So I applied to a role but have realised there’s a better role in another department. The hiring manager called me and said I’ll hear back soon if an interview will happen with the role I applied to. Shall I let her know that I’m interested in the other role instead?

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Take the interview, learn all you can about the role and the company. Then pursue the other opportunity as well. Just because you interview doesn't mean you need to take it.

Now you know someone in the Co who can refer at the approp time

Understood, but I also want to progress with the other role which is in a whole different department.

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