Introduction

Although turnover dominates discussions in human capital analytics, there are many other informative metrics that get overlooked. One such metric is the Internal Hire Rate. 

The Internal Hire Rate provides a potential KPI (key performance indicator) for those organizations honestly dedicated to deliberate employee develop and growth.

It’s incredibly easy to calculate and even more informative.

What is the Internal Hire Rate?

Internal Hire Rate is the the proportion of employees that have moved internally (into a new role) over some time period of interest.

The calculation is simple:

\[ Internal\ Hire\ Rate = \frac{Total\ Internal\ Hires\ in\ period}{Average\ Headcount\ in\ period}\]

In R the basic form is the following:

avg_head <- mean(c(beg_head, end_head)) # average headcount for period
int_hire_rate <- num_int_hires/avg_head #internal hire rate for that same period

As a reminder, the average headcount averages the number of people employed at your company at the beginning and end of the period. This gives you an estimate how many people were there throughout the entire period. You can also read more about“average headcount” in this post.

The time period is typically monthly but measuring on a quarterly or annual basis is also common.

What Does the Internal Hire Rate Tell Me?

The Internal Hire Rate provides a potential KPI (key performance indicator) for those organizations honestly dedicated to deliberate employee develop and growth.

Why?

The Internal Hire Rate is a tidy summary measure of how well companies are providing new development opportunities for existing employees.

Companies are increasingly aware of the value that employees with prior organizational knowledge can bring to a new role. There are also major career development benefits for those who move around an organization and learn different aspects of the business.

All things being equal, companies with higher Internal Hire Rates are providing more internal career growth opportunities. This not only impacts talent development but also engagement, job satisfaction, and ultimately turnover.

High Potential Internal Hire Rate

The Internal Hire Rate for the organization as a whole might be informative, but its true value may lie in its application to high potential/ high value employees.

A simple, informative extension is to calculate the Internal Hire Rate just for those categorized as “high potentials” (or perhaps another relevant talent category within your organization):

\[ High\ Potential\ Internal\ Hire\ Rate = \frac{Total\ High\ Potential\ Internal\ Hires\ in\ period}{Average\ High\ Potential\ Headcount\ in\ period}\]

This would tell us the percentage of high potential employees who have been hired into a new role in the time period of interest.

Each organization should develop its own ideal Internal Hire Rate for its best employees according to its own strategic goals.

Broadly though, an extremely low Internal Hire Rate suggests limited growth and development opportunities. An extremely high Internal Hire Rate, on the other hand, suggests the risk of too much movement which may blunt true learning and ultimately destablize the organization.

Calculating the Internal Hire Rate for your most valued employees and future stars provides a clear measure of how well you are developing this critical talent pool. Tracking this measure over time will also shed light on the effectiveness of deliberate efforts to increase or decrease talent movement.

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