Recruitment and Selection
Internal and External Sources of Recruitment: The Case of Citigroup
Table of Contents
Page
Introduction
Recruitment and Selection
External and Internal Recruitment and Selection
Case Study of Citigroup
Conclusion
References
Introduction
Recruitment and selection are important aspects of human resource management because human resources are areas of investment that requires care and diligence on the part of the organization seeking to find the best person for the job. This recognition of the importance of directed recruitment and careful selection received recognition by many firms especially in the heightening competitive business environment that requires firms to operate cost-effectively and boost the performance of personnel. One important issue in recruitment and selection is whether to obtain talent from outside of the organization or develop and promote people within the organization. In business news, recruitment and selection from outside of the organization receives consideration because of the movement of people across competing firms. One example of movement across organizations is Lee Iacocca moving from Ford to Chrysler. He was a vital contributor to Ford automobile designs and his move was spurred by clashes with the owner. Another example is Louis Gerstner moving from American Express to IBM. He built a customer base for American Express before moving on to help IBM to rebound from low sales and dwindling customers. These exemplify the importance of recruitment and selection since Iacocca and Gerstner became important contributors to the persistence and growth of Chrysler and IBM. However, although external recruitment and selection received greater news coverage, statistics show that there are more people promoted from within the organization regardless of the business culture or environment where the firm operates. (Chan, 1996) The paper looks into the advantages and disadvantage of external and internal recruitment and selection by considering concepts as well as the case of Citigroup, a banking and finance company with global operations.
Recruitment and Selection
Recruitment pertains to the management task of staffing (Dransfield, 2000) through the processes of seeking, attracting, discovering skills and talents to enhance the human resource pool of the company (Spencer, 2004). This is important because it makes up the initial step in the human resource process. Recruitment has three major objectives, which are fulfilling job vacancies, acquiring skills, and fostering organizational growth. This makes recruitment a crucial part of organizational success as expressed through human resource planning. (Sims, 2002)
Several factors determine or influence the recruitment efforts of firms. One is the reputation of the firm since companies with good public reputation are able to attract more skilled and qualified individuals when compared to firms with poor public reputation. Another is the attractiveness of the job that depends on the job description, the expectations from the applicant, the salary and benefits, the working environment, and the other job-related benefits. Still another is the costs or recruitment that largely affects the choice of external or internal recruitment. Cost depends on the aggregate of financial and non-financial expenses with the financial expenses. A higher cost of external recruitment relative to internal recruitment means that the company is likely to recruit within the organization while a lower cost of external recruitment compared to internal recruitment could influence the company to engage in external recruitment. Last is the recruitment goals and philosophy of the company such as diversity and fairness. Diversity could mean that the company would recruit from outside and within the organizations while fairness could involve the utilization of qualifications as criteria for both external and internal recruitment. (Sims, 2002) External and internal recruitment depends on the human resource needs and objectives of business firms, particularly the priorities of the firm or the balancing of the training and development of the current work force from which to draw personnel for promotion and the drawing of external talents and skills to enhance the existing work pool.
Selection sometimes finds usage synonymous to recruitment but technically, selection constitutes a different term. Selection is recruitment’s partner in human resource planning and practice. This constitutes the crucial process of determining or picking the applicant or person who would take on the vacant position, whether newly created or vacated. Selection involves the criteria of the characteristic of an employee together with the criteria for the right person for the job. These sets of criteria guide the selection process. This involves an important decision because of the implication on the financial investment and expected returns from employees. (Spencer, 2004) Mistakes in selection could mean frustration of the achievement of the goals of the firm, added cost due to the necessity of repeating training, piling documentation because of complaints and evaluations or re-evaluations, low morale of employees because of poor performance, and waste of valuable time because of the need for repeat selection. Concurrently, correct selection improves performance and productivity as well as minimizes the likelihood of lawsuits due to unfair or discriminatory employment practices. (Dransfield, 2000)
Internal or external selection depends on the criteria set by the firm so that if the existing work force does not exhibit the criteria for an employee and position requirements cannot be found within the organization, then selection from the pool of external applicants could happen. If the current work force exhibits qualification for both sets of criteria, then selection from qualified internal applicants could happen.
External and Internal Recruitment and Selection
The primary difference between external and internal recruitment and selection is the work pool from which applicants are drawn and personnel hired. External recruitment and selection draws applicants and hires from people outside of the organization. This means a new addition to the pool of employees by personnel without previous experience of the firm environment. Internal recruitment and selection refer to the drawing of applicants from existing personnel or the promotion of personnel to a vacant position. (Sims, 2002; Spencer, 2004)
The advantages and disadvantages of external recruitment and selection have close links with that of internal recruitment and selection. On one hand, external sourcing carries the advantages of tapping into a wider pool of applicants making it likely for the firm to find the skills it requires, gaining new and valuable work force, fostering change when the existing work force has become adamant towards change, and meeting employee expectations for promotion because of factors such as experience and tenure. The last advantage coincides with the perspective of human resources as assets so that with training and development, the firm would have able and loyal personnel to take on new or vacated positions. On the other hand, internal sourcing offers the advantages of motivating existing personnel to get ahead in their careers, providing incentives for personnel to remain with the firm and decrease turnover, saving on time because the training starts from where the training of existing personnel ended, minimizing the risk of errors in selection because the firm has a record of the performance of candidates, and saving on cost by already having a pool of applicants. (Sims, 2002; Spencer, 2004)
The disadvantages of external sourcing are the advantages of internal sourcing and vice versa, which means that the objectives of human resource planning determines whether the firm engages in external or internal recruitment and selection.
