How to improve your internal hiring ratio

Internal mobility rates have slumped from pandemic-era record highs to concerning record lows, according to research from the Josh Bersin company. This negatively impacts hiring metrics such as time-to-hire, but also limits employer flexibility, damages loyalty, and increases costs to talent acquisition and HR. Whether external talent market conditions are prospering or plummeting, organizations must measure their propensity for delivering internal mobility, and seek to improve their internal hiring ratio.

In an interview with HRD Connect, Janet Mertens, Senior Vice President, The Josh Bersin Company, examines the latest research on internal mobility and explores how organizations can use skills data and establish non-linear pathways to move the needle on their internal hiring ratio.

1. Why is the internal hiring ratio such a critical measure?

Janet Mertens: The internal hiring ratio has always been vital but has assumed even greater importance over the past few years for employees and employers. However, our research revealed that internal hires represent just 24% of all hires, from a high of 40% in 2020. When employees know there is a clear and accessible pathway to different roles within the organization, they are far more likely to stay, whether applying for a role now or just knowing there will be future opportunities. It just makes for a better employee experience.

For the employer, the benefits are vast. It delivers substantial cost savings; it can cut the time to hire by up to two weeks and significantly improves long-term retention. In an uncertain economy and a global skills shortage, any smart organization should be looking to elevate its internal hiring and internal mobility strategies.

2. What measures of skills data can signal to organizations to understand what next-gen skills they need?

Janet Mertens: First and foremost, organizations must get to know the skills they have and identify the ones they need. But getting this granular visibility into your enterprise’s skillset often requires the application of technology – advanced analytics, AI, machine learning – so you can see where skills and capabilities live in your organization, where the expertise is, and where you have gaps.

Access to external labor market insights data provides an outside-in view of what’s coming – for example, what does the market typically pay for a software engineer in your region? Who are you competing with for a data scientist? What are the typical career paths for a particular role? Then you can make informed decisions about where to buy, build, or borrow the skills you need for the future.

3. How can organizations establish non-linear pathways to improve their internal hiring ratio?

Janet Mertens: There is a shift in mindset that is essential to this, and that involves embracing potential over experience. Specifically, tap into data sources to identify adjacent skills that complement or align with target jobs, equip recruiters with the data and insights they need to know when to focus on the existing workforce and be intentional about creating non-linear career pathways that encourage lateral movement.

Building a culture of mobility is also important. Introduce job rotation, non-linear career paths, and continuous learning into the flow of work. If you coach and incentivize hiring managers to support talent mobility and progression across the company, much more will happen.

There must also be a compelling internal candidate experience, which is not always true. Internal recruiting practices should mirror external practices.

4. Can you share an example of a company that has achieved a high internal hiring ratio?

Janet Mertens: In terms of the industry with the highest internal hiring ratio, Consumer Banking was the clear winner, with an internal hiring rate of 42% in 2022. Tech & Media and Retail & Consumer Goods have the lowest internal hiring rates overall, at an average of just 11.5%. This is an enormous opportunity for organizations in those sectors to learn from what others are doing.

What’s also interesting is that the roles within companies can vary in their internal hiring talent ratios. Operations, finance, and IT/Tech all saw the highest internal hiring rate, with an average of 32.5%, while HR roles have seen the biggest jumps in internal hiring rates in 2023, with an average 6.5-point increase.

5. How can fostering an elite internal candidate experience help improve external talent acquisition?

Janet Mertens: People want to join organizations where there is the opportunity to progress, develop, and learn, and enjoy a company culture that rewards and prioritizes internal mobility. Demonstrating an effective internal hiring strategy shows external talent that your organization is exactly that kind of place, which can be hugely compelling to a candidate.

6. What future trends do you expect concerning the internal hiring ratio?

Janet Mertens: The global talent shortage is not going away. Companies are going to continue to struggle to find top talent, especially digital and tech talent. In addition, most organizations are facing increased costs around hiring, and time-to-hire rates are getting longer. There is always a place for external hiring to bring in fresh ideas and talent, but developing a successful internal hiring strategy in tandem is essential. Internal hiring is not just about closing job requisitions. It’s about building a resilient, sustainable, and dynamic organization and creating a culture of growth and innovation.

Janet Mertens is Senior Vice President, The Josh Bersin Company.