Given all these benefits companies are making sure they have a robust internal hire policy in place. "We are extremely mindful of recruitment costs, and have found that if we fill vacancies internally, we save almost one crore a year," says A Sudhakar , HR head at Dabur. In fact, the company's internal hire policy is so well-entrenched that if a new person is taken on board through referrals or an external agency, the manager has to explain in writing why an internal candidate was not fit for the job. Alternatively, those who wish for a role change within the organisation, go through a performance management training followed by an interview with HR and line managers. Their profiles are managed by a career development 'centre' , which is the inventory Sudhakar delves into when a vacancy is created. "At times, when there are not enough openings we combine two positions to create one, rather than hire an outsider," he adds, referring to the way the company keeps its existing employees happy. Since it takes a few months for the employee to start performing in the new role, that period needs to be factored in as well. At Dabur, this 'gestation period' is around four months. Therefore, for an external hire, if the person's salary at the junior management is Rs 12 lakhs per annum, the loss to the company is taken to be Rs 4 lakhs, to take into account the four months that s/he might require to start showing results.
At Netapp, says HR head Manjunath, "there is a clear preference for employees to be sourced from within the company compared to taking people from the outside." The IT services company saves around 12.5% of the recruitment fees that a company would have to pay an external headhunter for a juniorlevel employee, 18% for a person in middle management and 25% for a senior employee, by conducting internal hires. Even though those taken in through employee referrals are less expensive for the company, internal changes are still considered the best option. Around 100 existing employees have applied for job rotations in the period between May 2010 and April 2011 at Netapp. India. About 45% of these hires are direct; 45% are conducted through referrals, and the rest through external agencies.
At Essar, which started the initiative of focussing on internal hires about six months ago, some 85 positions have been filled so far, totally from among existing staff. "It is not about saving costs but earning profits through career development of the employee ," says HR head Adil Malia. But it appears the company has saved "a couple of crores" by filling the 85 positions from within. Internal promotions and hires reflect on the company's leadership management and succession planning strategy. However, that does not mean that those already working in the organisation will not take time to acclimatise to their new role
Abhijit Bhaduri, chief learning officer at Wipro says, however, that the time taken by an internal hire to acclimatise is perhaps a few months at the most - and still considerably less than what an outsider might require. In the IT firm, the recruitment fee given to a headhunter is 25% of the candidate's CTC. By automatically saving on this through an internal hire, the company sometimes finds itself in a position to provide better compensation , and makes provisions for the seven months (on average) that the internally-hired candidate to start producing. With internal hires, the more difficult decision that a company has to take relates to whether management is actually putting the best person in the job, or worrying about whether it is an internal hire. "Should there be a headcount addition to fuel expansion, or should one settle for the most suited internal candidate," says VA Rangarajan, recruitment leader at India.
There's no doubt that external candidates can bring much more fresh blood and perspective to an organisation, and there's no discounting the merits of this. That's why companies like IBM have a management tool called Global Opportunity Marketplace, where the resumes of all internal and external candidates are managed and the best one is picked. Preference is given to internal hires, but a tussle ensues when the skill sets required for a role are unavailable from within. The firm makes a rough saving of 30% because of internal hires. "Searching for the right talent from within is like seeking an elusive white tiger," says DK Srivastava , corporate vice-president and global HR head at HCL Technologies. The IT services company has a portal called 'The Insider Edge' which shows the positions that have opened up at any point of time, along with the names of the managers who would be hiring for those posts.
So when an employee wants a transfer, he or she can find out more about the managers and the attributes they are looking for, for that position. This is not just about providing more information about the position, but also gives candidates an overall perspective of hiring in the company. SAP Labs has seen a 20% year-on-year increase in employees picking up alternate job roles within the company - both locally and overseas. Over 30 open positions were closed in India through internal transfers this year. Nevertheless, there is another school of thought that states that measures such as internal hires are only possible in companies that have a 'bench' of employees (floaters who move from one project to another, and are not attached to any particular department), and not companies that prioritise product development. "Money is saved through referrals and not internal hires since to fill up one position, you invariably end up vacating another," says Deepak Shetty, director (HR) of the Philips Innovation Campus. Philips has around 600 employees and 400 of them have been hired following employee referrals. This has been such a success that the company has hiked the fee, given to employee for referrals and subsequent hires, to Rs 40,000 from Rs 20,000. This will be applicable, adds Shetty, for the next few months since the January to October period is the peak hiring time.