When it comes to adding to your talent pool, it’s more a matter of “recruitment and retention” than “recruitment versus retention.”
Because one can’t exist without the other.
You can’t exclusively hire people from within. As your company grows, you’ll need new people. You may also lose people to natural attrition, although having a learning culture with clear internal growth opportunities can reduce your overall turnover rate.
Of course, you can’t retain staff if you never hire anyone to begin with. And you may need to backfill the positions of internal employees once they are upskilled and advance. If you upskill good people in hard-to-find skills, you can backfill roles more easily.
Whether you should hire or upskill can vary greatly depending on the situation. The following are not hard-and-fast rules, but serve instead as general guidelines.
Comparing Upskilling and Hiring
|Can be a lengthier process as people have to spend time learning; creating a learning culture doesn’t happen overnight||Can be a quicker process for many roles; but can take months to fill more niche roles and train for them|
|Typically less expensive than hiring||Typically more expensive than upskilling|
|Can help improve retention rates when people feel that they have internal growth opportunities||New hires are more likely to leave than those who have been with a company for a long time (this can contribute to the hiring process being more expensive)|
|Can reduce onboarding needs as existing employees already understand the company, its values and messaging, and have networks and peer relationships already in place||Can come with a lengthier onboarding process as new employees need to be trained and taught about the company before they can even begin to work|
|Can be used to address current and future talent needs||Can be used to address current and future talent needs|
|Does not solve hiring issues for some highly skilled, senior-level roles||Can be used to solve hiring issues for some highly skilled, senior-level roles|
|Shifts the number of open roles from specialized to entry level by giving entry-level employees specialized career paths||Enables companies to backfill roles of employees who take on new roles thanks to upskilling|
Depending on the skill and the role you’re looking to fill, upskilling for an existing employee can take longer than hiring a new one. Research from 2019 by Glassdoor found that it took the average American employer around 24 days to hire a new employee. In a tight job market, however, hiring can sometimes take much longer, while training and onboarding adds more time to the recruitment process, especially for in-demand jobs.
If your upskilling strategy is ad hoc, it can take much longer than hiring. But if you’re investing in upskilling all the time, it can mean those skills are already in-house when jobs open.
Upskilling an existing employee is typically more cost-effective than hiring externally. While the numbers vary depending on the study, a study by Society for Human Resources Management found that it costs around $4,700 to hire a new worker (with soft costs like time spent by the hiring manager pushing that number way higher).
Upskilling can help retain great employees by showing them you’re invested in their growth. That matters a lot to employees: According to McKinsey, the most cited reason people gave for leaving their previous job was a lack of career development and advancement.
Upskilling also reduces your organization’s exposure to new hire turnover: A study by Korn Ferry found that between 10% and 25% of new hires leave within the first six months of starting their new roles.
Upskilling a new employee can reduce the need for a big chunk of the onboarding process. An internal candidate likely knows existing processes already, understands the business goals and may already be compliant in cybersecurity and other workplace policies. They also have existing relationships and networks on which they can rely as they get acclimated to their new role.
Compare this to a new hire: Aside from the formal onboarding process, a 2019 Gallup study found that new employees take about 12 months to reach their full performance potential.
Current vs. Future Needs
Both upskilling and hiring help companies meet current and future talent needs, albeit in different ways.
Upskilling helps build a quality talent pool that teams can draw from when opportunities arise. Having in-house employees who have the right skills for jobs that will become open helps make turnover more manageable.
At the same time, hiring is an effective way to fill complex or hyper-specific roles. These tend to be more senior roles that require years of experience and specific training that may not be feasible to provide internally.
Consider the following two situations.
In the first, a company has a mid-level role to fill. It opts to fill that role externally, which requires hiring managers to create job descriptions with a list of requirements that can significantly narrow the qualified talent pool. That makes it more difficult to fill the role in question.
In the second, a company opts to fill that same role internally. It upskills an entry-level employee, which creates an opening for that employee’s job. That job, which is less specialized, is likely to have vastly more qualified candidates. In this way, upskilling can actually make the hiring process easier for recruiting teams.
Interested in upskilling your workforce? Learn how you can start today.