Case Study of Citigroup
Citigroup started as the single banking firm Citibank in Singapore in the early part of the 1900s. After a century of operation, Citibank has expanded to become Citigroup, constituted by Citibank Consumer Bank, City Bank International Personal Bank, Citigroup Private Bank, Smith Barney Private Client Group, Citigroup Corporate and Investment Bank, and Citigroup Asset Management. The aggregate of these banking and financial institutions coincided with the expansion of its market from individuals to corporations, service offerings from private banking to investment, and geographic scope with presence in more then one hundred countries. (Ministry of Manpower, 2004)
As a large multinational corporation, Citigroup places stress on the key role of recruitment and selection to its success. The thrust of its human resource planning is the identification and engagement of the correct person. This is especially so in Singapore since the small population, means limited talent pool and the heightened competition in Singapore’s financial sector hinders and complicates the recruitment and selection process. (Ministry of Manpower, 2004)
Due to the human resource challenges, Citigroup devised the recruitment and selection strategy of drawing the interest of the best and most qualified people. The outcome of Citigroup’s recruitment and selection process greatly depended on its brand equity and excellent public reputation supported by its merit-based recognition and reward system together with its adherence to the concept of diversity. Since Citigroup values merit, it employs a thorough screening process that considers ability, competence, experience, integrity, skills and vigilance before making an offer, with the offer depending on how well the candidate meets these criteria. This enables the company to executive its human resource plan cost-effectively since nil mistakes occur in the recruitment and selection of personnel. The company also relies on its previous experiences and developed best practices to ease its recruitment and selection process. (Ministry of Manpower, 2004)
In terms of external and internal recruitment and selection, Citigroup engaged in external sourcing in its new business units located in other countries. However, with established business units, Citigroup prefers internal sourcing strategy for the actualization of its human resource plan. Citigroup has decentralized the recruitment and selection process across its different business units so that every business unit operating in the different regional clusters have their respective human resource departments in charge of recruitment and selection. Citigroup has also employed a firm to manage the resumes of applicants to the firm and use internet services to facilitate the processing and scheduling for interview of applicants. This led to the development of a database of possible applicants, which decreases the cost of advertising and drawing candidates. (Ministry of Manpower, 2004)
This paved the way for the preference of internal recruitment at Citigroup. The database enabled Citigroup to hire the best people to work its different business units. As such, it developed the talent inventory review that targets the building and development of the skills and talents of its hired personnel for them to fill in key positions in the future. This means that firm personnel who have maintained its standards end up in the leadership team of Citigroup as managers and executives in the various business units. The review assesses the personal profile of likely candidates based on records in the database together with employment qualifications, experiences and potential. The review happens every year resulting to an inventory of talents. This offers benefits to various parties. On the part of personnel, the review enables them to evaluate their performance and extent of skills development so they can adjust career development goals or targets. This has become an empowering experience for Citigroup personnel. On the part of Citigroup, the review allows it to create an inventory of promising leaders, assess its capability for long-term growth and competitiveness, and compare its leadership capabilities in the long-term with its close competitors. (Ministry of Manpower, 2004)
Apart from the talent inventory review, Citigroup also utilizes internal job posting. This works by encouraging all personnel to file their applications for vacated leadership positions in the different business units after the announcement of vacant or new positions. This is a standard policy at Citigroup and internal personnel receive prioritization. External sourcing only happens if there are really no people fit for the job, which is widely unlikely. (Ministry of Manpower, 2004)
Conclusion
The preference of external or internal sourcing is context-based, with the choice depending on the needs and requirements of the firm expressed in its human resource plan together with other business contexts such as the labor market and extent of industry competitiveness. This means that the choice between external or internal sourcing does not necessarily mean that one is absolutely better than the other strategy. In fact, business firms can practice one or the other or both depending on the need. In the case of Citigroup, it preferred internal sourcing as its recruitment and selection strategy because of the limited labor pool and the need for technical skills in its operation. Industry competitiveness and the scarcity of technical skills justified internal sourcing because of the value of maintaining and developing existing personnel to take on leadership positions and propel the company towards long-term growth and further expansion.
References
Chan, W. (1996). External recruitment versus internal promotion. Journal of Labor Economics, 14(4), 555-571.
Dransfield, R. (2000). Human resource management. Oxford: Harcourt Heinemann.
Ministry of Manpower.2004. Case study series 1/2004: Recruitment and selection. Retrieved May 21, 2008, from http://www.mom.gov.sg/publish/etc/medialib/mom_library/Workplace_Standards/files2.Par.6868.File.tmp/2632_RecruitmentSelection.pdf
Sims, R. R. (2002). Organizational success through effective human resources management, Quorum Books, Westport, CT.
Spencer, J. D. (2004). Fundamentals of staff development. In N. Bhindi & C. Davies (eds.), PDAS 313: Fundamentals of staff development resource book. Armindale: University of New England.
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