Lateral Hiring: Definition, Trends, Benefits, and Challenges

Hiring practices have evolved significantly over the years. Companies are no longer just looking for fresh graduates or promoting existing employees—they are also actively seeking experienced professionals who can bring immediate value to their organizations. This strategy, known as lateral hiring, has become a dominant force in talent acquisition. But why are companies increasingly turning to lateral hires? What are the advantages and challenges of this approach? And how does it compare to other hiring methods? Let’s explore the world of lateral hiring in depth.(source)

What is Lateral Hiring?

Lateral hiring refers to the recruitment of experienced professionals from outside an organization for positions at the same level of seniority as their current roles. Unlike fresh graduate hiring or internal promotions, lateral hires bring proven expertise and industry knowledge, enabling them to contribute immediately with minimal training.

For example, if a software company needs an AI expert, they may choose to hire a seasoned AI engineer from a competitor rather than training an existing employee from scratch. This approach ensures faster skill deployment and business impact.

Why is Lateral Hiring on the Rise?

The modern workforce is increasingly mobile, and companies must compete for top talent. According to LinkedIn’s Global Talent Trends Report, 73% of job seekers are “passive” candidates—not actively job hunting but open to new opportunities. Organizations must proactively reach out and attract these professionals to secure the best talent before their competitors do.

The Growing Trends and Statistics in Lateral Hiring

Lateral hiring has become a mainstream strategy across industries, with several key trends shaping its evolution:

• External Hires Dominate: Internal hiring has significantly decreased post-pandemic. Internal mobility fell from 40% in 2020 to just 24% in recent years, meaning most positions are now filled through external lateral hires.(source)
• Highly Competitive Talent Market: A survey by ManpowerGroup revealed that 90% of employers struggle to find skilled candidates, pushing companies to aggressively poach top talent from competitors.(source)
• Industry-Specific Fluctuations: Law firms saw a 110% increase in lateral hiring in 2021, driven by post-pandemic business expansion. However, this hiring spree cooled down by 35% in 2023, highlighting the cyclical nature of lateral recruitment.(source)
• Remote Work Expansion: Lateral hiring is no longer limited by geography. With the rise of remote work, companies can recruit top talent globally, leading to a more diverse and distributed workforce.(source)

The Importance of Lateral Hiring

Lateral hiring plays a crucial role in talent acquisition, offering benefits that other hiring methods struggle to match:

• Rapid Skill Acquisition: Instead of waiting years to develop internal talent, companies can hire professionals who already possess the required skills.(source)
• Fresh Perspectives and Innovation: External hires bring new ideas and best practices learned from their previous organizations.(source)
• Competitive Advantage: Hiring industry veterans can accelerate business growth by leveraging their expertise and networks.(source)
• Expanded Talent Networks: A new hire often brings valuable industry connections, helping businesses tap into new opportunities.(source)
• Business Agility: Companies can quickly respond to market changes by bringing in talent with specialized skills as needed.

However, while lateral hiring offers these advantages, it comes with its own set of challenges.

The Challenges and Dark Side of Lateral Hiring

Lateral hiring is not without risks. Companies must carefully navigate these challenges to maximize the benefits:

1. High Turnover Rates

One of the biggest risks of lateral hiring is retention. Studies in the legal industry found that 47% of lateral hires leave within five years, causing organizations to lose their investment in recruiting and onboarding.(source)

2. Cultural Integration Issues

Experienced professionals may struggle to adapt to a new corporate culture, leading to lower job satisfaction and performance. If not properly onboarded, even a highly skilled lateral hire may fail to thrive in a new environment.(source)

3. Higher Compensation Costs

Companies often have to offer premium salaries to attract lateral hires. External hires tend to receive 18-20% higher salaries than internally promoted employees for similar roles, leading to potential pay disparities and resentment among existing staff.(source)

4. Internal Morale and Career Growth Impact

When companies consistently hire from outside, it can demotivate internal employees, making them feel undervalued. This can lead to a decline in morale and even increased attrition.(source)

5. Limited Talent Pool for Specialized Roles

For niche roles, the availability of experienced professionals can be limited. Finding a perfect lateral hire can take months, delaying projects and increasing recruitment costs.(source)

Best Practices for Effective Lateral Hiring

To overcome these challenges, companies should implement strategic hiring practices:

• Define a Clear Lateral Hiring Strategy: Identify critical roles where external expertise is needed and ensure that lateral hiring aligns with business goals.(source)
• Conduct Rigorous Candidate Assessments: Look beyond resumes—assess cultural fit, adaptability, and long-term potential.(source)
• Offer Competitive Yet Equitable Compensation: Balance pay equity to avoid internal dissatisfaction.(source)
• Implement Robust Onboarding and Integration Programs: Assign mentors, conduct team introductions, and ensure smooth cultural adaptation.(source)
• Provide Career Growth Paths: Lateral hires should see a clear future within the company, preventing early exits.(source)
• Balance Internal and External Hiring: Promote from within whenever possible while using lateral hires strategically.(source)

Lateral Hiring vs. Other Hiring Methods

How does lateral hiring compare to other recruitment strategies?

Impact of Lateral Hiring on Diversity, Equity, and Inclusion (DEI)

Lateral hiring can boost workplace diversity when done strategically:

• Increasing Representation: Companies can actively recruit diverse talent from external pools to address workforce imbalances.(source)
• New Perspectives: A diverse set of lateral hires brings different viewpoints, fostering innovation.
• Equity Risks: Over-reliance on industry referrals can reinforce biases. Studies show women of color are 35% less likely to receive job referrals than white men, highlighting the need for fair hiring practices.(source)

To ensure inclusive lateral hiring, companies should implement unbiased screening processes, expand sourcing channels, and prioritize diversity hiring goals.

Is Lateral Hiring the Right Strategy for Your Business?

Lateral hiring is a powerful tool for acquiring skilled talent quickly, but it must be used wisely. Companies that strike a balance between lateral recruitment and internal promotions can create a dynamic workforce that thrives on experience, innovation, and growth.

By addressing the challenges of lateral hiring through structured onboarding, fair compensation, and strong retention strategies, organizations can fully unlock the potential of experienced talent and stay ahead in today’s competitive market.

FAQs

Q1: What industries benefit the most from lateral hiring? 

Industries like tech, finance, law, and healthcare heavily rely on lateral hiring to acquire specialized skills quickly.

Q2: How long does it take for a lateral hire to become fully productive?

 On average, a lateral hire takes 6 to 12 months to reach full efficiency in their new role.

Q3: What is the biggest mistake companies make in lateral hiring?

 Failing to assess cultural fit and retention potential, leading to early exits.

Q4: How can companies retain lateral hires for the long term?

 Providing career growth opportunities, strong onboarding, and fostering an inclusive work environment are key strategies for retention.

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