Build vs buy: Why cultivating internal talent beats costly external hiring

The rise of artificial intelligence and automation will create 69 million new roles by 2028, the World Economic Forum predicts in its Future of Jobs Report 2023. To meet this demand, organisations are sharpening their talent acquisition strategies. While external hiring will always play an important role – bringing in fresh perspectives, new expertise, and critical skills – companies also need to look inward.

An often underutilised but highly effective strategy is talent development: developing internal talent by enhancing employees’ skills and supporting their long-term growth. This typically includes targeted training, mentorship, and clear career-pathing that match employees’ interests and ambitions while staying aligned with business objectives. Done well, this approach ensures better role fit and faster time-to-productivity, while also boosting engagement, loyalty, and retention.

By investing in employees already aligned with the company’s culture and mission, organisations build a resilient, future-ready workforce – while reducing the costs and risks of relying too heavily on external hires. The smartest companies will balance both strategies but treat internal development as the foundation of workforce planning.

Taking on the build vs buy talent debate, this article elaborates on the advantages of talent cultivation and development versus external recruitment, and demonstrates how MuchSkills, as a skills management platform, supports talent cultivation.

Build vs buy talent – which is better?

External hiring has its advantages. It invigorates the workforce with new skills and fresh perspectives, but internal mobility and talent development often deliver better long-term results. Especially when in the backdrop of a global talent shortage, finding the right people is easier on paper than in practice. What’s more, an over-dependence on external hiring is counter-productive. Here are the financial and non-financial costs of an overdependence on external recruitment to fill vacancies:

• High cost: A new hire costs approximately $4,700, as per SHRM benchmarking data. This might be a conservative estimate as some experts reckon the average cost per hire to be as much as four times the position’s salary.
• Risk of turnover: If a new hire turns out to be unsuitable for their chosen role, they are more likely to leave or be replaced. Companies want to avoid high turnover and attrition rates as much as possible. A high turnover rate means more expenses as replacing an employee can cost between 50% and 200% of their annual salary. 
• Extended time to fill: Time to fill is the number of days it takes to fill a position, starting from the day the job requisition is approved and stretching till the day the candidate accepts the job offer or joins work. External hiring extends time to fill because candidates need to be verified, onboarded, and trained. External hires also require a longer adjustment period as they familiarise themselves with the organisation. Average time to fill can range between 44 days and 11 weeks, by some estimates. And time to fill is increasing across jobs and industries, according to one survey. The longer the time to fill, the greater the cost. Additionally, this adjustment period is associated with a dip in performance and potential loss of productivity and revenue. Projects might suffer from disruptions and inefficiencies. 
• Cultural misalignment: Newly hired employees often struggle to adjust to their employer’s expectations, values, and policies. When that adjustment fails, quitting is a common outcome. Research shows that 68% of employees want to work for companies that are aligned with their values. When this alignment is missing, the result is disengagement and, ultimately, higher turnover.
• Disengagement: When employers bypass internal talent to hire externally, existing employees feel resentment and neglect. If the recruitment system lacks transparency, it might even cause a morale slump and disengagement. The absence of growth opportunities is a primary reason why employees quit. This, coupled with the fact that 50% of employees say it is easier to find a job outside than a new opportunity within their organisation, leads to increased attrition and turnover.

On the flip side, talent development through internal mobility opportunities and learning and development initiatives negates the shortcomings of external hiring and brings other benefits for employees and employers.

• Cost-effective: First, internal hires are comparatively more cost-effective. There’s no need to spend big on advertising open positions, interviewing candidates, performing background checks, and paying relocation fees.
• Low risk: Internal candidates come with clear performance records, which makes hiring them less of a risk. The risk of productivity disruption is also lower when internal talent is promoted as they take less time to get up to speed.
• Cultural fit: Internal hires are a better cultural fit as they are already familiar with company values and policies. Furthermore, they don’t need the extensive onboarding and training that external hires do.
• Engagement and retention: Cultivating existing talent through growth and advancement opportunities improves morale, engagement, and, by extension, retention.

How internal talent development drives retention and engagement

Employee retention is one of today’s biggest workforce challenges. While employee satisfaction is on the rise — 60% of employees in PwC’s Global Workforce Hopes and Fears Survey 2024 said they were satisfied, up from 56% the year before — this hasn’t translated into loyalty. In fact, 28% of employees said they are likely to change employers within the year, compared to 19% in 2022 at the height of the Great Resignation.

This shows that keeping employees engaged and committed requires more than simply maintaining satisfaction levels. What today’s workforce wants is clear: opportunities to grow, advance, and future-proof their skills. That’s where a comprehensive talent development strategy – one that prioritises internal mobility, upskilling, reskilling, and employee growth planning – comes in. It makes employee retention more likely and also supports long-term workforce planning.

