why external hires get paid more, and perform worse, than internal staff
Post on 04-Apr-2018
213 Views
Preview:
TRANSCRIPT
-
7/29/2019 Why External Hires Get Paid More, and Perform Worse, than Internal Staff
1/13
Why External Hires Get Paid More, and Perform Worse,
than Internal Staff
Published: March 28, 2012 in Knowledge@Wharton
Share this Article
Share on facebookShare on twitterShare on emailMore Sharing Services
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 professorMatthew 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 "substantiallymore." About 18% to 20% 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.
"Most jobs are entered into through a variety of different routes, sometimes by being hired from
the outside and sometimes by moving up from inside the firm," says Bidwell. "I was curious asto what the effect of these different routes would be" on an individual's job performance. His
research is presented in a paper titled, "Paying More to Get Less: The Effects of External Hiring
versus Internal Mobility."
The issue has significance for organizations, Bidwell says, as they think about where they sourcetheir employees, especially higher-level ones. Do they "grow their own" or do they go out into
the job market and hire outsiders? "My research documents some quite substantial costs to
external hires and some substantial benefits to internal mobility," he notes.
Getting Up to Speed
The context for Bidwell's research lies in the increased mobility of workers over the past threedecades 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.
http://knowledge.wharton.upenn.edu/article.cfm?articleid=2961http://knowledge.wharton.upenn.edu/article.cfm?articleid=2961http://knowledge.wharton.upenn.edu/article.cfm?articleid=2961http://knowledge.wharton.upenn.edu/article.cfm?articleid=2961http://knowledge.wharton.upenn.edu/article.cfm?articleid=2961http://mgmt.wharton.upenn.edu/people/faculty.cfm?id=1385http://asq.sagepub.com/content/56/3/369.abstracthttp://asq.sagepub.com/content/56/3/369.abstracthttp://knowledge.wharton.upenn.edu/article.cfm?articleid=2961#sendcommenthttp://knowledge.wharton.upenn.edu/createpdf.cfm?articleid=2961http://knowledge.wharton.upenn.edu/printer_friendly.cfm?articleid=2961http://knowledge.wharton.upenn.edu/article.cfm?articleid=2961http://knowledge.wharton.upenn.edu/article.cfm?articleid=2961http://knowledge.wharton.upenn.edu/article.cfm?articleid=2961http://mgmt.wharton.upenn.edu/people/faculty.cfm?id=1385http://asq.sagepub.com/content/56/3/369.abstracthttp://asq.sagepub.com/content/56/3/369.abstracthttp://knowledge.wharton.upenn.edu/article.cfm?articleid=2961 -
7/29/2019 Why External Hires Get Paid More, and Perform Worse, than Internal Staff
2/13
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 andexternal 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 buildrelationships. 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, mainlybecause they may not develop the necessary skills and thus will not perform as well as expected.
Then, too, they might decide to leave voluntarily."
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 probablysome of the reason they are being paid more," he says. "When you know less about the person
you are hiring, you tend to be more rigorous about the things you can see" -- such as educationand experience levels listed on a person's CV, or what Bidwell calls "externally observable
attributes." And yet "education and experience are reasonably weak signals of how good
somebody will be on the job, he notes.
Those tradeoffs might help explain why external hires earn so much more than internalemployees promoted into the same jobs. If these hires have better resumes and are perceived as
able to get a job more easily outside the company, then they can demand higher pay than internal
people. Hires may also want higher pay to reflect the unfamiliar environment that they face on
coming into a new position. Hiring managers confirm that they typically pay 10% or 20% moreto pull people out of positions "where they already have some security and where people know
them and know they are doing a good job," Bidwell says.
He acknowledges that his research may frustrate an organization's in-house workforce. "It issadly 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 onlyway 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 think you can go to another job and performwell, 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." Bidwell is clearly a fan of internal mobility. "While the pay may be less, yourperformance is better, and there is more security."
'Let's Make a Deal'
-
7/29/2019 Why External Hires Get Paid More, and Perform Worse, than Internal Staff
3/13
For his research, Bidwell analyzed personnel data from a U.S. investment banking division from
2003 to 2009. In that study, he documented twice as many internal promotions as external hires.
