Which Are More Valuable: Internally or Externally Sourced Candidates?

The science of recruiting is years behind our peers in other disciplines, but when I see research like this journal article, “Paying More to Get Less: The Effects of External Hiring versus Internal Mobility,” I know we’re beginning to catch up.

This study was published in the Administrative Science Quarterly in September 2011 and recently described in detail by Peter Cappelli (my favorite Wharton Professor), in his column for HR Executive magazine, Paying More to Get Less.

It is perhaps the best work I’ve seen in years.

In the original research, the author describes how he dug into the data of one financial services firm to identify and track a number of jobs filled by both internally and externally sourced candidates over a protracted period of time.

He then compared subsequent performance ratings of the incumbents (over years) and found statistically significant evidence that:

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  • Internal candidates performed better than those hired from the outside.
  • External candidates took as long as three years to achieve the performance levels of their internally promoted peers.
  • External candidates were paid 15% more on average.
  • The performance of individuals who were externally sourced was higher if they were not brought in through search.

Now this is science I enjoy … not because it is necessarily true beyond the one firm in which the study was done, but because it is transparent, describing methodology openly and in a way that we (dear readers) would be able to improve on and replicate within your own firms.

As someone who is getting tired of tons of unsupported opinions stated as fact and megatons of research by vendor content creators with serious conflicts of interest, this is refreshing. Give me more.

Gerry Crispin, is an internationally recognized speaker, author, and thought leader. He seeks to understand how firms design and build staffing processes, the technology to enhance them and the systems to manage them. He is also committed to writing, researching, and sharing his adventures, opinions and observations about evolving staffing models with the HR profession, clients and friends. He and his partner, Mark Mehler, created CareerXroads® and the CareerXroads Colloquium with one goal in mind: critically analyzing corporate recruiting issues from a tactical yet strategic perspective. Learn more at CareerXroads