Success and failure : profiling performance trajectories in the internal talent market

Abstract

The internal talent market (ITM) is a market-based internal staffing practice that is particularly popular among large firms. The practice involves inviting internal applications for job vacancies, and successful applicants who pass the selection process are internally transferred or promoted to new positions. Although the use of the ITM is common, only a handful of empirical studies have examined its effectiveness. Interestingly, while almost all of the existing ITM research take a positive side, the evidence from ITM practice is more divided—many reports have even warned that the use of the ITM does more harm than good. Why so? First, the focus of the existing ITM research has been on comparing the ITM with other internal and/or external staffing practices. Even if the ITM is proven to be better, it is still unclear whether or not it adds value to the firm. Second, unlike the external talent market, most of the rejected employees in the ITM remain with the firm. Rejection is pervasive in the ITM, but it is often overlooked in studies. ITM research usually draws the conclusion that ITM is effective only based on the sample of accepted employees, but the situation is different when considering the rejected employees. Finally, by adopting an aggregate approach, previous research only captures the overall effectiveness of the ITM. However, in practice, some subgroups of employees have a positive ITM experience while others have a negative experience. The aggregate approach has difficulty in reflecting these negative effects. I address these gaps and reassess the ITM effectiveness by adopting the Latent class growth analysis to (1) track both accepted employee and rejected employee performance over time, before and after experiencing the ITM; (2) identify different subgroups with distinct performance change patterns before and after acceptances/rejections of ITM; and (4) explain the trajectory differences of rejected employees from the expectation perspective and accepted employees from the information asymmetry perspective. Using the archival data of a Fortune 500 technology firm, I identified four subgroups of employees with distinct performance change patterns for rejected employees (i.e., stable, downward, inverted-U from medium performance, and inverted-U from low-performance patterns) and three for accepted employees (i.e., stable, upward, and downward patterns). In addition, the results also show that rejected employees with high expectations (i.e., being competent) tend to display a downward pattern. Accepted employees who are hired under less information asymmetry conditions are more likely to show an upward pattern (i.e., employees who have specific recognition information) and less likely to have a downward pattern (i.e., employees who have repeatedly applied for this team). Theoretical and practical implications of these findings are discussed.