Investment banking, Bidwell writes, represents "an interesting context in which to study theeffects of internal versus external mobility [because] organizational performance often depends
on the skills of the workforce, [thereby] increasing the importance of personnel decisions." In
addition, workers in banking are "notoriously mobile, making this a context in whichorganizations regularly engage in external hiring at all levels."
One important feature of investment banking jobs is that promotions tend to involve some
measure of continuity with the prior job. Promotions often involve getting a higher title, such as
vice president or director, while continuing to do similar work. In fact, as Bidwell notes,promotions in many organizations do not instantly lead into a very different job. Instead,
responsibilities increase gradually, being recognized over time by a promotion. When
considering their future staffing needs, though, organizations still must think about how they willacquire the workers capable of operating at the higher levels: Will it be by hiring or promotion?
Bidwell found similar patterns for different kinds of jobs and within different organizations. Heanalyzed separately the investment professionals (traders, salespeople, research analysts and
investment bankers) and the support staff at the research site. His findings about pay andperformance were consistent across those groups. He also looked at another investment bank and
a publishing company, and found the same results of "paying more for external hires while
giving them lower performance ratings."
He concludes, however, that the nature of the promotion mattered. Unlike other promotedworkers, those who were simultaneously promoted and transferred to another group did not
perform any better than external hires. Bidwell speculates that "the skills that are important to
our jobs may be very specific to the positions that we are in. Even large changes in the nature of
jobs within the organization were associated with performance declines."
Yet overall, Bidwell says, external hiring has grown much more frequent since the early 1980s,
especially for experienced high level positions and especially in larger organizations. "It used to
be that smaller organizations always did a lot of outside hiring while big ones focused more oninternal mobility. But now the pendulum has shifted toward external hiring and away from
internal mobility for large organizations as well.
"Companies should understand that it can often be harder than it seems to bring in people who
look good on paper," says Bidwell. "In addition, there is a suspicion that 'the grass is alwaysgreener' attitude plays a role in some companies' desire to hire from the outside. Managers see a
great CV and get excited about playing 'Let's Make a Deal,' even when it's hard to know what
weaknesses the external hires bring with them."
On the other hand, "to promote more people internally also means that companies need to have along-term perspective and know how big a pipeline of people will be needed in the future," notes
Bidwell. It also requires managers to ensure that internal people are aware of the opportunities
open to them. "Finally, there are clearly some costs to internal mobility -- for example, the costof training people in-house versus piggybacking on someone else's training."
-
7/29/2019 Why External Hires Get Paid More, and Perform Worse, than Internal Staff
4/13
Another variable in the mobility equation, he adds, concerns non-compete clauses which tend to
complicate the movement of employees between competing firms. "Although these have not
always been so salient in investment banking, non-compete agreements have becomeincreasingly important in many states and many jobs, particularly in areas like technology where
employers can plausibly claim that employees will take critical competitive knowledge with
them."
'Involuntary Exits'
In his paper, Bidwell argues that the differences between internal and external mobility all
ultimately stem from two factors: the skills workers bring from their prior jobs, and the amount
of information that firms and workers have about each other.
He comments on the significant amount of new knowledge that external hires are required tolearn, even in those jobs that demand "high levels of general skills, such as securities research,
scientific research and surgery.... Although such work depends on individual workers' skills and
knowledge, it can also require intense coordination with others in the organization." Becauseinternal movers have longer experience within the firm, "they are likely to have already acquired
important firm-specific skills that new hires will lack," Bidwell writes.
In terms of the process that takes place when firms and external employees are eyeing each other
for a possible matchup, Bidwell writes that the task can be difficult because each side often has"highly incomplete information about each other. Firms struggle to evaluate the true qualities of
applications, and workers struggle to know which of the jobs available will best suit their
preferences and abilities." But, as Bidwell notes, companies obviously have more informationabout internal job candidates, including how well they have performed in prior roles and how
well they fit in with the current organization.
Bidwell suggests that his paper "provides unique evidence on the value to firms of internal labor
market structures. Results show that internal mobility allows the firm to staff higher-level jobswith workers who have better performance but are paid less." By detailing the strong advantage
of internal mobility over external hires, he adds, "these findings help to explain the continued
resilience of internal labor markets in the face of pressures for worker mobility."
