October 30, 2018
October 30, 2018
Contributor: Mary Baker
To ease the talent crunch, reduce employee attrition and increase intent to stay, HR should make it easier and more attractive for employees to move jobs internally.
Increased competition in the external labor markets means organizations are facing an increasingly tough time attracting new candidates and retaining their best talent. This is compounded by today’s historically low unemployment rates, which have put pressure on traditional talent management strategies. For HR and talent management leaders, the bottom line is that it’s taking longer and costing more to hire critical talent.
The competition for talent is fiercer than ever — especially for sought-after skills, Dion Love, Gartner VP, Advisory, said at Gartner ReimagineHR 2018 in Orlando, FL. According to Gartner TalentNeuron, 47% of S&P 100 job postings in 2017 were for the same 37 roles, and 90% of S&P 100 companies recruited for those same roles. Heads of talent management may intuitively know that recruiting from within the company could alleviate some of this pressure, but few yet leverage the internal talent pool effectively to fill critical skill needs.
“Over the past 5 years, Gartner’s benchmark data shows that internal hire rates — as a percentage of total hires — have trended downward from 41% in 2015 to 28% in 2017,” says Thomas Handcock, Gartner Vice President, HR practice. “This is despite organizations trying to empower their employees to take advantage of internal mobility opportunities.”
Gartner analysis shows employee turnover due to lack of future career opportunities costs an average-sized organization $49 million per year. This conservative calculation looks at the cost of hiring a replacement employee and the lost productivity that the organization experiences. It doesn’t factor in equally impactful but harder to cost factors, such as loss of organizational knowledge and the impact on the performance and engagement of other employees.
Read more: High-Potential Employees Want Chances to Grow and Learn
There are three fundamental barriers preventing companies from creating effective internal labor markets:
Read more: Motivate Employees to Reskill for the Digital Age
“Creating an internal labor market requires organizations to develop processes, norms and infrastructure that facilitate the mobility of employees from their current roles to other existing or newly created roles within the organization,” said Love.
To achieve this, talent management leaders are focusing on three key initiatives:
Employee willingness to go above and beyond at work is 27% higher and employee intent to stay is 33% higher at organizations with a more vibrant internal labor market. Managers also report internal hires perform better than those hired from outside across a whole range of measures, including attendance, collaboration and meeting expectations — factors that all contribute to fewer hires regretting their decision to take the job.
“The best organizations understand that it is insufficient to simply empower employees, you need to actively ‘engineer the market’,” said Handcock. “Companies often underweight the value of engagement capital they have built in their existing workforce, and the organizational knowledge those people possess. Ensuring you are tapping into this underleveraged talent pool, while still bringing in people from outside with diverse backgrounds and experiences, is a winning formula.”
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Recommended resources for Gartner clients*:
The New Path Forward: Creating Compelling Careers for Employees and Organizations.
*Note that some documents may not be available to all Gartner clients.