Topics covered:
- Internal recruitment
- External recruitment
- Labour turnover
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Milan and Rachel established Suzza a partnership, in 2018. Suzza imports electronics components from Singapore and Hong Kong for manufacturers of smart phones, laptops, televisions and many other electronics items. These imported components are mainly sold in big cities of India like Mumbai, Delhi, Bangalore, and Chennai.
Milan an engineering graduate from prestigious university, and his main role is contacting suppliers abroad, and establishing contact with the local manufacturers. Rachel, a business graduate, mostly she takes care of HR, finance and general administration.
In 2020, they converted into a private limited company called Suzza Private Limited(SPL). Milan owns 40 % of share, Rachel owns 30 % and the 30 % by David, an employee of Suzza. This decision was mainly due to meet additional financial requirement.
Suzza enjoys reputation in the market due to its delivery and customer service. Local manufacturers are given liberal credit terms. Though it helps Suzza retain customers, sometimes, it has created cash flow problem for smooth operations. Sales and profit margins have been consistent except the first few months of operations. Other small traders of similar electronics components are the possible threats for SPL. Liberal international trade policies and technological development, some of local manufacturers are directly contacting foreign suppliers for their needs. Even this will harm potential sales for Suzza. However, government’s initiatives to boost the economy has created positive business environment among the manufacturers.
Despite of many threats, David has come up with a result-oriented growth plan, which needs to recruit more employees to lead, manage and coordinate a group of employees. David is in favour of promoting eligible employees of SPL. This allows you to skip many of the steps of full life cycle recruiting, including external job postings on job boards and elsewhere, and the evaluation process. Employees get excited about the prospect of a future of career growth. When investing in people becomes part of your brand, good things happen. It creates positivity in the work culture and sends a message to those outside of the company that working for you has long-term benefits. David also argued that since the industry is competitive, cost cutting and low labour turnover with uninterrupted customer service would be the key to success.
However, Rachel has different views. SPL employees, while they are talented, may not have everything you’re looking for in a new hire. That means you may need to look outside SPL to find someone with very specific or technical skill sets. Not only that, but someone from a different industry may be better suited to bring a fresh perspective to a role as well. However, Milan has strongly suggested to have views from private recruitment agency regarding pros and cons of internal versus external recruitment.
Define the following terms:
- Internal recruitment. [ 2 marks]
- External recruitment. [ 2 marks]
- Identify two reasons for employees leaving the organization [ 2 marks]
- What is labour turnover and how is it calculated [ 4 marks]
- Recommend whether SPL should choose internal source or external source of recruitment [ 10 marks]
Answers
- Define the following terms:
- Internal recruitment. [ 2 marks]
Internal recruitment process is used to recruit employees within an organization. Means, the current employees of the organisation. It can be either formal or informal, but it always involves the participation of the HR department.
It is a way for an organization to promote an employee who has shown potential and deserves the opportunity to grow. Companies can save time and money because there are no agency fees or other costs associated with hiring an employee internally.
2.External recruitment. [ 2 marks]
External recruitment is a recruitment process that takes place outside of the company. Means, hiring employees from outside of the organisation. External recruitment is either done by an agency or by the company itself. The main advantage of an external recruitment is that it provides access to a larger pool of candidates than the company’s own HR department. This way, Suzza can find the best candidate for their vacant position.
3. Identify two reasons for employees leaving the organization [ 2 marks]
There are a number of reasons why employees leave organisations. Here are a few:
- They feel they have reached their full potential and cannot grow in the organisation.
- They don’t enjoy their work or feel challenged by it.
- They don’t get along with their boss or colleagues.
- The organisation is going through a difficult period and they can see that it’s not going to improve soon
- 4 What is labour turnover and how is it calculated? [ 4 marks]
Labour turnover is the rate at which employees leave their jobs. In other words, labour turnover is a measure of the rate at which employees leave their job.
It is calculated by dividing the number of employees who left by the total number of employees. However, this can also be calculated using the average number of employees. Means, dividing the total number of employees who left the organisation by the average number of employees in a year. It is expressed in percentage.
5 Recommend whether SPL should choose internal source or external source of recruitment [ 10 marks]
Internal recruitment means the company looks for a candidate from within its existing workforce. It can be from any level of the organization. External recruitment, on the other hand, is when the company looks for a person outside of its existing workforce to fill a specific job opening.