Additional Reading
Ranking Employees: Why Comparing Workers to Their Peers Can Often Backfire:
Knowledge@Wharton
Should Performance Reviews Be Fired? Knowledge@Wharton
http://knowledge.wharton.upenn.edu/article.cfm?articleid=2567http://knowledge.wharton.upenn.edu/article.cfm?articleid=2567http://knowledge.wharton.upenn.edu/article.cfm?articleid=2760http://knowledge.wharton.upenn.edu/article.cfm?articleid=2961#tophttp://knowledge.wharton.upenn.edu/createpdf.cfm?articleid=2961http://knowledge.wharton.upenn.edu/printer_friendly.cfm?articleid=2961http://knowledge.wharton.upenn.edu/article.cfm?articleid=2567http://knowledge.wharton.upenn.edu/article.cfm?articleid=2567http://knowledge.wharton.upenn.edu/article.cfm?articleid=2760 -
7/29/2019 Why External Hires Get Paid More, and Perform Worse, than Internal Staff
5/13
LoginFollow the discussion
Comments (30)
Sort by: DateRatingLast Activity
Login orsignup now to comment.
+5
theglobalroundhouse 47p 33 weeks ago
Interesting. Insightful. This article delves into an HBR article on "plug 'n play" hiring; hiring
externally, someone who can hit the ground running. The author of that article says "plug 'nplay" is not advisable and this article examine why. Great cross reference. Wish I wasn'tresponding via my phone and could pass along the link.
Must be a morale killer for internal employees to know external hires earn so much more. Seemsto demonstrate a profits over people strategy (implicit) used by companies. Not good. I get the
sense, intuitively and from the reading I do, people are tired of this. They want dignity (at least)
in the workplace and to know their efforts are meaningful.
ReportReply
1 reply active 22 weeks ago
+1
Nicola Stratford 33 weeks ago
Something for all firms and organisations to note. I'm going to share this around, especially with
my union, so they can add to the research about the dangers of casualisation of the workforce andthe emphasis on consultants, too.
Report
Reply
+2
Martha 33 weeks ago
Anecdotally, I have seen new hires motivated to get up to speed quickly while bringing a fresh
perspective on how things could be done better, whereas existing employees can be lazy aboutmaking new connections and take a 'this is how we do it' mentality into whatever role they get
http://intensedebate.com/postRSS/127647205http://intensedebate.com/signuphttp://intensedebate.com/profiles/theglobalroundhousehttp://knowledge.wharton.upenn.edu/article.cfm?articleid=2961#IDComment326616425http://knowledge.wharton.upenn.edu/article.cfm?articleid=2961#IDComment326616425http://%20showreportbox%28326616425%29/https://www.facebook.com/Acerebelhttp://knowledge.wharton.upenn.edu/article.cfm?articleid=2961#IDComment326716667http://knowledge.wharton.upenn.edu/article.cfm?articleid=2961#IDComment326716667http://%20showreportbox%28326716667%29/http://knowledge.wharton.upenn.edu/article.cfm?articleid=2961#IDComment326753190http://knowledge.wharton.upenn.edu/article.cfm?articleid=2961#IDComment326753190https://www.facebook.com/Acerebelhttps://www.facebook.com/Acerebelhttp://intensedebate.com/profiles/theglobalroundhousehttp://intensedebate.com/postRSS/127647205http://intensedebate.com/signuphttp://intensedebate.com/profiles/theglobalroundhousehttp://knowledge.wharton.upenn.edu/article.cfm?articleid=2961#IDComment326616425http://%20showreportbox%28326616425%29/https://www.facebook.com/Acerebelhttp://knowledge.wharton.upenn.edu/article.cfm?articleid=2961#IDComment326716667http://%20showreportbox%28326716667%29/http://knowledge.wharton.upenn.edu/article.cfm?articleid=2961#IDComment326753190 -
7/29/2019 Why External Hires Get Paid More, and Perform Worse, than Internal Staff
6/13
promoted into, rather than looking for innovation. And, in my experience, it's rare to see an
existing employee willing to challenge the system, whether in deference to their colleagues, not
wanting to stand out, whatever. So contrary to your study, I've seen new hires who were muchmore productive, and much more valuable, to organizations.
