Why it pays to stay on and explore roles within

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Why it pays to stay on and explore roles within



While less than half of companies posted anything other than blue-collar jobs in the mid-1980s that figure rose to 60% in 1999 before exploding to over 95% in the mid-to-late-2000s.

What can be a matter of greater delight for a company’s HR team than to promote Internal Growth! It allows them to fill a role, retain a good employee and improve their talent brand.

Hiring within addresses the core issue of why employees leave a company: the inability to advance in their career. Plus employees feel they are valued and are a key investment of the company.

Research on why it pays to stay on and explore roles within

Often the HR’s hands are tied if employees feel it is easier to leave their current organization and augment their skillsets elsewhere rather than taking up a new role in a different function within the current organization.

Read this to find out why it pays to stay on and explore roles within

Paying More to Get Less: The Effects of External Hiring versus Internal Mobility’

Research by Wharton has thrown up some startling observations on the topic of Internal Growth. In his research titled ‘Paying More to Get Less: The Effects of External Hiring versus Internal Mobility’, Wharton management professor Matthew Bidwell stated

  1. “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.
  2. They also have higher exit rates, and they are paid “substantially more.” About 18% more.[1]

There is no free lunch for the external hires.  Bidwell suggests that external hires need about two years “to get up to speed” in their new jobs, to learn how to be effective in their new organization — specifically, how to build relationships.

Meanwhile, the risk of failure is substantial. Although their salaries are higher, so are expectations. So, there is a likelihood that they may be asked to go during those first few years, mainly because they may not develop the necessary skills and thus will not perform as well as expected.

Unpacking prior experience: How career history affects job performance

According to research published by Dokko, Wilk, and Rothbard in the year 2009 titled “Unpacking prior experience: How career history affects job performance”, since internal movers have longer experience within the firm, they are likely to have already acquired important firm-specific skills that new hires will lack.

There are good reasons to believe that external hires may have stronger qualifications than those promoted, but firm-specific skills may be important enough that new hires will still experience lower performance than internal movers[2]; in some cases, hires’ experience in other similar jobs may even be counter-productive

The actual reason why employees jump ships is not better compensation but rather greater opportunities for advancement. LinkedIn estimates that by hiring employees internally for a different position, companies retain 38 of 100 employees who would have otherwise left the company.

Merits of Promoting From Within

In the year 2012, the consulting firm Booz & Co. released its twelfth annual study on CEO succession. The study, of the world’s 2,500 largest companies, reports that from 2009 to 2011, companies let go 35% of CEOs hired from outside, compared to 19% of bosses who were promoted from within. Also, CEOs who come up from within, stay on their jobs for a year longer than outsiders, an average of five years, as opposed to four.  Companies apparently recognize the advantages of hiring insiders. Four out of five new CEOs rise through the company ranks

Harvard Study

HBR used data on more than 11,000 internal hires made between 2007 and 2012 in a Fortune 100 firm, and found that candidates hired through internal postings outperformed sponsored internal hires on nearly every conceivable dimension of quality. They received higher competency and contribution ratings (two different measures of performance) during their first year on the job, and were both more likely to be considered top performers (rated in the Top 25% of the performance distribution of peers in similar jobs) and less likely to be considered poor performers (rated in the bottom 25%).[3]

Summing Up!!

When it comes to career moves, you can often enter a similar jobs—as defined by criteria such as functional roles, reporting relationships, and hierarchical rank—through either internal mobility or external hiring. We would request you to pause a moment and check internally before deciding to move on.

If you like where you are, stay there. Or at least understand how hard it can be to take your skills with you. You think you can go to another job and perform well, but it takes a long time to build up to the same effectiveness that you had in your previous organization. You need to be aware that often your skills are much less portable than you think they are. In case of internal mobility, certainly, while the pay may be less, your performance is better, and there is more security.

[1] http://journals.sagepub.com/doi/abs/10.1177/0001839211433562

[2] http://pubsonline.informs.org/doi/abs/10.1287/orsc.1080.0357

[3][3] https://hbr.org/2015/06/the-best-way-to-hire-from-inside-your-company

About cajobportal.com

Founded in in August 2013 by a group of CAs and IIM Ahmedabad graduates, cajobportal.com is India’s first recruitment website exclusively for finance professionals


[1] http://journals.sagepub.com/doi/abs/10.1177/0001839211433562

[2] http://pubsonline.informs.org/doi/abs/10.1287/orsc.1080.0357

[3] https://hbr.org/2015/06/the-best-way-to-hire-from-inside-your-company