Is it better to hire outside of a firm or internally?

For large corporations, recruiting expenses are enormous, and yet in most cases, the process of hiring internally is secondary to going outside to recruit talent. Research suggests that promoting from within can deliver more benefits for companies than hiring outside talent. I came upon a recent study that found that external hires were paid approximately 18% more than internal employees in equivalent roles, but fared worse in performance reviews during their first two years on the job. Even more interesting was a recent Wall Street Journal article that reported on a study by Booz & Co., which found that chief executives hired from outside a company are twice as likely to be forced out as those promoted from within. These statistics support the fact that companies should invest more in succession planning, a process which, if managed well, will save significant recruiting dollars and produce considerably better performance and organizational stability.

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