Report
Reply2 replies active 29 weeks ago
+3
Martha 33 weeks ago
Also, performance reviews tend to favor compliant behavior. In other words, existing employees
who have proven their willingness to not rock the boat.
Report
Reply
+2
Alan Overton 33 weeks ago
Nicely written. There is a related issue that I believe should also be considered. Internal hiresbring competence in company systems and procedures, but less new knowledge. What internal
hires know may be embodied in organizational structures and processes already, and therefore
their competence can be recreated. I believe that organizations instead may seek to benefit fromthe cross pollination of internal and external ideas and that the benefit of this does not wholly
inure to the department. This would explain 1) the observed predilection for external hiring in
many corporations as a tacit or explicit organizational policy, 2) the premium salary paid to
external hires (both to compensate for the risk of moving and to reflect the higher value of newknowledge and perspectives to overall firm objectives), as well as 3) the observed tendency of
poor performance reviews for external hires, which may reflect the Darwinian friction between
perspectives becoming personalized between employees and managers who do not directlybenefit from, and may actually feel threatened by the larger organizational strategy. Greater
communication of corporate objectives and reasoning might make these hiring scenarios less
disruptive. However, if the organization can predict the amount of time it takes to harvest newknowledge for incorporation into their own systems, the lack of stability experienced by either
the existing department or the newly hired personnel may represent a calculated cost that they
choose to bear.
ReportReply
+2
Reem Y 33 weeks ago
http://%20showreportbox%28326753190%29/http://knowledge.wharton.upenn.edu/article.cfm?articleid=2961#IDComment326755707http://knowledge.wharton.upenn.edu/article.cfm?articleid=2961#IDComment326755707http://%20showreportbox%28326755707%29/http://knowledge.wharton.upenn.edu/article.cfm?articleid=2961#IDComment326773437http://knowledge.wharton.upenn.edu/article.cfm?articleid=2961#IDComment326773437http://%20showreportbox%28326773437%29/http://helparoundtown.com/http://knowledge.wharton.upenn.edu/article.cfm?articleid=2961#IDComment326783957http://knowledge.wharton.upenn.edu/article.cfm?articleid=2961#IDComment326783957http://helparoundtown.com/http://%20showreportbox%28326753190%29/http://knowledge.wharton.upenn.edu/article.cfm?articleid=2961#IDComment326755707http://%20showreportbox%28326755707%29/http://knowledge.wharton.upenn.edu/article.cfm?articleid=2961#IDComment326773437http://%20showreportbox%28326773437%29/http://helparoundtown.com/http://knowledge.wharton.upenn.edu/article.cfm?articleid=2961#IDComment326783957 -
7/29/2019 Why External Hires Get Paid More, and Perform Worse, than Internal Staff
7/13
I think the reason internal employees moved to another department do not outperform external
hires is not so much a need for new skills as losing their key asset: knowledge of the people
around them. You could count understanding the corporate culture and knowing how to work inthe company as a skill. But knowing who to turn to for what information (and whom to avoid),
having a mental map of the people around you, that's priceless knowledge. I think that's what
makes the internal hires more efficient and what handicaps the external ones. And it's notsomething a new hire can find out through research or reading. It takes time.
Report
Reply0
Barry Ackerson 33 weeks ago
The lower performance for new hires and employees promoting to a new department is not
surprising because it takes time to develop new skills. In the learning and development field this
is known as the "J" curve of performance development. How long does it take for a newlypromoted employee to develop the skills, knowledge, and abilities of a current incumbent? How
does the organization support and encourage the development of new skills and knowledge?
Also, I did not notice anything about the objectivity/bias of the rating system used. Could the
expectations of the external hire be greater than the internal hire?Report
Reply
1 reply active 33 weeks ago
+2
Kenneth Armitage 33 weeks ago
A report from the Association of Business Recovery Professionals (ABRP) some years ago
suggested it was bad management, poor or weak leadership, clear lines of responsibility andaccountability and a combination of poor financial management and planning, that accounted for
more than 60 per cent of business failures in Britain, although that might apply in other nations.
