In a CEPR article published on 22 September, researchers analyse Finnish company data: more productive firms fill vacancies internally more often, through both promotions and lateral moves.
Key takeaways
- Among higher-level professionals, the productivity association appears mainly through lateral moves; at lower levels, through promotions.
- The authors suggest that more productive companies may be better at recognising how internal candidates fit new roles.
- The study does not establish that better talent assessment causes this relationship: direct evidence about management practices is limited.
- External hiring remains necessary when new knowledge is needed or a stronger candidate works elsewhere.
What this means for CEOs
Editorial takeaway: internal mobility is a system for sharing information about people as well as a career benefit. Review the internal talent pool before opening a vacancy.