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The LinkUp Blog The Industry's Best-Kept Secret

January 21, 2015 / Molly Moseley

Internal vs. external, which hire has more value

internalexternalIn many industries, it’s common knowledge that if you want a big pay raise, you’re probably going to have to look for a new job with a new company. Even after years of loyalty, companies tend to underestimate the potential of internal staff and instead hire external candidates whose skills, they hope, will bring new energy and productivity to the team.

But is this strategy paying off for companies, or is it better to promote from within? Furthermore, how do these actions affect existing staff who get passed by?

A fascinating study, titled “Paying More to Get Less” and published by Administrative Science Quarterly, found that although external hires are paid about 18 percent more, they scored worse on performance reviews and were 61 percent more likely to be fired from their new jobs than their internally promoted counterparts.

Every situation is unique, of course, and there will be times when no internal candidates are qualified for a particular role. If there are hardworking employees that could be a potential match, however, it appears that any hiring manager who overlooks them would be making a big mistake. Even if fresh candidates are highly qualified in regards to the skills they bring to the table, it can still take one to two years to get up to speed with important components of success, such as trust, relationship building and aligning with the corporate culture.

While the allure of bringing in new blood in hopes of revitalizing a team can be difficult to resist, it’s important to look at all your options in order to make the right decision. Here are four ways that internal candidates trump external talent:

Productivity: Internal employees already know the company and its procedures. Even if some training is required for the new positions, they will be more productive more quickly than a fresh face.

Reputation: You already know this person’s work ethic and how he or she collaborates with other employees. Knowing the strengths and weaknesses of an employee ahead of time is a huge asset.

Cost: In addition to often paying more for salary, there is also added training and lost productivity to consider. This means it often costs a company much more to hire externally.

Loyalty: You know internal staff are more loyal because they have a history with the company. Hiring from within boosts morale for the whole team; hiring externally can cause worry.

These compelling reasons aren’t just valuable for companies, they can be great points for employees who want to make the argument that they are the best candidate for a promotion. If you want to be considered for a job opening, have a candid talk with your supervisor and/or head of HR. Bring hard numbers about your productivity, know why you want the position and mention your tenure. These things alone can make a compelling case.

What about getting paid less than an external candidate to do the same job? It’s a topic that should be addressed head-on. Existing employees should have the confidence to negotiate salary if they are applying for a new internal position. You might already know the pay scale based on the job posting, so make sure you get an offer within that range. If that information is not advertised, research what people in that position are getting paid in the local market, and share those numbers to back up why you feel you’re worth more. Remember, you are your biggest advocate for a promotion and adequate pay, so make sure to share your thoughts in a professional manner.