Over the last several years, workers and firms have both come to place an increased premium on internal hiring and mobility. While it remains rare for workers to spend their entire career within the same organization, workers would prefer to advance their careers with their current employer, as internal moves are less risky, provide stability, and allow workers to take on more new responsibilities than other firms are willing to provide.
Organizations have come to realize that internal hires are both less expensive and more effective than external hires. As a result, nearly half of all open jobs are now filled internally, and that percentage is even higher as one moves closer to the C-suite.
In a recent study, I set out to better understand how jobs are filled internally. It turns out that the vast majority of internal hires are made through posting or slotting. Posting is a formal, market-oriented process in which a hiring manager posts an open job to an internal job board and invites interested internal candidates to apply.
Over 95% of companies now post at least some jobs internally and many encourage managers to post open jobs, but very few require it, as there are no laws mandating that open jobs are posted internally.
Managers therefore also have the option of filling open jobs through slotting, a relationship-oriented process in which a manager fills an open job with their preferred candidate absent open competition. Posting and slotting operate side-by-side as viable ways for hiring managers to fill jobs within most organizations.
It also turns out that managers who fill jobs through posting make much better hiring decisions than managers who fill jobs through slotting. An analysis of more than 8,000 hires made over a six-year period in a large healthcare organization revealed that posted internal hires outperformed slotted internal hires on multiple dimensions. They received higher overall performance ratings, were more likely to be considered top performers, less likely to be considered bottom performers, more likely to be promoted, and less likely to exit the organization.
So why does posting lead to better hiring decisions? It does so by improving a managers’ ability to identify and evaluate potential candidates. Even the most well-connected hiring manager cannot be expected to know about every potential candidate for an open job. By enabling employees located outside a manager’s personal network to express their interest in and present their qualifications for an open job, posting reduces the likelihood that the hiring manager will fail to identify an exceptional internal candidate.
Posting is also particularly effective in helping managers overcome two common problems associated with evaluating candidates. First, managers often overlook or fail to seek out information that could improve their evaluation of job candidates. Posting a job requires a manager to create a formal job description, which establishes a set of criteria against which to evaluate candidates. Managers who use slotting, in contrast, are able to mold the job requirements around their preferred candidate. Managers who post jobs are therefore more likely to recognize and seek out information that will allow them to evaluate whether a candidate actually possesses the knowledge, skills, and abilities to succeed in the job.
Second, hiring managers are notorious for allowing information that is irrelevant to the candidate’s ability to do the job to influence their evaluation. For example, hiring decisions are often influenced by the extent to which a candidate shares a common set of interests or experiences with the hiring manager that has little if any relevance to the job itself. By requiring managers to post relevant criteria and explain to rejected internal candidates why they were not selected, posting embeds a level of accountability into the evaluation process that reduces the likelihood that this information will influence the hiring decision.
Posting also leads to higher salaries for workers by shaping the dynamics around salary negotiations. A worker who is slotted into a job is unlikely to risk harming a relationship that just led to a promotion by asking for a higher salary. In contrast, a candidate who competed for and beat out other candidates for a job is likely to feel emboldened to ask for more money. Moreover, should they ask, the hiring manager has more leverage to advocate for a higher offer on their behalf, as they can credibly assert that this is the most qualified candidate for the job.
From a practical perspective, these results suggest that workers and firms would be better off if more jobs were posted. Workers would receive higher salaries, and because the costs of replacing an employee alone run anywhere between 20 and 200 percent of an employee’s annual salary, the combined performance and retention benefits associated with better internal hires is likely to far exceed the higher salary costs.
However, it is important to note that I studied an organization that has separate systems to facilitate posting and slotting. For this reason, there were few instances where a manager posted a job while already knowing who they were going to hire – what is commonly referred to as a “wired” search.
While this study suggests that posting is beneficial, managers will not make better decisions simply because the job appears on an internal job board. For posting to work its magic, managers must be willing to fully consider the expanded pool of candidates, to evaluate them against a set of established criteria, and to explain to unsuccessful candidates why they were not selected.
JR Keller. “Posting and Slotting: How Hiring Processes Shape the Quality of Hire and Compensation in Internal Labor Markets.” Administrative Science Quarterly, 2018.
Image: Mike Lawrence via Flickr (CC BY 2.0)