Because of the confused and often ineffective programme of fast-tracking individuals with paper
academic qualifications many of those placed in supervisory let alone management positions lack
actual hands-on practical experience of managing people, which is what management is
primarily about. This particular weakness is exacerbated when people are elevated, sometimesthrough nepotism or cronyism, too quickly up the management tree to positions of responsibility
and accountability for the actions and performance of others without knowing them and what
they do. This particular situation is exacerbated when someone is brought in from outsidebecause he or she has apparently been successful in another company when the facts do not
support the rhetoric, and one has to wonder if the person jumped before he or she was pushed or
if the company was only too pleased to lose them.
http://%20showreportbox%28326783957%29/http://knowledge.wharton.upenn.edu/article.cfm?articleid=2961#IDComment326787464http://%20showreportbox%28326787464%29/http://knowledge.wharton.upenn.edu/article.cfm?articleid=2961#IDComment326902999http://%20showreportbox%28326783957%29/http://knowledge.wharton.upenn.edu/article.cfm?articleid=2961#IDComment326787464http://%20showreportbox%28326787464%29/http://knowledge.wharton.upenn.edu/article.cfm?articleid=2961#IDComment326902999 -
7/29/2019 Why External Hires Get Paid More, and Perform Worse, than Internal Staff
8/13
However, the apparent inability to understand the complexity of jobs undertaken by employees at
the coal-face or on the shop-floor means that when programmes do not go as planned
directors and senior managers often outsource investigations and reports and look forrecommendations from management consultancies; and, these organizations are ones that tend to
be staffed with supposedly bright young things who have very little practical experience of
managing people and best management practice or understanding the businesses and culture ofthe companies they report on.
The result is a 'merry-go-round' of costly advertising and recruitment programmes that seesupposedly brighter people, often with inflated academic and professional experience, move
from one company to another to progress their careers and climb corporate ladders but without
actually contributing to and improving the performance and productivity of the companies they
join for short periods. In the end it all boils down to the character, attitude, communication andperformance of those brought in as to whether they will succeed.
It is not 'Education, Education, Education' but 'Training, Training, Training' that should be the
battle cry that must be applied to the process of training managers and also applied to the way inwhich companies are organized, structured and lead simply because the model of management,
organization, structure and leadership in some companies and organizations is not only jaded but,because of greed, sleaze and nepotism, is tarnished. As Peter F Drucker suggested, No
institution can possibly survive if it needs geniuses or supermen to manage it. It must be
organized in such a way as to be able to get along under a leadership composed of averagehuman beings.
Report
Reply
+1
Andrew McFarland 33 weeks ago
Paid more
Companies trying to maximize profits will always tend to pay less for their existing team if theyview that resource as "stable". When a companys actions give the impression that internal
employees are valued less, turnover naturally increases which leads to an expensive cycle.
Instead, pay employees market competitive rates. If the talent market becomes more competitive,companies ought to do better than a 1% pay raise.
Perform worse
In addition to the who you know factor, lower efficacy could also be due to rating bias in favorof the "devil you know." Human nature favors the familiar and is threatened by the competent.
Report
Reply+1
Kint 33 weeks ago
http://%20showreportbox%28326902999%29/http://pivotpointsolutions.net/http://pivotpointsolutions.net/http://knowledge.wharton.upenn.edu/article.cfm?articleid=2961#IDComment327114529http://%20showreportbox%28327114529%29/http://knowledge.wharton.upenn.edu/article.cfm?articleid=2961#IDComment327122393http://knowledge.wharton.upenn.edu/article.cfm?articleid=2961#IDComment327122393http://pivotpointsolutions.net/http://%20showreportbox%28326902999%29/http://pivotpointsolutions.net/http://knowledge.wharton.upenn.edu/article.cfm?articleid=2961#IDComment327114529http://%20showreportbox%28327114529%29/http://knowledge.wharton.upenn.edu/article.cfm?articleid=2961#IDComment327122393 -
7/29/2019 Why External Hires Get Paid More, and Perform Worse, than Internal Staff
9/13
The authors said it, moved along, and apparently never noticed it: "get significantly lower
performance evaluations". So not lower performance, lower evaluations. Take note, because an
outsider will always need time to settle in and be accepted in an organization.
