Internal vs external recruitment: pros, cons and when to choose which

Choosing between looking for talent within your own organisation and turning to the job market is one of the main dilemmas facing every HR department. Internal and external recruitment are two distinct approaches that affect the time and cost of filling vacancies, team dynamics, the level of innovation and the company's organisational culture. In short: internal recruitment relies on the mobility of current employees, while external recruitment means hiring a candidate from the open job market.

The decision on which path to take should stem from a thorough analysis of available competencies and the company's plans. In this article, we analyse both processes and their pros and cons based on available research, and we point out the criteria worth using to make the choice.

Internal recruitment – definition and forms

Internal recruitment (also referred to as internal mobility) is the process of identifying, assessing and moving a current employee of the organisation into a new role. The advantage of this approach is that it draws on the experience of people who already work within the company's structures and know its operational processes. This allows teams to be built around people whose way of working is already known to the employer.

This approach is not limited to traditional promotions. In organisations, it can take several forms, depending on business needs and the policy in place:

• Vertical promotion: An employee moves to a higher position in the company hierarchy, which involves a change in the scope of responsibility and new duties.
• Lateral transfer: A change of position at the same level of the hierarchy, most often to another department. Such a move allows the employee to develop new competencies and broaden their knowledge of how the company works, without a simultaneous managerial promotion.
• Job rotation: Temporarily moving employees between different roles to broaden their knowledge of how processes work across the company. It is a way of building a versatile team.
• Internal job board: An open system in which employees can apply for vacant positions in the company. It gives the team the initiative in shaping their own career paths.
• Succession: Long-term planning and preparation of selected employees to take over key positions in the future.

External recruitment – definition and channels

External recruitment is the process of searching for and hiring people from outside the organisation's current structures. The main idea behind this method is to acquire competencies the company lacks and to bring in a fresh perspective from the job market.

This approach involves using a variety of channels to reach candidates. We cover these channels and the selection methods used in detail in a separate article: https://www.sharehire.pl/blog/metody-rekrutacji-i-selekcji.

Organisations can also reach people who are not actively looking for a job, which we describe in detail at: https://www.sharehire.pl/blog/rekrutacja-pasywna. HR departments that want to optimise this process can also build their own pools of potential candidates from the market, as we explain in: https://www.sharehire.pl/blog/wlasna-baza-kandydatow-do-pracy-talent-pool---jak-ja-zbudowac-i-przestac-przepalac-budzet-na-portale-ogloszeniowe.

Pros and cons of internal recruitment

Focusing on your own employees as the main source of talent comes with specific structural challenges that HR departments need to take into account when designing their processes.

Pros:

• Shorter onboarding into the new role, because the person already knows the organisation, its structure and its basic rules of operation.
• Clear career paths for the team, which makes it possible to plan development within the organisation.
• Usually a lower direct process cost compared with searches carried out on the open external market.

Cons and risks:

• The “vacancy chain”: Promoting an employee to a higher position creates a new vacancy in the role they have left. Filling that gap with another internal employee pushes the problem down to lower levels of the structure, often ultimately forcing the company to launch external recruitment for entry-level positions.
• Closing off to new ideas: Relying only on internal promotions can lead to a lack of fresh perspective and market competencies.
• Team conflicts: Promoting one team member to a managerial position can create tension among their former peers.
• A sense of unfairness: Rejected internal candidates may feel frustrated and dissatisfied about not being promoted, which can be a challenge for their further cooperation with the organisation.

External recruitment – pros and cons

Going to the market makes it possible to acquire competencies unavailable within the company, but it requires planning for a longer adaptation period for the candidate.

Pros:

• A fresh perspective from the job market, which allows the organisation to look at business challenges differently.
• The opportunity to acquire new, specific professional competencies that the company lacks.

Cons and risks (in light of the indicators studied): The drawbacks of external recruitment can include a longer time for the employee to reach full productivity and a higher cost per hire.

This phenomenon was studied by Matthew Bidwell (published in Administrative Science Quarterly in 2011, SAGE; discussed by Knowledge at Wharton). The study was based on data from 2003–2009; its findings concern a single US company (in the investment banking sector) and may not translate to Polish companies. Bidwell's analysis shows that external hires were initially paid around 18% more than employees promoted internally to similar positions. At the same time, new hires from the market received significantly lower performance ratings during their first two years. External hires also had higher exit rates (both voluntary and involuntary). However, if they chose to stay with the organisation, they were promoted faster in subsequent years than internal hires.

According to the 2025 SHRM Benchmarking Reports (SHRM, 2025), the average cost per hire for non-executive positions is USD 5,475, while for executive positions it is USD 35,879. These are US data only – there is still no verified, comprehensive benchmark for the Polish market. SHRM also reports that talent acquisition consumes on average 26% of HR budgets in the organisations surveyed, while only 20% of them measure quality of hire.

Comparison table

The table below compares the approaches discussed against key organisational criteria, also including employee referral recruitment.

The ratings in the table are qualitative and our own; apart from the Bidwell, LinkedIn and SHRM data, they are not based on measurements.