Internal mobility has proven to be a strong driver of retention. A 2023 LinkedIn study found that employees who make an internal career move at the two-year mark are 75% more likely to stay compared to 56% for those who don’t. Similarly, organisations that have mastered internal mobility retain employees for an average of 5.4 years, almost double the 2.9 years of those that struggle with it.

Upskilling is another talent development strategy contributing to employee retention. By equipping employees with new skills, organisations show their commitment to helping them stay relevant as roles and industries evolve. Nearly half of respondents in PwC’s survey cited upskilling and reskilling opportunities as a deciding factor in whether to stay with or leave their employer.

This is particularly important because much employee turnover is preventable when managers engage proactively with their teams. According to Gallup, 42% of voluntary leavers say their departure could have been avoided, yet 45% report that in the three months before leaving, little or no effort was made by managers to discuss how their job was going. The research also shows that turnover often results from insufficient support, limited career development opportunities, or misalignment with job expectations. These findings highlight a clear opportunity for organisations: targeted coaching conversations, regular check-ins, and clear internal mobility and development paths can help employees feel supported, see a meaningful future with the company, and potentially cut preventable turnover nearly in half.

If figures above don’t inspire organisations to prioritise talent cultivation with an eye on retention, here are some more compelling arguments:

• Skills-based organisations that put talent development at the core of their business strategy tend to be more profitable. They are also more likely to help their employees move to higher pay brackets.
• One big advantage of nurturing internal talent is that they come with references and ready-made performance data, which makes it easier to predict their future performance. Their work ethic is also no secret. Additionally, internal candidates show better role fit and cultural fit, so they tend to be better performers compared to external hires, who are 61% more likely to be fired. The benefit to employee performance from internal mobility is two-fold – not only do internal candidates show better outcomes but employees who consistently perform well in critical roles are 800% more productive than average performers in the same roles.
• Talent development has an added bonus – it promotes diversity, equity, and inclusion (DE&I) by improving access to growth and mobility opportunities. Through recruitment strategies focused on skills rather than college degrees and through the creation of talent marketplaces that seek to identify underrepresented but high potential employees, organisations stand to gain a larger and more diverse talent pool. And companies that promote DE&I, as studies show, are more profitable.
• Overall, attrition rates at companies that value talent development are five percentage points lower than in other companies.

A good talent development strategy needs skills intelligence

Talent development requires more than effort and commitment from the employer; it depends on clear visibility into the skills within an organisation. Skills intelligence – the collective understanding an organisation has of its employees’ capabilities – provides this by offering a systematic, data-driven approach to understanding, analysing, and developing employee skills and competencies.  It involves identifying and mapping individual skills, uncovering patterns and gaps, and delivering actionable insights in an intuitive, easy-to-understand format.

With these insights, business leaders can identify untapped potential, optimise team composition, and make informed decisions about upskilling, reskilling, and internal mobility. In short, real talent development cannot happen without the clarity and guidance that skills intelligence provides.

With more than 80% of companies unable to anticipate their future skill needs, more and more organisations are turning to skills intelligence platforms such as MuchSkills to get a clear picture of their workforce capabilities, identify critical skills gaps, and assess future skills needs. The growing adoption of AI-powered skills intelligence systems has made it easier to pinpoint in-demand skills. These insights help leaders come up with impactful and actionable talent development strategies backed by data.

How MuchSkills supports talent cultivation

A forward-looking talent strategy begins by identifying the skills, competencies, and roles essential for achieving your organisation’s strategic goals. Next, organisations create a comprehensive inventory of the skills present across their workforce, capturing relevant skills as well as hidden strengths, motivation, and adjacent capabilities. Comparing this inventory with the skills required for business success reveals gaps and growth opportunities. Missing or underutilised skills can then be addressed through targeted learning, development, and workforce planning. By treating skills intelligence as a living asset, organisations adopt a dynamic, data-driven approach that aligns talent development with strategy, enhances workforce agility, and supports long-term growth.

Here are five ways in which MuchSkills can help optimise your organisation’s talent development strategy:

By mapping skills, validating them and spotting gaps

MuchSkills’ skills and competency mapping tool captures all technical, soft, and organisation-specific skills, along with each employee’s proficiency and willingness to use them. Its 3x3 proficiency matrix (beginner, intermediate, expert, each with three sub-levels) ensures granular, accurate assessment across the workforce.

Next, to give managers a trusted picture of workforce capability, skills can be validated through manager reviews and certifications, with automated expiry alerts for compliance-driven organisations.

Finally, managers can use the platform’s skills gap analysis to pinpoint weaknesses and missing competencies. This prevents blind hiring, surfaces hidden talent, and ensures development efforts focus on areas with the greatest impact.