Strategy

The perils of job-hopping

Research shows that job-hopping isn't actually the best way to climb the corporate ladder.

When the economy takes a dive, workers hold on to their jobs for dear life, fearful of being cast adrift without a lifeboat. Recovery, meanwhile, provokes the opposite response. As companies begin to fill positions they cut in down times, employees are buoyed by the promise of higher pay and better opportunities, making them quicker to jump ship. It should come as no surprise, then, that the recent return to stability has brought with it a wave of job-hopping: everywhere from North America to Asia to eastern Europe, there have been reports of an uptick in the number of workers that are either considering or making external moves. But it might be wise for aspiring CEOs to think twice before taking the plunge. As new evidence suggests, staying put may in fact be the quickest way to the top.

According to Monika Hamori, a professor at Spain’s IE Business School, “there is a misconception that if you change companies often, it guarantees you a faster promotion velocity.” By comparing the career trajectories of 1,001 CEOs in the U.S. and 21 European countries, she found that contrary to popular belief, the longer individuals stayed with a firm, the more rapidly they progressed to a firm’s upper echelons. In fact, while the average CEO had worked at just three different companies over the course of his career, a quarter of those included in the study had but a single employer. The finding is not limited to those at the very top: when she extended her research, published in a recent edition of the Harvard Business Review, to include the careers of 14,000 lower-level executives, she reached similar conclusions.

While external moves can result in higher pay (presumably workers bargain with those looking to lure them from their current positions), Hamori says that there is no evidence that “greater promotions would accrue from … changing organizations frequently” — even for younger workers. Though the average CEO included in this study was 55 years old, she says preliminary findings for another data set, where employees had an average age of 30, show “no relationship between hopping and promotions.”

It could be that firms are more likely to trust employees they know. “An outsider can often misrepresent herself in an interview,” says Hamori, who conducted interviews with 45 executive search consultants. “Organizations have greater confidence in insiders. They already have information on them.” The tendency to hire from within is even more pronounced in small industries, she says, where it is frowned upon to poach employees from competitors, and in countries like Japan, where “leaving a job is culturally seen as treachery.”

Workers with executive ambitions can, however, be forgiven for believing in the virtues of job-hopping. As University of California Davis economist Ann Huff Stevens asserts in her contribution to the 2008 book Laid Off, Laid Low, “In recent years, a conventional wisdom has emerged, suggesting the extent to which U.S. workers and employers form long term relationships has deteriorated.” Since the 1980s, when companies began slashing jobs in a bid to do more with less, successive rounds of layoffs have fed into the belief that lifelong employment is a thing of the past.

Hamori says it’s in large part this notion that has prompted career counsellors and opinion leaders to advise employees to maintain an external gaze, with some recommending a switch every 18 to 24 months — despite the fact that the data show otherwise. Though some experts argue that employee tenures at the top are decreasing, she points to U.S. Bureau of Labour Statistics, which find that managers stay with a firm an average of 6.1 years (up from 5.3 years in 1983), as proof that the jury is still out. Huff Stevens concurs: “Quantitative studies have, until very recently, shown little evidence of fundamental changes in empirical job security.” While the landscape may be slowly shifting, Hamori insists that careers haven’t changed “to the extent that we think they have.” Her main message: “To strike a balance between external and internal moves.”

To be sure, company loyalty has its limitations. “People who stay very long are sometimes taken for granted by their employers,” says Anil Verma, a professor at the Centre for Industrial Relations and HR at the University of Toronto’s Rotman School of Management. “We see that a lot of senior hires are now made from outside, because people inside the company are not considered good enough.” This is especially true in tough times, he says, citing Ford’s decision to install former Boeing executive Alan Mulally as CEO in place of the founder’s great-grandson in 2006. “When companies are trying to break out of a crisis,” says Verma, “they invariably turn to outside talent.”