Internal hiring boosts retention and saves money, yet has slumped post pandemic new research finds

• Internal mobility initiatives and hiring processes rose in popularity during the pandemic to become a source of innovation, employee retention, a core driver of company culture, and broad savings
• But the focus on internal recruitment has waned—slumping to represent just 24% of all hires from a high of 40% in 2020
• This pivot away from internal hiring may be limiting employer flexibility and loyalty, reducing retention and contributing to increased time-to-hire rates in a talent climate still characterized by skills shortages

September 13, 2023 — The Josh Bersin Company, the world’s most trusted human capital advisory firm, and global talent solutions business AMS, have today announced new insights into the scale of savings possible when employers actively innovate with internal mobility and internal hiring.

Focusing on internal talent can help organizations expedite rising time-to hire rates–often by 10-12 days – and address the chronic labor shortages many sectors are encountering. This on top of the benefits of increased employee retention, improved company culture, and the collective impact these factors have on bottom-line costs.

After a spike in internal hire activity and related innovation at the peak of the pandemic, internal hiring drives have tailed off leaving an untapped opportunity. This is at a time when the pain of external recruitment, caused by a global skills shortage, remains heightened. In fact, internal hire rates have slumped to just 24% of all hires on average, one of the lowest rates of internal hiring seen in years.

At the peak of the COVID-19 pandemic, momentum around internal recruitment drives was strong, as restricted market conditions forced employers to think laterally. As companies were forced to look internally to fill workforce gaps, internal hiring rates rose sharply, spiking in 2020 at 40% of all hires. This was up from a more usual proportion of 30-32% of positions being filled internally.

These are the latest findings from an unprecedented global Talent Climate research initiative launched earlier this year by The Josh Bersin Company in collaboration with AMS. It draws on almost 600,000 hire-related data points spanning five years of global HR and recruitment records.

The finding that organizations have lost momentum around productive internal hiring initiatives is striking in the context of the potential financial savings such a focus can bring, and the positive impact on retention during a continuing widespread talent crisis.

Among the connected challenges that now need to be addressed to drive greater internal employee mobility is the potential for talent “hoarding,” as divisional managers try to hold on to their best people. Companies may need to consider incentives to encourage internal hiring as part of the broader talent solution for their organization.

The Talent Climate research project aims to delve deeper into the current skills crisis plaguing entire industries around the world, and distils some of the most innovative emerging solutions being put in place by major employers including Johnson & Johnson, Bayer, and Deloitte.

The current analysis, which is cross-industry, cross-geography, and cross-role, follows analysis into time-to-hire trends in May. This confirmed that it is now taking employers substantially longer to find, attract and appoint new recruits from the external market.

Janet Mertens, The Josh Bersin Company Senior Vice President of Research, said: “Internal hiring rates have fallen to their lowest rate in years—to just 24% of all hires, compared to closer to a third on average historically, and 40% at the peak of the pandemic. This is despite the finding that, when leading players across a range of industries devised innovative new approaches to filling vacancies, they see a reduction in talent gap/hire-related challenges and associated costs, and a rise in employee satisfaction. But all is not lost. These are valuable insights to employers who continue to grapple with the global talent crisis, and the hard statistics are a strong incentive to review recruitment practices once more.”

Josh Bersin, global HR research analyst and CEO of The Josh Bersin Company, said: “Organizations that want to succeed in this post-industrial era, where talent is scarce and hiring times are extended, have no choice but to think laterally about approaches to hiring, and career pathways. Now, more than ever, there needs to be a culture of movement inside the company, whether those moves are part time, project based or full time. The potential cost savings, the prospect of cutting the time to hire by up to two weeks, and the direct impact on the employee experience and on long-term retention are all huge reasons to revisit and elevate internal hiring and internal mobility strategies. There will always be challenge, of course, for instance around how to tackle talent ‘hoarding.’ But there’s always a solution. In this case, that could involve incentivizing managers to think about their own employees as part of the broader talent solution for the organization.”

 Jim Sykes, Global Managing Director, Operations at AMS, said: “2023 has the makings of the perfect storm for talent acquisition. In the face of reduced hiring volumes, continuing skills shortages and increasing time to hire, it’s all the more surprising to see that organizations are relying more on external talent rather than moving their existing employees into new roles. You could be forgiven for thinking that this trend has been driven by highly specialized hiring within niche skills sets but it’s clear from our data that this is a much broader issue.

“Seeking talent outside organizations will always be important, it brings fresh thinking and new experience but companies need to be mindful that often the talent they need and that can elevate their culture and achieve business success, is right under their nose. The fact that it remains easier for employees to identify and gain a new role externally than it is for them to do so with their existing employer should be a wake-up call for all organizations.”

The Talent Climate research series is designed to inform and inspire employers looking to optimize their recruiting practices, through the ability to compare their own practices and outcomes with those of their industry peers, by region and by job category. The research pinpoints opportunities to improve those results through innovative new approaches to talent appointment and retention.

 The full Talent Climate findings are published in the Internal Hiring Factbook exclusively available to Josh Bersin Company members. An October 5, 2023, public webinar will reveal key findings and feature industry leaders’ perspectives.