There’s no one-size-fits-all answer to the train vs hire question.
Some companies will only hire as a last resort if there are no internal candidates for a vacant role, while others strike a rough balance between training up and hiring in. It depends on several factors unique to your organization, including the makeup of your existing team, the urgency of the role needing to be filled, and budgetary constraints.
Rather than trying to provide a firm opinion on the train vs hire question (I would be biased, after all), let me share some key factors for consideration.
Training vs hiring during a talent shortage
Organizations are reacting to the ongoing talent shortage in several ways: raising salary offers, ramping up employee value propositions, and strengthening their contractor benches. But for many, it makes more sense to pivot towards upskilling their current team members. According to McKinsey, “skills building is more prevalent than it was prior to the pandemic, with 69% of organizations doing more skill building now than they did before the crisis”.
The Great Resignation isn’t the only megatrend to consider. Rapid digitalization, catalyzed by Covid, has exposed severe skills gaps and created the perfect storm of high demand and low availability of IT talent. The talent pool is narrowed further for organizations that can’t meet candidate demands for ever-increasing flexibility.
Skills training, internal mobility, and retention
Professional development is an essential pillar of any organization’s engagement and retention strategy, but only if skills training is genuinely connected with internal mobility and career pathing. While the average retention span is currently around 2.9 years, companies that excel at internal mobility retain employees for an average of 5.4 years – nearly double the length of tenure (LinkedIn 2022 Workplace Learning Report).
A 2021 Lorman study found that 70% of employees would leave their current job to work for an organization known for investing in employee development and learning. Younger people are more concerned with the consequences of not being trained: 86% of millennials would be willing to stay in their current position if their employer offered better training and development.
Talent attraction
This is where the “train vs hire” dichotomy falls apart because it’s clear that companies struggle to hire top candidates if they do not offer an effective and engaging training program as part of their employee value proposition. LinkedIn’s 2022 Global Talent Trends Report highlighted “opportunities to learn new, highly desired skills” as a top priority for candidates.
A strong L&D program can be a powerful differentiator in the talent marketplace, particularly if you can’t compete with top salaries. No career page is complete without a thorough explanation of L&D opportunities such as training, mentoring, coaching, workshops, and conference attendance, with a clear link between L&D and internal mobility.
Training vs hiring costs
Know your metrics. Understand your cost-to-hire and your cost-to-train per employee. An oft-quoted rule of thumb is that replacing an employee will cost the equivalent of six to nine months of their salary – far steeper than the cost of most training programs (somewhere between $1200 to $1500 per employee each year). But training costs increase sharply with the seniority of the employee, with large organizations willing to splash up to $150,000 per person on customized executive coaching programs from top business schools. There’s little wonder that leadership development is a $166 billion industry in the U.S. alone.
The possibility of failure
McKinsey found that despite the eye-watering fees involved, most leadership programs fail to deliver the desired results due to a focus on content over context, a lack of real-world applicability, a failure to adjust underlying mindsets, and no rigorous ways of measuring results and business impact.
Let’s be honest here – the possibility of failure looms large when recruiting, too, but here’s the difference: most recruiters work on a contingency model where they do not get paid if the new hire does not pass their probation period. You would be hard-pressed to find an L&D provider who will waive their fees if desired results are not met.
When hiring makes the most sense
Sometimes, the decision to hire is a no-brainer. Even an organization with highly mature L&D and talent succession programs will need to hire new people at every level of the business in the following circumstances:
- A skills assessment identifies gaps that would be too slow to fill through training.
- Hiring to build a bigger team as the business scales up, or replacing employees who have left.
- The organization is moving into a new area and has very few employees with the required skills.
- Drawing new, specialist skills into the organization.
- A need for fresh ideas, perspectives, or someone from outside the organization to shake up the status-quo or change the culture.
- Hiring to bring more diverse talent into the organization.