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Making the case for hiring from within the company
April 16, 2012, Monday
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HERE is some research sure to rankle every employee who has applied for an internal promotion and been passed over in favor of someone brought in from the outside.
According to Wharton management professor Matthew Bidwell, "external hires" get significantly lower performance evaluations for their first two years on the job than do internal workers who are promoted into similar jobs.
They also have higher exit rates, and they are paid "substantially more." About 18 percent to 20 percent more.
On the plus side for these external hires, if they stay beyond two years, they get promoted faster than do those who are promoted internally.
The issue has significance for organizations, Bidwell says, as they think about where they source their employees, especially higher-level ones. Do they "grow their own" or do they go out into the job market and hire outsiders?
The context for Bidwell's research lies in the increased mobility of workers over the past three decades as companies have turned away from offering lifetime employment in favor of relying on the external labor market to find experienced workers at all levels of the organization.
By comparing internal mobility and external hiring processes - looking specifically at performance and pay - Bidwell's research can help employees learn more about "the consequences of their career decisions," including the tradeoffs that characterize internal and external mobility, Bidwell writes in his paper.
Some of those tradeoffs are easily identified. In noting that external hires need about two years "to get up to speed" in their new jobs, Bidwell suggests it is because outsiders need that amount of time to learn how to be effective in their new organization - specifically, how to build relationships. Meanwhile, the risk of failure is substantial. Although external hires are paid quite a bit more than employees promoted into similar jobs, "this is not a free lunch for the external hires," he says. "There is a much greater risk of being let go during those first few years, mainly because they may not develop the necessary skills and thus will not perform as well as expected."
While doing his research, Bidwell noted one particular difference between the external hires and those already in the company who are being promoted. "People hired into the job from the outside often have more education and experience than internal candidates, which is probably some of the reason they are being paid more."
He acknowledges that his research may frustrate an organization's in-house workforce. "It is sadly the case that being more marketable, as external candidates are, is always going to be valuable and will generally lead to higher compensation.
So the question is, should internal people threaten to quit to raise their pay?"
It's well known in academia, for example, that the only way to get a significant pay raise is to nail down an outside offer, Bidwell notes. "But in some organizations, that's an easy way to get fired. People will take it as a signal that you are disloyal."
Bidwell offers this career advice: "If you like where you are, stay there. Or at least understand how hard it can be to take your skills with you. You need to be aware that often your skills are much less portable than you think they are."
Adapted from Knowledge@Wharton, http://knowledge.wharton.upenn.edu. To read the original version, please visit: http://bit.ly/GWCf4o
According to Wharton management professor Matthew Bidwell, "external hires" get significantly lower performance evaluations for their first two years on the job than do internal workers who are promoted into similar jobs.
They also have higher exit rates, and they are paid "substantially more." About 18 percent to 20 percent more.
On the plus side for these external hires, if they stay beyond two years, they get promoted faster than do those who are promoted internally.
The issue has significance for organizations, Bidwell says, as they think about where they source their employees, especially higher-level ones. Do they "grow their own" or do they go out into the job market and hire outsiders?
The context for Bidwell's research lies in the increased mobility of workers over the past three decades as companies have turned away from offering lifetime employment in favor of relying on the external labor market to find experienced workers at all levels of the organization.
By comparing internal mobility and external hiring processes - looking specifically at performance and pay - Bidwell's research can help employees learn more about "the consequences of their career decisions," including the tradeoffs that characterize internal and external mobility, Bidwell writes in his paper.
Some of those tradeoffs are easily identified. In noting that external hires need about two years "to get up to speed" in their new jobs, Bidwell suggests it is because outsiders need that amount of time to learn how to be effective in their new organization - specifically, how to build relationships. Meanwhile, the risk of failure is substantial. Although external hires are paid quite a bit more than employees promoted into similar jobs, "this is not a free lunch for the external hires," he says. "There is a much greater risk of being let go during those first few years, mainly because they may not develop the necessary skills and thus will not perform as well as expected."
While doing his research, Bidwell noted one particular difference between the external hires and those already in the company who are being promoted. "People hired into the job from the outside often have more education and experience than internal candidates, which is probably some of the reason they are being paid more."
He acknowledges that his research may frustrate an organization's in-house workforce. "It is sadly the case that being more marketable, as external candidates are, is always going to be valuable and will generally lead to higher compensation.
So the question is, should internal people threaten to quit to raise their pay?"
It's well known in academia, for example, that the only way to get a significant pay raise is to nail down an outside offer, Bidwell notes. "But in some organizations, that's an easy way to get fired. People will take it as a signal that you are disloyal."
Bidwell offers this career advice: "If you like where you are, stay there. Or at least understand how hard it can be to take your skills with you. You need to be aware that often your skills are much less portable than you think they are."
Adapted from Knowledge@Wharton, http://knowledge.wharton.upenn.edu. To read the original version, please visit: http://bit.ly/GWCf4o
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