advantages and disadvantages of internal and external recruitment

2.3.1 Recruiting and Selecting Employees

Learning Objective (AO1‑AO4)

Students will be able to:

• Explain the different recruitment methods (internal, external, part‑time, full‑time).
• Describe the eight‑stage recruitment‑selection process and the purpose of each stage.
• Identify and evaluate the main selection techniques.
• Analyse the legal, practical and strategic factors that influence the choice of recruitment method.

1. Recruitment Methods

Definition Box

Internal recruitment – filling a vacancy with an existing employee of the organisation.
External recruitment – sourcing candidates from outside the organisation.

1.1 Internal Recruitment

Advantages

• Lower advertising and usually lower training costs.
• Faster to fill – the candidate is already known and may already have relevant experience.
• Shows clear career progression, motivating staff and increasing loyalty.
• Reduces risk of cultural mismatch – the employee already understands the company’s values and procedures.
• Retains organisational knowledge and expertise.

Disadvantages

• Limited pool of candidates – the required skill set may not exist internally.
• Can create resentment or perceived favouritism among staff who are not selected.
• Promoting one employee often creates a vacancy elsewhere that must be filled.
• May lead to stagnation – fresh ideas and new perspectives are less likely.
• Employees who are passed over may become demotivated, affecting morale.

1.2 External Recruitment

Advantages

• Access to a much larger talent pool with a wider range of skills, experience and qualifications.
• Brings new ideas and innovation that can improve products, services or processes.
• Provides an opportunity to change or refresh the organisational culture.
• Reduces internal politics over a particular vacancy.
• Enables recruitment of specialists for highly technical or specialised roles.

Disadvantages

• Higher costs – advertising, agency fees, travel expenses and longer onboarding.
• Longer time‑to‑fill – sourcing, shortlisting, interviewing and background checks take time.
• Risk of poor cultural fit – new hires may struggle to adapt to existing ways of working.
• Existing staff may feel overlooked, which can lower morale.
• External hires often need more initial training and support.

1.3 Part‑time vs. Full‑time Employees

2. Stages of the Recruitment & Selection Process (aligned with syllabus)

1. Job analysis & person specification – Identify duties, responsibilities, required skills, qualifications and experience.
2. Advertising the vacancy – Choose internal channels (notice boards, intranet, staff newsletters) or external channels (online job sites, newspapers, recruitment agencies).
3. Receiving & shortlisting applications – Compare CVs/resumes against the person specification and create a shortlist of suitable candidates.
4. Selection tests and assessments – May include psychometric/aptitude tests, work‑sample tests or assessment centres to evaluate specific competencies.
5. Interview – Conduct structured, semi‑structured or competency‑based interviews to explore experience, knowledge and behaviour.
6. Reference and background checks – Verify qualifications, previous employment, right to work and any criminal or health‑related checks required by law.
7. Decision & job offer – Select the most suitable candidate, negotiate terms, and issue a written contract of employment.
8. Induction and training – Introduce the new employee to the organisation’s culture, policies, team and role‑specific tasks.

3. Main Selection Techniques

• Interview
  • Structured – same questions for all candidates; high reliability.
  • Competency‑based – focuses on past behaviour to predict future performance.
• Psychometric / aptitude tests – Assess numerical, verbal or logical reasoning; useful for entry‑level and graduate roles.
• Work‑sample tests – Candidates perform a realistic task (e.g., writing a report, coding a module) to demonstrate capability.
• Assessment centres – Series of exercises (group discussion, role‑play, case study) that evaluate a range of competencies.
• Reference checks – Contact former employers to confirm performance, reliability and suitability.
• Medical examinations – Required where health and safety legislation mandates fitness for the role (e.g., heavy‑lifting positions).

4. Comparison of Internal and External Recruitment

5. Legal Controls that Influence Recruitment & Selection

• Employment contracts – Must set out terms of employment, pay, hours and notice periods.
• Unfair dismissal legislation – Organisations must follow fair procedures when terminating staff.
• Equality & anti‑discrimination laws – Recruitment must not discriminate on the basis of gender, race, disability, religion, age, sexual orientation or any other protected characteristic.
• Health & safety regulations – Employers must ensure candidates are fit for the role and provide a safe working environment.
• National Minimum Wage (and Living Wage) – All employees must be paid at least the statutory minimum.
• Data protection (GDPR) – Personal data collected during recruitment must be stored securely and used only for recruitment purposes.

6. Decision‑Making Activity (Case Study)

TechSolutions Ltd has a vacant senior‑project‑manager position. Two candidates are available:

1. Emma – a long‑serving internal employee who has been a team leader for three years but has no formal project‑management qualification.
2. Raj – an external candidate with a PMP certification and five years of experience managing similar projects at a competitor.

Task for students (80‑120 words): Using the comparison table and the selection criteria (skills, experience, cultural fit, cost and time to fill), decide which candidate should be offered the role. Justify your choice and comment on any legal or morale implications.

7. Key Points to Remember

1. Choose the recruitment method that best supports the organisation’s strategic objectives (cost, speed, innovation, cultural fit).
2. Follow the eight‑stage recruitment‑selection process to ensure fairness and legal compliance.
3. Match the selection technique to the nature of the job – e.g., work‑sample tests for technical roles, competency interviews for managerial positions.
4. Balance internal promotion opportunities with external hiring to avoid stagnation while still bringing in new ideas.
5. Ensure all recruitment practices comply with employment law, equality legislation and data‑protection requirements.
6. Invest in a thorough induction programme for new hires (internal or external) to improve retention and cultural integration.
7. Regularly evaluate recruitment outcomes (time‑to‑fill, cost, turnover) and adjust policies accordingly.