Employers can staff vacancies from a wide array of sources. External labour markets may be tapped for new organizational members when there is a need for expertise that is cost-prohibitive to develop internally; for an infusion of new perspectives that might improve business processes; for compliance with equal employment opportunity mandates; or for additional manpower to redress shortages in semi-skilled and unskilled labour. How far afield a firm must go to satisfy its demand for qualified persons varies greatly across countries and over time. The skill mix within a given nation can be quite dynamic, affected by demographic shifts (for example, altered labour force participation rates among key population subgroups), migration flows (for example, brain drains from emigration, skill booms from in-migration), government policies for human-capital formation (for example, magnitude and targeting of expenditures on education, vocational training initiatives) and large-scale technology transfers. Even when skills are abundant in the indigenous population, strong norms about the acceptability of certain types of work may create artificial shortages that necessitate importing labour. For example, menial or dangerous jobs in the manufacturing, construction and service sectors of industrialized economies are often filled by individuals from less developed countries. All of these factors must be considered when establishing the appropriate geographic scope for external searches.

Alternatively, employers may seek full exploitation of their internal labour markets when vacancies arise within business units. There are numerous advantages in doing so for domestic firms, such as providing incentives for employee retention, extending the returns on company-specific skills or knowledge, or simply decreasing recruitment and selection costs. However, this strategy assumes that the firm has sufficient human resource slack to be stockpiling skills for creative deployment internally. Major downsizing trends in western economies have made it more difficult to rely heavily on such sourcing in recent decades. It is increasingly the case that firms are shrinking to a smaller permanent core of key employees and drawing upon a large flexible pool of contingent workers from the outside as demand dictates. Multinational enterprises (MNEs) appear to be in a better position in this regard, having bigger internal labour markets that transcend the skill constraints associated with any single national labour force. Yet they seldom utilize the wide range of talents available within their far-flung operations.

By the 1980s, human resource management practitioners had also intensified efforts to have human resource supply and demand analyses incorporated into business strategy formulation. Thus, firms that repeatedly experience human resource flow imbalances may not be taking full advantage of the planning technologies at their disposal.

Gary Florkowski