.

As we discovered in hundreds of interviews, what these companies found is that internal staff have a pent-up demand for new opportunities. Notably, every company that  implemented a new internal talent marketplace found it valuable. Seagate, for example, reported savings of $20 million to $30 million in the first year by eliminating the need for external contractor assistance through its marketplace.

And the benefits keep adding up. LinkedIn research shows that when employees are promoted, they are 70% more likely to stay long term. The same research shows that 62% of employees who make lateral moves display high retention rates. Our data also shows that hiring externally can incur costs three to five times more than those associated with internal mobility factoring in various financial, time, and associated expenses

The idea of “hire to grow” is just gone after all. Big Tech has matured to a stage where it is now habitually shedding workers not because of real economic pressure but to tweak the stock price.

And no matter how much money organizations throw at hiring, achieving the desired results may not be guaranteed. Our data indicates that the average hire cycle is 45 days, but that’s the average. The high end is set at 90 to 120 days. If a job remains open for this prolonged duration, the likelihood of attracting high-caliber candidates diminishes. Anybody who is good isn’t going to apply to a job that takes that long to fill, leading to the recruitment of less-able candidates.

CULTIVATING GREAT GENERAL-PURPOSE EMPLOYEES

So, it’s time for the chief human resources officer to dial down on job board harvesting and to look at how to buoy up the organization with better cultivation and development of the people already on the team.

By adopting an internal-growth-first mindset, organizations can acquire useful general managers because people who move around inside a company understand the dynamics of that whole organization and can more easily apply their skills to relevant use cases and problems. These HR teams have realized that they will always want to replace people, but there’s no reason a lot of that growth can’t come from people they have already expensively hired and trained.

A great example is Microsoft, which says to high-potential people that if they want to be a senior leader at the organization, they are not going to get promoted in place—they are going to have to take a job rotation because they need to know how Microsoft works as a whole, not just in the function they were hired into.

It’s noteworthy that pioneers in internal hiring practices are implementing dynamic organizational people strategies, such as developmental careers, innovative internal talent marketplaces, transparent job opportunities, and targeted coaching and mentoring programs. Slowly but surely, a shift is occurring where the traditional practice of compartmentalizing employees by specific units or divisions is gradually giving way. For instance, in contrast to restricting employees to ESPN, Pixar, or the Parks unit, companies like Disney are moving toward a model that recognizes employees as part of the larger organization, potentially being tapped for roles that diverge from their initial hire. This approach allows for a better assessment of new hires because you can talk directly with colleagues and supervisors who have firsthand experience of working with them.

THE PROBLEM OF THE TALENT-HOARDING MANAGER

In summary, sourcing internally is not only more straightforward for recruiters but is also beneficial when there is strong organizational support and a culture that encourages it. So what can (and does) block this practice from happening as regularly as it ideally should?

The first obstacle is inertia fatally combined with what we might term a lack of organizational imagination. For instance, I was talking with a leader at a large telecommunications company who was experiencing a talent shortage. Their business unit was part of a conglomerate that owned an oil company, where they actually had an excess of talent. So I asked the obvious question: Why don’t you just move some people around? “We would never do that; it would never work,” they scoffed. But it turned out they had never actually attempted it. In a landscape where we are facing a shortage of 1.7 million Americans from the workforce compared to February 2020, this kind of lazy thinking is no longer acceptable.

Another challenge is manager resistance, often referred to as talent hoarding. A departmental manager’s instinct is to try to hold on to their best people, which is logical in terms of them meeting their targets but which serves to frustrate the wider aims of a new, more lateral, approach to the firm’s ongoing skills shortage. This is simple pragmatism: If the reward system emphasizes hitting targets under the threat of termination, managers are less likely to encourage valuable team members to explore opportunities outside their group.

To address this, organizations need to adopt strategies such as providing incentives to encourage internal hiring, making it a viable and long-term talent solution for the entire organization.

Enhancing internal hiring practices and incorporating dynamic people strategies may indeed require substantial effort. However, considering the numerous benefits of promoting internal hires, I believe undertaking this initiative is highly worthwhile. The potential for improved efficiency, cost savings, and a more resilient and adaptable workforce can contribute to the long-term success and sustainability of the organization.