The Benefits of Hiring Within

In advertising it used to be said that in order to get ahead you had to quit your job. Seems crazy, but if you knew what we were paid in those early years, you would understand that the only way to survive (& get ahead) was to do your time, and jump ship the minute that you became valuable for the promise of a slightly better title and paycheck. Increasingly the idea of “climbing the corporate ladder” to the top has vanished along with the promise of the gold watch at retirement. All too often companies are perpetually looking outside for their next new hire, rather than looking at the talent that they have cultivated internally, creating a culture of self-preservation versus teamwork. What is interesting to note though is the findings of a recent study that shows that looking outside for your new “super star” employee might be a big mistake.

Earlier this week a study by Matthew Bidwell, an assistant professor at the University of Pennsylvania’s Wharton School, was brought to my attention by pieces in The Wall Street Journal and Forbes. Looking at data from 2003-2009, Bidwell found that external hires often were paid 18% than workers promoted internally, and despite greater experience & education actually performed worse during their first two years on the job. In more shocking is that in addition to scoring poorly on performance reviews, external hires were 61% more likely to be fired from their new jobs than those promoted from within the firm, and 21% more likely to quit. According to Bidwell, “Employers underestimate the time it takes for workers to get up to speed.” Even worse is that “because everyone has to work to bring the new hire up to speed, the performance of the whole unit declines.” Not to mention it’s a morale killer.

As the pace of hiring begins to pick up, Hiring Managers need to rethink how they build their teams. The first step is to shore up the talent that already have, and provide incentives for staying, whether it be salary based, better benefits, even flex time. Then create a culture of advancement, where you not only identify those individuals who could be promoted, but create an environment where your employees can seek out opportunities for training and movement within the company.