When to choose which – 5 criteria

When planning a hire, HR departments base their strategy on qualitative assessment criteria that help match the process to the company's situation.

Time

Processes vary in length depending on the source of talent. The internal approach makes it possible to skip the early stages of searching for candidates on the market, which usually speeds up the first steps and shortens the overall time to fill the role. External efforts require screening applications and waiting longer for the candidate to become available, which often lengthens the cycle and delays the moment the employee joins the organisation.

Cost

Organisations that opt for internal mobility do not, in direct terms, incur the costs of searching the market. Using in-house resources can be a way of optimising finances in the short term. Focusing on the external market means securing an operating budget for activities aimed at reaching people outside the company.

Competencies

When planning, you need to assess whether the current team has the expertise to take on new roles. If the role being opened requires entirely new skills not previously available in the organisation, external recruitment often becomes a necessity. Established operational knowledge and familiarity with processes, on the other hand, are the domain of people being promoted or transferred laterally.

Organisational culture

Moves within the company help preserve the existing shape of the organisational culture. This can be perceived as stability of the working environment. However, if the company sees that it needs a change in its business approach, hiring someone from outside can bring a different perspective and new working standards.

Development and company growth plans

The company's stage of development determines its hiring strategy. HR departments in fast-growing companies often notice that the pool of current employees alone is not enough to fill newly created roles. In such situations, going to the open job market is a complementary step to fill staffing gaps.

Internal mobility as a retention tool

Enabling employees to change positions within the structure affects keeping the team in the company (retention). According to the Hays 2026 salary report (Hays Poland), 48% of professionals and managers are considering changing jobs in 2026. This figure describes the context of the Polish job market rather than internal mobility itself, but it shows the importance of the staff retention problem. We describe the consequences of this phenomenon at: https://www.sharehire.pl/blog/co-to-jest-rotacja-pracownikow-i-jak-fluktuacja-kadr-niszczy-twoj-biznes.

The link between internal moves and retention rates was analysed by LinkedIn. According to the Global Talent Trends report (2022 edition), employees who made an internal move have a 75% chance of staying with the company after two years. By comparison, the rate is 56% for those who did not move within the organisation. These figures come from 2022, and there is currently no newer verified source.

Employee referrals – a middle path

HR policy can include intermediate models, such as employee referrals. From a process perspective, this is external recruitment, because the organisation gains an employee from the market. Such a candidate is, however, “vetted” and recommended by a current team member. The company's employee acts as the first point of verification, which supports the candidate's future fit with the team.

We analyse building a referral programme in the article: https://www.sharehire.pl/blog/program-polecen-pracowniczych-od-a-do-z-jak-wdrozyc-skuteczny-system-polecen-w-2026. A comparison of this method with classic market searches can be found here: https://www.sharehire.pl/blog/direct-search-czy-rekrutacja-z-polecenia-przyklady-i-porownanie-skutecznosci-metod.

How to calculate what pays off

The decision on the balance between the approaches should be based on calculations. The key indicator here is cost per hire. The HR department can analyse cost per hire separately for internal and external processes. This distinction makes it clear that creating a promotion also requires process effort from the company. Keep in mind that the SHRM figures are US data, and the Polish market still lacks a verified Polish benchmark for hiring costs.

You can read about the methodology and formulas for calculating costs within the organisation at: https://www.sharehire.pl/blog/ile-kosztuje-rekrutacja-pracownika-jak-policzyc-cost-per-hire-i-obnizyc-go-w-2026.

FAQ

What is the difference between internal and external recruitment?

Internal recruitment means filling vacancies with the company's current employees through promotions, transfers or internal job boards. External recruitment means hiring new employees directly from the job market.

What are the biggest pros and cons of internal recruitment?

The main advantages include shorter onboarding and usually a lower process cost. The main drawbacks are the “vacancy chain” (pushing the staffing gap further down), the risk of team conflicts, a sense of unfairness among rejected candidates and limited access to new perspectives.

Is external recruitment always more expensive?

SHRM data (USA) show that the average cost per hire on the US market is USD 5,475 for non-executive positions and USD 35,879 for executive positions. Poland lacks a publicly available benchmark. On the other hand, keep in mind that internal recruitment also consumes resources and generates hidden costs (e.g. the vacancy chain).

Is an employee referral internal or external recruitment?

Formally, it is external recruitment, because the candidate comes from outside the company. However, it requires current employees to get involved in recommending people they know, which combines an external source with verification inside the organisation.

How can both approaches be combined in one strategy?

The approaches are not mutually exclusive. Companies can develop a policy in which job openings are first shared internally and then communicated publicly. Good practice is to run internal efforts, market searches and a referral programme at the same time, dividing the budget accordingly.

Summary

An optimal talent management strategy usually combines different methods of hiring employees. Well-planned internal recruitment builds development opportunities for current staff, while the external market remains a source of new skills and a different business perspective. When making hiring decisions, it is worth considering the time needed to complete the process and the company's development goals.

You don't have to choose between your own team and the market. ShareHire – a referral recruitment platform – helps you reach external candidates through your employees' networks: https://www.sharehire.pl.