Build Vs. Buy: The Days Of Hiring Scarce Technical Skills Are Over
For years leaders have grown their companies by issuing the demand “go out and hire someone who knows how to do this!” This approach leads HR departments and hiring managers to retain expensive recruiting firms, spend millions of dollars on recruitment advertising, and often hire expensive sourcers to try to “steal” great talent from competitors.
Well, there is. We just completed a research study with three companies and found that some of the highest performing organizations are doing something different: they’re taking a “build vs. buy” approach to critical talent. And finding that “build” often outperforms “buy.”
Internal talent development is not a new idea – so why is it so important now? It’s quite simple: the economy has created a bidding war for people with critical skills, increasing the cost and risk of hiring from the outside. So the economics have now totally shifted: it’s more cost-efficient and far more effective to build critical skills from within. And there are many cultural benefits as well.
Here are the economics:
The cost of recruiting a midcareer software engineer (who earns $150,000- 200,000 per year) can be $30,000 or more including recruitment fees, advertising, and recruiting technology. This new hire also requires onboarding and has a potential turnover of two to three times higher than an internal recruit. By contrast, the cost to train and reskill an internal employee may be $20,000 or less, saving as much as $116,000 per person over three years.
The net savings: it can cost as much as 6-times more to hire from the outside than to build from within.
We conducted detailed interviews with Bloomberg, Adobe, and Guardian and in each case we found an overwhelming business case to building a “capability academy” to develop skills internally. And as I discuss in the article Capability Academies: Where Corporate Training Is Going, this model can become a business transformation solution as well.
I recently met with the CHRO of one of the world’s largest auto manufacturers and she told me the company is desperately trying to hire people with skills to build autonomous vehicles. Short of buying an autonomous vehicle company, she said “these skills are just not to be found.” As we discussed the problem further, she agreed that “the solution is to build from within.”
Every company is now looking for critical skills in AI, machine learning, data science, user interface design, and cloud engineering. If you’re a healthcare company, insurance company, or manufacturer, are you going to be able to compete with a well-funded startup that lavishes people with stock options and benefits?
As this research shows, you may not have to. New ways of building internal skills are now here, and the result is a stronger learning culture and positive brand of internal development and growth.
I encourage you to read this research: it will get you thinking about how important L&D has become to recruiting. Internal mobility, mentorship, and capability academies create a growth mindset, something every company needs today.