Making the Right Hire: Comparing Internal and External Options for Small Business Roles

Making the Right Hire: Comparing Internal and External Options for Small Business Roles

It's not easy to run a small business, especially when it comes to filling open positions with qualified individuals. Finding the right person for small business roles can make a world of difference for your company. This is why every position in your company is essential. However, when it comes to filling positions, you should decide whether to hire from within the company or from outside the company. In this article, we will discuss the benefits and drawbacks of each possibility. We also look at the steps to take in order to evaluate each function in your company. This way you can make the most informed choice possible when filling small business roles.

To begin, let's discuss the key distinctions between recruiting from within an organization and seeking candidates outside the company. When you hire someone from within your organization, also known as "internal hiring," you give that person a promotion or fill a position with someone who was already working for your company. When a role within an organization needs to be filled, the practice of "hiring externally" refers to the process of bringing in a new employee from outside the organization.

Conducting a thorough examination of each function within your small company

First, you should conduct an in-depth analysis of each role in your small business. This can help you make a decision regarding whether or not to hire new employees from within or outside the company. When conducting this analysis, you should take into consideration a variety of factors. Include the skills necessary for the role, the level of expertise necessary, and the budget you have available for compensation. When conducting an analysis of each function in your small company, follow these steps:

Determine the functions that require your attention and fill those roles.

Create a list of all the positions in your small business that are currently vacant. This can help you to plan accordingly. This may include jobs in marketing, sales, providing customer service, and administrative work, among other possibilities.

Find out what kinds of skills are needed for each position.

After you've determined the roles that need to be filled, the next step is to examine the necessary skills for each role. This might include abilities such as problem-solving, communication, and technical know-how, among other things.

Determine the appropriate level of specialized knowledge.

Take into consideration the necessary level of expertise for each role. Some roles, such as those that involve complex technical skills or leadership responsibilities, may require a higher level of expertise than others. One example of this would be a role that manages a team.

Take into account the funds you have available.

When conducting an analysis of each function in your small business, it is imperative that you take into account your financial resources. How much of a monetary price tag are you able to put on each individual role? Do you have the financial means to pay for someone with a higher level of expertise? Or, do you need to think about hiring someone with less experience? This is especially important if you don't have enough money to pay for someone with a higher level of expertise.

employee working

Both the advantages and disadvantages of recruiting from within an organization

After conducting an audit of each position in your startup company, it is time to evaluate the benefits and drawbacks associated with filling open positions from within the company. The following is a list of some of the advantages and some disadvantages of hiring from within an organization:


When you hire someone from within your company, you won't have to spend as much time or money on things like recruiting, training, and orienting a new employee. Thus, this can reduce your overall costs.

Quicker onboarding

Since current employees are already familiar with the company's culture and procedures, onboarding new employees is quicker. There is also less disruption to existing operations.

Motivating employees and boosting morale are two benefits that can result from promoting from within an organization. When employees see that the company recognizes and appreciates their talents and efforts, morale and motivation tend to increase.


Hiring from within can limit the pool of candidates you have access to, meaning you run the risk of missing out on talented individuals. Especially, those who could bring fresh perspectives and capabilities to your company.

Limitation of diversity

If you always promote from within, you may be limiting diversity within your organization. This can be detrimental to creative endeavors and new product development.

When hiring from within an organization, there is a possibility that other workers will feel overlooked or undervalued. Thereby, potentially leading to feelings of resentment among those workers.

The benefits and drawbacks of bringing in employees from outside the organization

hire worker

Now, let's examine the benefits and drawbacks of sourcing employees from outside the organization:


Access to a wider pool of candidates

When you hire someone from outside your company, you have access to a larger pool of potential candidates. This can increase the likelihood that you will find the best person suited for the position you are trying to fill.

Fresh perspectives

Hiring people from outside of your company can provide your company with new ideas and fresh perspectives. Both of which can contribute to the company's ability to innovate and grow.


Hiring people from outside of your organization can help increase its diversity. This, in turn, can lead to improved problem-solving and creativity within the organization.


When an individual is brought in from the outside of the organization, the onboarding process can take more time. This is because that person will need to become familiar with the procedures and culture of the business.

When you hire someone from the outside, the costs can be higher. Especially, as you will need to spend both time and money on the recruiting process.

sales worker

Let's take the example of a bookkeeper for small businesses and compare whether it's better to hire internally or externally by determining which is better.

Hiring from within for the position of bookkeeper:


Familiarity with the Company

An employee who is hired from within the company will already be familiar with the financial records, policies, and procedures of the company.

Existing relationships

An internal hire is likely to already have relationships with other employees and departments within the company. Thus, helping to facilitate communication and collaboration.

Lower cost

It is more likely that an internal hire will be less expensive than an external hire. Internal hires require less training and onboarding than new hires from outside the company.


Expertise limitations

Depending on the size and complexity of the company, an internal hire might not have the necessary expertise and experience to handle all of the accounting responsibilities. This is especially true for larger companies.


An employee hired from within an organization might have a restricted view of the most effective accounting procedures. They may also not be aware of the most recent developments in the industry. This could stifle new ideas and stunt business expansion.

Potential for conflict of interest

An internal hire may have personal relationships with other employees or a vested interest in certain business decisions. Both of which can create the potential for conflicts of interest when it comes to accounting practices.

training new hire

Recruitment from outside sources for the following accounting roles:



An external hire is likely to have a higher level of expertise and experience in accounting than an internal hire. This can ensure more accurate financial reporting and compliance with regulations.


An external hire is likely to have more than five years of experience in accounting.

Perspective from outside the company

Bringing in new employees from outside the company can provide the company with new ideas and a new perspective. Thus, potentially leading to better innovation and growth for the business.

Access to networks

A person hired from the outside may have a larger network of contacts in the industry. This can be advantageous for the company if they have access to it.


Higher cost

The cost will likely be higher for external hires because they will require more training and onboarding than an internal hire would.

Longer onboarding

A longer onboarding period may be necessary for an external hire because they will need more time to become acquainted with the financial records, policies, and procedures of the company.

Cultural compatibility

It's possible that a new hire from outside the company won't be a good cultural fit for the business, which can lead to conflict and decrease productivity.

In the end, the decision of whether to hire someone from within the company or from the outside for a small business role will depend on a number of different factors. These factors include the size and complexity of the business, the level of expertise required for the role, and the budget that is available for compensation. Before settling on a choice, it is essential to give careful consideration to all of the perks and drawbacks of the situation. This will guarantee that you will hire the most qualified individual possible for small business roles.

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