On the author's point, the HR departments in their endless incompetence indeed look for what
they "can" see, such as education and crap written in resumes, and fail to see what people withreal jobs can see, such as how good a person may be for the position.
Report
Reply0
Carmel 33 weeks ago
This is very common in all organisation, it depends on the requirement like
skill,knowlege,experience,competency,talent. Yes partially internal staff might be demotivated,
but it also depends on lack of time for training the internal source for it and the emergency of thesituation. Either the company should spend time in training the internal staff or already have a
good Internal staff which avoids the organisation to hire External hires.Report
Reply
+1
Thomas 33 weeks ago
There is in my experience also an infatuation with politicians with bringing in outsiders from the
private sector to run Government departments who frequently struggle with the political
complexities and constraints in the public sectorThis extends to preferring the advice of external consultants over in house public servants,when
the consultants ,no fools , simply interview all the public servants and synthesize their views
based on experience to advise governments who pay them big money for the adviceReport
Reply
+1
yasin 32 weeks ago
this means that companies continue to work with internal staff and have an aging work force
external employees also bring in fresh ideas into the organisation while the old timer's are the
most resistant to changehaving a healthy mix is always good
Report
Reply
http://%20showreportbox%28327122393%29/http://knowledge.wharton.upenn.edu/article.cfm?articleid=2961#IDComment327164568http://%20showreportbox%28327164568%29/http://knowledge.wharton.upenn.edu/article.cfm?articleid=2961#IDComment327552662http://knowledge.wharton.upenn.edu/article.cfm?articleid=2961#IDComment327552662http://%20showreportbox%28327552662%29/http://knowledge.wharton.upenn.edu/article.cfm?articleid=2961#IDComment329269388http://knowledge.wharton.upenn.edu/article.cfm?articleid=2961#IDComment329269388http://%20showreportbox%28329269388%29/http://%20showreportbox%28327122393%29/http://knowledge.wharton.upenn.edu/article.cfm?articleid=2961#IDComment327164568http://%20showreportbox%28327164568%29/http://knowledge.wharton.upenn.edu/article.cfm?articleid=2961#IDComment327552662http://%20showreportbox%28327552662%29/http://knowledge.wharton.upenn.edu/article.cfm?articleid=2961#IDComment329269388http://%20showreportbox%28329269388%29/ -
7/29/2019 Why External Hires Get Paid More, and Perform Worse, than Internal Staff
10/13
0
Chandra Kant Saran 32 weeks ago
A good, thought provoking article.However, I have a different view in the matter.
Out of my experience, I have found that external hires are very good at challenging the status
quo. This is essential to bring the existing employees out of their comfort zones to respond to thenew challenges. This contributes in keeping the organisation's fabric 'fresh'. New avenues of
smart working is evolved and adds up to growth and sustainability of the business.
The performance of the external hires is not comparable with the internal staff, as only apple toapple should be compared. The external hires face more than obvious road bumps as they adopt
non-con-formative style of functioning, causing perceived loss of credibility within the internal
staff.
We do need to embrace change that the businesses demand and it may come through external
hires / Consultants.Report
Reply+1
JeffreyAllenMiller 32 weeks ago
I thought that my strategy was extremely old fashioned until reading this post. I have been tryingfor more than a year to secure an ''entry level'' internal communications job while recruiters are
pushing me to apply for a director-level or vice president roles. I've managed, by this point in
time, to piece together hiring managers' excuses -- they think that I'm way over qualified and that
my salary requirements would blow their budget.
How does one say "wrong'' on both?
This article supports my philosophy of promote from within and hire out to replace that lower-
level opening. Salary means nothing to me -- I trust my skills enough after 20 years to know for a
fact the pay scale will improve in time.
So, why isn't corporate HR on board?
