1. Get the Job
  2. Get Ahead
  3. Office Life
  4. Work-Life Balance
  5. Home Office
Product and service reviews are conducted independently by our editorial team, but we sometimes make money when you click on links. Learn more.
Build Your Career Get Ahead

Why You're More Likely to Get a Raise by Quitting Your Job

job promotion Credit: Job Promotion Image via Shutterstock

If you think the only way to get a big pay raise is to find a new job, you may be right. New research validates employees' sneaking suspicions that they have been wrongly passed over for a promotion in favor of someone from outside the organization – who often gets paid more. To add insult to injury, it turns out that external hires don't do nearly as good a job as people who are promoted from within.

The reality is, companies might be better off hiring or promoting from within.

"Companies should understand that it can often be harder than it seems to bring in people who look good on paper," said Matthew Bidwell, management professor at the University of Pennsylvania's Wharton School of Business and author of the study. "In addition, there is a suspicion that 'the grass is always greener' attitude plays a role in some companies' desire to hire from the outside. Managers see a great CV and get excited about playing 'Let's Make a Deal,' even when it's hard to know what weaknesses the external hires bring with them."

Bidwell found that hiring from the outside has two major drawbacks. Chief among them is that it generally takes about two years for new hires to adjust to new responsibilities within an organization. Additionally, hiring managers reported that they typically pay these hires more, between 18 and 20 percent more, to lure them away from their current position. However, those who made it past the first two years were promoted more quickly than internal candidates.

[10 Celebrities Hiring Right Now]

Even if external hires are qualified for the job, Bidwell notes that success is not guaranteed.  

"This is not a free lunch for the external hires," Bidwell said. "There is a much greater risk of being let go during those first few years, mainly because they may not develop the necessary skills and thus will not perform as well as expected. Then, too, they might decide to leave voluntarily."

While being passed over for a position within an organization for a person from outside the organization may frustrate employees, Bidwell does not recommend quitting as a move to improve your situation. According to Bidwell, that is nothing more than a way to show disloyalty toward your organization and potentially be fired.

"If you like where you are, stay there," Bidwell said. "Or at least understand how hard it can be to take your skills with you. You think you can go to another job and perform well, but it takes a long time to build up to the same effectiveness that you had in your previous organization. You need to be aware that often your skills are much less portable than you think they are. While the pay may be less, your performance is better, and there is more security."

"Paying More to Get Less: The Effects of External Hiring versus Internal Mobility" was published in the journal Administrative Sciences Quarterly.

Reach BusinessNewsDaily staff writer David Mielach at Dmielach@techmedianetwork.com. Follow him on Twitter @D_M89.

Business News Daily Editor

Business News Daily was founded in 2010 as a resource for small business owners at all stages of their entrepreneurial journey. Our site is focused exclusively on giving small business advice, tutorials and insider insights. Business News Daily is owned by Business.com.