As per the stimulus, David has come up with a strong growth plan which requires additional employees whose role is to direct and lead the group of employees hence, this response analyses both internal and external sources of recruitment and recommends the best source.
Recruiting employees internally offers many advantages for SPL like:
- Cheaper and quicker to recruit: If SPL recruits employees internally, SPL can save the time of identifying, attracting and training candidates from outside (recruitment and selection cost) SPL can have instant access to the candidates in the firm and their track record to see if they are fit and good for the position, means SPL already knows the strengths and weaknesses of candidates. So, it reduces downtime. Since the market is becoming competitive (small traders could become possible threat), SPL cannot afford to loose existing customers.
- It improves employees’ morale: Recruiting employees internally provides opportunities for promotion within the business and also it shows values for their staff and are willing to invest in their career growth. It gives career advancement by changing their role which will boost their morale and motivates and them to do better in their new roles. With the help of good internal recruitment policies, employees will be able to continue good customer service and maintain reputation of the SPL.
While the benefits of internal recruitment practice shouldn’t be ignored, it’s not a perfect plan always. There are some drawbacks to an internal recruitment strategy that everyone involved with the hiring process, from Human Resources teams to managers of SPL should know about before they begin.
Limited the pool of applicants: Limited choices for the recruitment for SPL as the firm may be having several qualified employees, since SPL is involved in importing components from different parts of the world, and hence business is always dynamic. So, this requires candidates with fresh and dynamic ideas ( new blood) to deal with customers requirements.
Creates conflict amongst colleagues: In any situation, it can be difficult to embrace a new boss. But what happens when the new boss is someone who used to be a peer at SPL? Hiring internally can cause hard feelings among co-workers who can’t adjust to the new shift in roles and responsibilities. Those who applied for the job, but didn’t get it, can become bitter over time. Interpersonal relationships can be affected when internal hiring is not handled with care. This might lead to dissatisfaction among the employees of SPL consequently lead to labour turnover and increasing hiring cost. As the industry is competitive, its is necessary to keep the cost low.
Since Rachel has different views and she is in favour of external source, let us discuss advantages and disadvantages of external recruitment.
Generation of creative ideas
Most probably when the company is in need of those candidates who can provide creative ideas for the growth of the company, then the company need to go with an external recruitment process for the overall development of SPL Therefore, once the company understands the working nature of external recruitment then there is a possibility that the company might select a candidate with new and better creative ideas. Since SPL has come up with massive growth plans in competitive business environment, fresh and creative ideas ( new blood) are needed.
Better growth
By using an external recruitment source, the SPL can expect growth not just for the employees of SPL, but actually, the company can expect it for itself also. If SPL selects a candidate with high potential, then there is a higher possibility of the overall growth of the SPL. Even the employees within the organization also broaden their capacity and may try to match with the new talent. Therefore, external recruitment holds on to the objective where it handles the selection procedure sorting by finding a skilled and qualified candidate for the position offered. Bye an large, external source gives competitive edge for SPL.
However, even external source also has a certain disadvantages:
Time-consuming and expensive:
The main disadvantages of external recruitment are that it is time-consuming as most of the companies post an advertisement for their company recruitment drive. Then there is a quite possible chance of receiving a higher number of applicants for the post and SPL HR team need to be very careful with their decision of selecting the best candidate for each round selection process. These different rounds of selection take a bit longer than the internal recruitment process as it involves a number of processes. Apart from the time consuming, the whole process might be expensive for SPL.
Less known about the company
When a candidate is selected from an external recruitment process, there is a possibility that the candidate might have less chance of understanding the environment of the SPL, means, mission, vision, values, etc. And this lesser understanding can make a big difference in the future activities of the company. Therefore, there is some sort of issues with an external process which needs to be rectified for a better understanding of the company environment.
Since SPL has its own name in the market, new employees may send wrong information to the customers, tarnishing the brand of SPL.
After analyzing pros and cons of both internal and external sources of recruitment and also evidences from the stimulus, SPL has been recommended to go with internal source. SPL should be able to reap benefits of investing in and recognizing (Maslow’s higher order needs) internal employees. Internal recruitment promotes loyalty and can even improve SPL’s employees’ morale as it serves as a reward for existing employees to reduce possible future employees’ turnover, and associated costs.
However, in the absence of well-defined job description, person specification, and profile of existing employees, it is difficult to recommend the best source of recruitment. SPL should have clear internal policies regarding recruitment practices and conveyed to all employees to avoid any internal conflict/confusion.