Many organizations use internal promotions as an investment in their employees, hoping to increase retention rates. However, this can create a “double-edged sword,” as more impressive job titles and responsibilities may increase an employee’s marketability, making them more attractive to other employers. New research (Hardy et al., 2025) investigated the retention rates of internally sourced versus externally sourced managers.
INTERNALLY VERSUS EXTERNALLY SOURCED HIRES
The authors conducted a study of over 11,000 restaurant managers. It took place around the COVID-19 pandemic, which created a rare transition from a weak job market to a historically strong one—or what many called the “Great Resignation.” During this new strong job market, externally hired managers were nearly four times more likely to voluntarily leave their roles compared to internally promoted managers.
In a follow-up experiment, participants were told to imagine being either internally promoted or externally hired as a restaurant manager. After being presented with a simulated economic crisis followed by a strong job market (similar to COVID-19), the external managers were more likely to want to leave when presented with the opportunity.
These findings occurred because, compared to internally sourced managers, external hires were (1) more afraid of eventually losing their jobs and (2) believed they would receive lower levels of organizational support.
PRACTICAL IMPLICATIONS
Promoting employees within an organization can serve as an effective retention strategy, as it boosts their perception that the organization cares about them. As such, organizations should invest in employee development and opportunities for upward mobility.
Further, organizations should be aware that externally hired managers may represent a heightened turnover risk, as they may be more likely to jump ship when the market is favorable for them. Ultimately, organizations may need to consider this research finding when balancing the need for new versus internal hires, but in any case, they should offer support to both.
Hardy, J. H. III, Thiel, C. E., Gibson, C., Klotz, A. C., & Barsa, A. (2025). After shocks: The effects of internal sourcing on voluntary turnover. Journal of Applied Psychology. Advance online publication.
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