Posting and Slotting: How Hiring Processes Shape the Quality of Hire and Compensation in Internal Labor Markets

Abstract

Recent research highlights the benefits of internal hiring––filling a job by hiring a worker currently employed by the organization––and more than half of jobs are filled that way. Yet we know surprisingly little about the processes that facilitate the movement of workers across jobs within firms. I address this gap by first detailing the portfolio of internal hiring processes employed by large organizations, focusing on posting and slotting. Posting is a predominantly market-based process in which a manager posts an open job and invites interested candidates to apply, whereas slotting is a predominantly relational process in which a manager personally identifies a preferred candidate and “slots” him or her into an open job. I then examine how key differences between posting and slotting shape two outcomes of importance to firms and workers: quality of hire and compensation. My analysis of 8,107 internal hires at a large U.S. health-services firm reveals that outcomes for internal candidates depend, in part, on the nature of the process used to facilitate the movement from one job to the next; compared with slotted employees, workers who enter a job through posting have higher performance ratings, earn higher salaries, and are less likely to exit the firm. My findings suggest that the posting process improves the quality of hires by expanding the pool of potential candidates at the recruiting stage and by disciplining the information managers use to evaluate candidates at the selection stage. As well, internal candidates hired through posting are more likely to initiate salary negotiations and negotiate more competitively, resulting in higher initial salaries.