Knowledge @ Wharton has an interesting article on why external hires tend to be paid more, quit 18-20% more, and get worse performance evaluations than internal promotions. Given the shift towards external hiring versus internal promotions across all sizes of organizations, it raises the question of whether a person is best served by being patient and staying with an organization and/or whether organizations would be wise to double their internal career mobility and talent development investments.
The short explanation seems to be that organizational context matters more than people would believe; that the various personalities, cultural norms, shared histories and relationships all impact your ability to do a great job.
“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 to learn, 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.” Because internal 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 information about internal job candidates, including how well they have performed in prior roles and how well they fit in with the current organization.”