Rejected internal candidates are twice as likely to quit compared to those who were hired or had not applied for a new job at all, according to research. What can HR do to reduce the flight risk?

In-house hiring makes a lot of sense. It can be quicker and cheaper than recruiting an external candidate, and you get a known quantity with an employee who is already familiar with the lay of the land, which slashes onboarding costs. Hiring internally also lets other employees know that progression is possible.

But not every internal candidate will be successful. In fact, on average, a hiring manager can expect roughly 10 internal applicants for every open job. This means nine people are likely to feel disappointment, jealousy and a reduced sense of job satisfaction. They might even engage in counterproductive work, with some going so far as to steal from the company.

If a rejected employee sticks around, these negative attitudes seem to fade after a few months. But what makes them more likely to stay? This is a question Kathryn Dlugos, Assistant Professor of HR Management at Pennsylvania State University and JR Keller, Assistant Professor of HR Studies at Cornell University, set out to answer.

The pair analysed more than 9000 rejection experiences of employees at Fortune 100 companies over a five-year period. They found employees don’t necessarily apply for jobs because they want a new role straight away. 

Instead, as organisational structures have changed and progression paths have become less obvious, employees tend to apply for new jobs to learn what might be available to them in the future.

“Often there aren’t a lot of clear, direct paths for future advancement in the way that there were in the traditional bureaucratic internal labour markets of, for example, the 1980s,” says Dlugos. 

“So to actually figure out whether or not you have an opportunity to move inside your organisation, your most direct option is to actually apply for a role. If you’re hired, that’s great, you’ve established that at least in the short term you’re a good option for the company.”

Being rejected, on the other hand, can influence whether you feel there is a future for you or if you need to look elsewhere for advancement. 

“If individuals get this far in the process, they are often provided a signal that, even though they didn’t get this particular job, they were a qualified enough candidate to be considered among the finalists.” – Kathryn Dlugos, Assistant Professor, HR Management, Pennsylvania State University

Knowing what motivates internal candidates to apply for a new position, and the factors that make them more likely to stay if rejected, feels particularly timely. As HRM reported earlier this month, 38 per cent of Australian workers are looking to change jobs in the next 12 months. In addition to this, pandemic border restrictions, and the resulting lack of international talent coming to Australia, is yet another reason to keep existing employees happy.

What reduces flight risk?

Dlugos and Keller discovered two factors that influenced how likely a rejected internal candidate was to leave: how far they got in the hiring process and whether they were passed over for an internal or external candidate. 

They found getting an interview with the hiring manager reduced the likelihood of a candidate leaving compared to those who were rejected earlier in the process. Importantly, those who only had an interview with an HR manager were still likely to quit. 

“Our thoughts behind this were that if individuals get this far in the process, they are often provided a signal that, even though they didn’t get this particular job, they were a qualified enough candidate to be considered among the finalists for this role, and so it’s likely that if they were to apply for similar positions in the future, they might be selected,” says Dlugos.

But only about two per cent of candidates get to this stage. This leaves the remaining 98 per cent feeling their application wasn’t given serious consideration, Dlugos and Keller suggest. They also likely don’t get the opportunity to receive concrete feedback about how to improve in future.

“Those rejected internal candidates [who met with a hiring manager] would have had the opportunity to gain feedback about their skills or qualifications … and where they may be more or less of a better fit in the organisation,” says Dlugos. 

“So part of it is signalling, but also talking to the managers about their likelihood of future success.”

Internal vs external candidates 

Another factor is who the candidate was rejected for. Dlugos and Keller’s research found an internal candidate rejected in favour of someone else within the organisation was half as likely to leave than if they were passed over for an external hire.

“It’s the same sort of thinking happening here as with future advancement,” says Dlugos. 

“I was rejected for this role, but somebody else within the organisation, whether it be a colleague or somebody I don’t even know, got the job. That signals that in the future, there’s still an avenue. The organisation cares about the development of its current employees and I could potentially move into a similar role in the future.”

In contrast, if an external candidate gets the job, it’s a signal that the organisation will perhaps look outside its current workforce for similar roles, and that those opportunities might be closed off to internal candidates. 

Tips for HR

It’s not practical for hiring managers to interview every person who applies for a job or for businesses to only ever hire internally. But there are a few steps HR managers can take to help keep rejected candidates happy. In fact, HRM wrote an entire article about it.

At its most basic, it comes down to communication. 

“It is so often the case that because companies are so focused on who gets hired and making sure they’re successful once they enter into those roles … we often forget about those individuals who are rejected,” says Dlugos. 

“A lot of companies send nothing more than a form email saying … they went with somebody else, and that’s it. And for people who are working at the organisations that can be really frustrating.”

If you have a star employee who has applied for a role that isn’t quite the right fit, Dlugos suggests directing them to another position that better uses their skills and qualifications.

“It’s about making sure those high performers are getting an interview or at least being in communication with them, letting them know that just because we can’t hire you for this role, or we can’t even interview you for this role, there are still plenty of potential opportunities,” she says.

In the case of an external hire, it’s important to let existing employees know why – and making sure that bringing someone in from outside is necessary.

“Organisations can’t only hire internal people,” says Dlugos. “Sometimes there’s just not the actual stock of human resources available, and external hires come with a number of benefits themselves.

“But by bringing in external folks over internal candidates … you do run the risk that employees will experience demotivation or thoughts about a lack of future advancement opportunities. So it’s about really making sure you are communicating to those internal candidates who are rejected about why that was the case.”

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