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Indian Businesses Prefer Internal Promotions, Recruiters Cautiously Raise Concerns

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In Short:

Companies in India are focusing on promoting from within and hiring from other teams instead of looking for external candidates to save costs and retain talent. Internal hires now fill as many as seven in ten vacancies. While this strategy reduces recruitment fees and induction costs, it may result in hiring the wrong candidate. Recruiters caution against this inward-looking approach, advising a balance between internal promotions and external hires for optimal talent acquisition.

India Inc Prioritizing Internal Hires Over External Recruitment

Companies in India are changing their approach to filling vacancies, opting for internal promotions and cross-team hires rather than seeking external candidates. This shift is driven by a desire to reduce costs and retain top talent within the organization.

Internal Promotions on the Rise

According to some organizations, up to 70% of job openings are now being filled by internal candidates.

“Internal hires are now the preferred method, unless a specific skill set is not available within the company. Over the past three years, the number of positions filled internally has increased from 45% to 70%,” explained **S. Venkatesh**, the group president of human resources (HR) at RPG Group. Venkatesh highlighted the challenges of onboarding external candidates, citing last-minute dropouts as a common issue.

Talent Retention a Top Priority

Retaining top talent is a major concern for companies. To prevent the loss of key employees, firms are emphasizing internal promotions, offering career mobility as a way to secure loyalty. This trend is not limited to any particular sector, as recruiters are noticing a decrease in the number of job mandates for external hires.

Cost Comparison: Internal vs. External Hires

“To get an external candidate, a firm will need to pay 4-6 times his/her current monthly salary”

**Aditya Narayan Mishra**, CEO of Ciel HR Services, pointed out that companies are increasingly focusing on internal job mobility, with 15-20% more positions being filled through this approach in sectors like engineering, construction, and infrastructure. Mishra highlighted the cost implications of hiring externally, including recruitment fees, induction costs, and the time needed for a new hire to adjust to the company culture.

Caution Against Inward-looking Strategy

While internal hires have their benefits, staffing firms warn against relying solely on this strategy. Not casting a wider net in recruitment could lead to hiring the wrong candidate, which may end up costing the company more in the long run.

**Agamjeet Dang**, CEO of Executive Access India, cautioned that the risk of making incorrect internal hires could outweigh the expenses associated with recruiting external talent.

Industry Specific Trends

The IT sector, which has experienced high attrition rates in recent years, is now prioritizing internal hires for talent retention. For instance, Tata Consultancy Services (TCS) reported in its annual report that 33% of job requirements in FY 2024 were fulfilled through internal grooming.

Similarly, Vedanta Group mentioned that 80% of their hires have been internal, except for niche skills not available in-house, such as in smelting, mining, and petroleum.

Challenges of Internal Promotions

While internal promotions have their benefits, there is a risk involved if the promoted employee is not able to meet expectations in their new role. Some firms are now balancing internal promotions with external recruitment to ensure transparency and competitiveness within the organization.

According to **Suresh Raina**, a partner at Heidrick & Struggles India, this dual approach is gaining popularity among US firms to secure the best fit for senior positions and maintain a competitive edge.

Industry in India is seeing a shift towards prioritizing internal hires for various reasons, aiming to cut costs and retain top talent within the organization. While this strategy has its advantages, recruiters and industry experts caution against potential risks and the importance of finding the right balance in recruitment practices.

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