Job Promotions More Effective Than External Hiring: Survey Says

What Does It Take To Build A Great Team?

You’d be nuts to pay more for something that performs worse, right? Then maybe the next time you need to hire, consider promoting from within. External hires get significantly lower performance reviews during their first two years on the job than employees promoted from within, according to a recent study by Matthew Bidwell, an assistant professor at the University of Pennsylvania's Wharton School.

External hires are also much more likely to quit and -- worst of all -- cost 18 to 20 percent more than employees promoted from within.

Why it matters to your business: Existing employees know your business, fit into the culture and can hit the ground running in a new position. It's also cost you a lot of time and money to train and develop them already, so why wouldn't you want to hold onto them? Sure, small businesses have a smaller talent pool to draw from than the wider world, but many entrepreneurs find it effective to hire entry-level employees from the outside, let them mature, then promote them to higher positions. That way, the pay gap is less painful, since entry-level employees are paid less and if they leave early on, you won't see years of investment walking out the door.

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