Inside vs. Outside (Opinion)

The Wall Street Journal published an interesting article recently on the value of internal promotion compared with new employees recruited from outside.

“What costs more but often works worse? Outside hires,” wrote reporters Rachel Emma Silverman and Lauren Weber.

And, you know, it seemed so obvious. A study by the University of Pennsylvania’s Wharton School found that external hires were paid more — about 18 percent more — than employees who were promoted from within. But despite being more expensive, the new recruits typically had worse performance reviews during their first couple of years in the new job.

“The system” seems designed to encourage high performers to go to another company because that’s the surest way to get a nice raise. The previous employer must replace that good employee — often with a newcomer and at a higher price — and the new employer may be disappointed because success in one setting does not necessarily translate into a new organization.

Haven’t Arkansas taxpayers seen this pattern played out over and over again? At the University of Central Arkansas, at UALR’s College of Business, at the Arkansas Scholarship Lottery: national searches that result in big-dollar, ultimately disappointing external hires that are finally replaced by someone who was right there all the time.

Something like that might even be happening with the Razorbacks football team.

Sometimes we wonder if Arkansas’ economic development efforts aren’t victim to the same forest-for-the-trees mentality. Of course we need to be reaching outside the state, even outside the country, for new markets and new investment. But let’s not forget that our biggest, best, most reliable corporate citizens are the ones who are already here, already invested in Arkansas.