Why being promoted from within gives you a key advantage

A new study has found that managers who were promoted from within the company receive more money and respect compared to managers hired from the outside. 

The study of 1,000 participants from around the United States found that most employees prefer to work for managers who were promoted from within the company.

More than half said that internal promotions also help to improve company morale and overall performance. 

Could internal promotions be the magic sauce to career advancement? 

The key advantages of being promoted from within

Internally promoted managers have several key advantages, according to the report. They are more likely to:

  • Gain respect from their staff. Almost 66% of those surveyed prefer to be managed by an internal hire.
  • Reduce turnover, due to the employee’s pre-existing experience working with the company’s processes, technology, and within its culture.

Also, those who work for managers who were promoted from within an organization reported key improvements in productivity, job loyalty, morale, job satisfaction, and stress compared to working for external managers. 

This means internally-promoted managers lead a more loyal and highly motivated staff with less of a need to earn trust and build brand new relationships. They feel more support from their team, and most internal hires are paid more money than external hires for the same position. 

“Managers promoted from within their existing organizations also reported earning higher annual salaries on average, over $59,000 compared to just under $57,000 for externally hired managers.”

These findings largely back up a similar study conducted almost 10 years ago. 

Matthew Bidwell, an assistant professor at Wharton School of Business, studied 30-year hiring trends from across the country and found that external hires were much more likely to be laid off than those who were promoted from within. 

“External hires tended to have more education and experience than the internal hires, but Bidwell says employers don’t appreciate how important it is for workers to know the ropes of an organization,” wrote Forbes. Onboarding and ramp-up time is a huge cost for most organizations, and Bidwell believes many companies underestimate how much time and resources they spend getting external hires up to speed.

“It can be tough to resist the allure of a superstar, and it’s challenging for companies to build up a pipeline of employees who are suitable for promotion.” 

But, evidence continues to show that promoting from within helps to improve employee morale and trust within many organizations across the country. They come to their new position with existing knowledge of the organization and can get up to speed much more quickly than a typical external hire. 

External hires still have value

“In cases where promotions from the inside might not be the best fit, many employees agreed that they may not currently have internal employees that fit the role (53%),” the report found. 

In addition, almost four in 10 said that internal employees might not want the demands of added responsibilities that come with promotions, and 36% said that those who were promoted from within are less likely to add new perspectives or diverse opinions to company projects. 

As with most things in life, there are pros and cons. 

There are conditions that could lean toward “buying” an external candidate instead of building a team that was promoted from within, according to SHRM

For instance, buying talent from the outside could be a better decision if the organization is going through a drastic shift in strategy or organization. Additionally, external candidates could bring skillsets that most internal staff don’t possess, and outside hires can fit well within companies that value multiple perspectives from a widely diverse workforce. 

“It’s not whether you build or buy, it’s figuring out under what conditions you build or buy,” says Harvard Business School professor Boris Groysberg.