Report
Reply-1
Paul Basile 32 weeks ago
http://knowledge.wharton.upenn.edu/article.cfm?articleid=2961#IDComment329770950http://%20showreportbox%28329770950%29/http://knowledge.wharton.upenn.edu/article.cfm?articleid=2961#IDComment330097936http://%20showreportbox%28330097936%29/http://www.matchpointcareers.com/http://www.matchpointcareers.com/http://knowledge.wharton.upenn.edu/article.cfm?articleid=2961#IDComment330099295http://www.matchpointcareers.com/http://knowledge.wharton.upenn.edu/article.cfm?articleid=2961#IDComment329770950http://%20showreportbox%28329770950%29/http://knowledge.wharton.upenn.edu/article.cfm?articleid=2961#IDComment330097936http://%20showreportbox%28330097936%29/http://www.matchpointcareers.com/http://knowledge.wharton.upenn.edu/article.cfm?articleid=2961#IDComment330099295 -
7/29/2019 Why External Hires Get Paid More, and Perform Worse, than Internal Staff
11/13
There is no inherent logic in the notion that external people are less capable than internal people
(in EVERY organization?) To think there is mirrors Lake Wobegon where "all the children are
above average". The real problem with the performance of external hires is that recruitmentprocesses are broken. External people are - of course - perfectly as capable as internal people, but
selecting the right ones is done so consistently poorly that, voila, it appears that external hires are
less capable than internal people. We can know just as much about external candidates asinternal and, equally important, we can use that information to make high-likelihood predictions
of future performance. But all too often, companies do neither. If external hires underperform,
it's not the external-ity that is at fault, but the flawed processes that select them.Report
Reply
+1
@Chief_Connector 32 weeks ago
"The author's point, HR in their endless incompetence indeed look for what they "can" see, suchas education and crap written in resumes, and fail to see what people with real jobs can see, such
as how good a person may be for the position." - On point with Kint's statement.
We need more accessibility to structured interviews. It's time to move beyond resumes - groups
like www.hrmc.comand www.hireIQinc.comReport
Reply
+1
Kunal 32 weeks ago
This article clearly states the kind of biased attitude organisations hold for new hires. Although it
is a noticeable fact that hiring someone from outside is more costly than promoting someone
from inside the organisation yet, for the excuses like the external prospect has better education orexperience , he/she can bring a fresh thought on how to do things are given. It is highly
demotivating for internal employees who put their hard work and time in assisting organisations
to earn profits when they are bypassed for someone hired externally. I would like to give mysupport for "promoting the employees internally" thought . An existing employee has better
knowledge about the organisation, the work culture and people inside. Promoting internal
employees bring stability and loyalty in the other employees. It promotes a healthy working
environment, which in turn increase the employee satisfactions and we all are aware that if theemployees are happy the customers will be happy too.
Report
Reply0
http://%20showreportbox%28330099295%29/http://twitter.com/Chief_Connectorhttp://knowledge.wharton.upenn.edu/article.cfm?articleid=2961#IDComment330187690http://www.hrmc.com/http://www.hrmc.com/http://www.hireiqinc.com/http://www.hireiqinc.com/http://%20showreportbox%28330187690%29/http://knowledge.wharton.upenn.edu/article.cfm?articleid=2961#IDComment330712470http://knowledge.wharton.upenn.edu/article.cfm?articleid=2961#IDComment330712470http://%20showreportbox%28330712470%29/http://twitter.com/Chief_Connectorhttp://%20showreportbox%28330099295%29/http://twitter.com/Chief_Connectorhttp://knowledge.wharton.upenn.edu/article.cfm?articleid=2961#IDComment330187690http://www.hrmc.com/http://www.hireiqinc.com/http://%20showreportbox%28330187690%29/http://knowledge.wharton.upenn.edu/article.cfm?articleid=2961#IDComment330712470http://%20showreportbox%28330712470%29/ -
7/29/2019 Why External Hires Get Paid More, and Perform Worse, than Internal Staff
12/13
Ajitha 32 weeks ago
He is totally biassed towards int. .promotions. Not sure about his research validity
ReportReply
0
Robert 32 weeks ago
For the good of the company, I believe that it is imperative to have a mixture of both. To alwayspromote internally lends more to doing the same things the same way with few exceptions. Still
at the same time, internal promotions normally get up to speed faster because they know the
company. External canidates bring fresh eyes and ears to the table, they are less tied to, "the waywe have always done it." Yes, they take longer to get up to speed but their strengths lie
elsewhere. The best system would be to have a diverse group based on the qualities that the job
requires.Report
Reply
0
Rohit 32 weeks ago
This is the true story of all the Organization which does this. Organization always does this bias
to the prompt employees in the organization. When asked why this difference? we are working
on the same and soon the normalization on the packages will be shown.Report
Reply
0
Ulki 30 weeks ago
Very interesting article, thought provoking.
