Latest / The Internal Move Podcast with Fexingo: Lateral Roles, Internal Transfers, and Staying at Your Company / The Hidden Cost of Internal Mobility You Are Not Tracking
Transcript
- Lucas: So here’s a number I couldn’t stop thinking about: a Fortune 500 retailer lost twelve million dollars in a single year from internal moves — lateral transfers, promotions, you name it. And they had no idea until they ran the numbers. Luna: Twelve million just from people shifting roles inside the same company? That sounds almost hard to believe. Where does that cost even come from? Lucas: Three buckets. First, the role the person leaves behind — it doesn't get backfilled instantly. The average time to fill for an internal backfill at this company was 73 days. That's over two months of lost productivity, overtime for remaining team members, sometimes lost sales. Luna: Right, so the cost of the vacancy is real. But isn't that temporary? Once they hire someone new, that cost disappears. Lucas: It does, but the second bucket is the ramp-up time for the person who moved. Even if they know the company, they don't know the new role. At this retailer, it took an average of six months for a lateral hire to reach full productivity. That's half a year of them operating at maybe 70 percent efficiency. Luna: So you're paying full salary for partial output. That adds up fast. Lucas: Exactly. They calculated that at about $4.2 million annually across all their internal moves. The third bucket is the morale tax — the disruption to the team left behind. People have to absorb extra work, onboarding, maybe train the new person. That showed up in lower engagement scores and higher attrition in those teams. Luna: That's the one that's hardest to quantify. How did they even assign a dollar figure to morale? Lucas: They used a proxy: the cost of voluntary turnover in departments that lost a key person to an internal move versus departments that didn't. The difference was about 4.3 percentage points higher attrition, which they costed out using standard replacement costs — recruiting, training, lost productivity. That came to another $3.6 million. Luna: Okay, so that's how they got to twelve million. But here's the thing I keep coming back to — if you start tracking these costs, aren't you basically building a case against internal mobility? That seems like the opposite of what companies should be doing. Lucas: That's the tension, and it's real. But the retailer didn't stop internal moves. They used the data to make them smarter. They introduced what they called an 'internal mobility P&L' for each move. Before approving a lateral transfer, the manager and HR would estimate the total cost of that specific move using these three buckets. Luna: And that didn't slow down approvals? Lucas: Initially, yes. Some managers pushed back. But within six months, they found that the biggest cost drivers were moves where the person had no overlap with the new team, or where the backfill was a complex role. So they started requiring a two-week handoff period for those moves — the person would stay in their old role part-time while starting the new one. Luna: That's actually clever. It reduces both the vacancy cost and the ramp-up time. Lucas: Exactly. And they invested in internal onboarding programs tailored to lateral hires — not the generic new-hire orientation. The result? time to productivity dropped from six months to about 3.5 months on average. And the total cost of internal mobility went from twelve million down to about seven point two million — a savings of $4.8 million in one year. Luna: So the ROI on transparency was pretty immediate. But I imagine most companies don't even have the data to start this kind of analysis. What's the first step for a listener who wants to pitch this at their own company? Lucas: Start small. Don't try to model the whole company. Pick one department — ideally one with a lot of internal moves, like sales or engineering. Pull three data points: average time to fill for backfills in that department, average time to productivity for internal hires, and turnover rates in teams that lost people internally versus teams that didn't. Luna: And if they don't have that data? A lot of companies don't track time to productivity at all. Lucas: Then ask managers for their gut estimates. It's not perfect, but it's a start. One retail manager I spoke to said, 'I know it takes a new lateral hire about four months before they stop asking basic questions.' That's a data point. You can build from there. The key is to frame it not as a cost-cutting exercise but as an investment — if we understand the true cost, we can reduce it and make internal mobility more sustainable. Luna: I like that reframe. It's not about stopping moves; it's about making them more efficient. And I think that's a much easier sell to leadership. Lucas: Absolutely. And here's the thing — the companies that do this well, like the retailer we've been talking about, they actually see internal mobility rates go up, not down, after they start tracking costs. Because the bottlenecks get removed. Managers are more willing to let their best people go when they know there's a plan to backfill and the new team is set up for success. Luna: So it's a virtuous cycle. You measure it, you improve it, and then you get more of it. Lucas: Exactly. And that's the goal, right? Internal mobility is one of the best retention tools a company has. But if you're not managing the cost, you're leaving money — and talent — on the table. Luna: Alright, so for our listeners who want to start this conversation at their company next week — what's the one concrete action you'd recommend? Lucas: Go to your HR business partner or your talent mobility lead and say, 'Can we run a pilot in my department? I want to track the cost of internal moves for the next six months.' Offer to help pull the data yourself. Most HR teams are overwhelmed and would welcome the help. And if they say no, do it informally — just track the time to fill and time to productivity for the next three internal moves in your team. You'll be amazed what you learn. Luna: That's a great place to start. I think a lot of listeners will be surprised by what they find. Lucas: I think so too. And if you do run that pilot, we'd love to hear about it. Reach out to us at Fexingo — we're on LinkedIn and our show page. Maybe we'll feature your story in a future episode. Luna: I'm already thinking about the next angle we could take. Maybe a deep dive into how to structure a handoff period that actually works. Lucas: That's a good one. Or how to measure time to productivity without making it a burden on managers. But we'll save that for next time. For now, if you take one thing away from this episode, let it be this: internal mobility has a cost, but it's a cost you can manage — and when you do, everyone wins.