Report
Reply
0
Darin 29 weeks ago
I am surprised about this article. I was a Contractor at a large company for several years, andwhile the Contractors make more money, it was very justified. It seemed to me that the majority
of Internal Employees move from one position to another without actually being qualified, and
http://knowledge.wharton.upenn.edu/article.cfm?articleid=2961#IDComment330746115http://%20showreportbox%28330746115%29/http://knowledge.wharton.upenn.edu/article.cfm?articleid=2961#IDComment331318119http://knowledge.wharton.upenn.edu/article.cfm?articleid=2961#IDComment331318119http://%20showreportbox%28331318119%29/http://knowledge.wharton.upenn.edu/article.cfm?articleid=2961#IDComment333087540http://knowledge.wharton.upenn.edu/article.cfm?articleid=2961#IDComment333087540http://%20showreportbox%28333087540%29/http://knowledge.wharton.upenn.edu/article.cfm?articleid=2961#IDComment344088977http://knowledge.wharton.upenn.edu/article.cfm?articleid=2961#IDComment344088977http://%20showreportbox%28344088977%29/http://knowledge.wharton.upenn.edu/article.cfm?articleid=2961#IDComment347861573http://knowledge.wharton.upenn.edu/article.cfm?articleid=2961#IDComment347861573http://knowledge.wharton.upenn.edu/article.cfm?articleid=2961#IDComment330746115http://%20showreportbox%28330746115%29/http://knowledge.wharton.upenn.edu/article.cfm?articleid=2961#IDComment331318119http://%20showreportbox%28331318119%29/http://knowledge.wharton.upenn.edu/article.cfm?articleid=2961#IDComment333087540http://%20showreportbox%28333087540%29/http://knowledge.wharton.upenn.edu/article.cfm?articleid=2961#IDComment344088977http://%20showreportbox%28344088977%29/http://knowledge.wharton.upenn.edu/article.cfm?articleid=2961#IDComment347861573 -
7/29/2019 Why External Hires Get Paid More, and Perform Worse, than Internal Staff
13/13
the Externals were hired at their position because they are very qualified. As a result, the
Externals did nearly all of the work, and had to teach the Internals how to do their job, especially
Managers because they move around more than anyone. I don't understand how other companiesthat hire Externals are any different.
Report
Reply0
keen psychics 27 weeks ago
An existing employee has better knowledge about the organisation, the work culture and peopleinside. Promoting internal employees bring stability and loyalty in the other employees.
Report
Reply
0
@SalarySchool 26 weeks ago
My experience has led me to believe that his article, in conjunction with the previously
referenced HBR "Plug 'n Play" article are spot on. There is no denying that, in moderation, aninfusion of fresh ideas can add significant value to any organization. However, when an
organization has employees that have jumped through multiple hoops to show their value to the
organization, only to be denied promotions because a box on their skill set has not been formallychecked, it can create an unhealthy environment. Likewise, if the organization hires newcomers
that have all the right experiences (even if performance was sub-standard or not consistent with
the demands of the new company) then one may be setting themselves up for failure.
http://%20showreportbox%28347861573%29/http://keenpsychicsreadings.com/http://knowledge.wharton.upenn.edu/article.cfm?articleid=2961#IDComment356905105http://%20showreportbox%28356905105%29/http://twitter.com/SalarySchoolhttp://knowledge.wharton.upenn.edu/article.cfm?articleid=2961#IDComment361890554http://twitter.com/SalarySchoolhttp://keenpsychicsreadings.com/http://%20showreportbox%28347861573%29/http://keenpsychicsreadings.com/http://knowledge.wharton.upenn.edu/article.cfm?articleid=2961#IDComment356905105http://%20showreportbox%28356905105%29/http://twitter.com/SalarySchoolhttp://knowledge.wharton.upenn.edu/article.cfm?articleid=2961#IDComment361890554
top related