It Happens Too Often: Good Employees Must Leave to get More Pay or a Promotion

HERE’S A PROBLEM that I struggled with when I was a middle manager.

It popped up in places I worked from Kentucky to Hawaii, and was detailed recently in a Harvard Business Review story titled When New Hires Get Paid More, Top Performers Resign. First.

As the summary in HBR describes it:

“To attract new talent, employers often offer new hires higher wages than existing employees. But today, a combination of regulatory changes and technological advances have dramatically increased pay transparency in many sectors, making employees increasingly aware of these pay disparities. How do existing employees (and especially top performers) react to these higher-paid new hires? And how can organizations mitigate the associated risks? “

This is not an uncommon issue. Most anyone who has been in the white collar workplace has seen people argue for a promotion (or even just a raise) and get passed over … only to find that somebody from the outside had been brought in for the job they wanted.

Sometimes, it turns out to be a good move and everyone can see that the new hire is talented and well qualified. I’ve even had people who had been passed over tell me later that as much as they felt cheated out of the job promotion, they could see that the person who was brought in was exceptionally talented in ways that they were not.

Things don’t always turn out as expected

YES, THAT DOES HAPPEN on occasion.

But more often than not, passing over someone on the staff for a promotion and pay raise in lieu of someone new doesn’t work out as expected.

This is what the HBR story digs into, and the data behind it comes from “the Visier Community Data, of more than 4 million live employee records from nearly 100 companies across the U.S., Canada, and Europe during the period of 2018 to 2023.”

Here’s what they did with that data:

“We looked at the tenures and salaries of higher- and lower-performing employees, leveraging statistical methods to identify patterns and trends in the data. We were particularly interested in how likely employees were to resign after the addition of a higher-paid coworker, as well as the extent to which getting a pay raise might reduce their chances of resigning.”

You should read the HBR story to get the deeper dive into the various things that they found in the data, but here’s the bottom line if you just want to cut to the chase:

“Every organization faces its own unique challenges.  … It’s up to individual organizations to analyze their own data to test whether they see similar patterns and to identify any effects that may be specific to their environment and workforce.

That being said, our data suggests that unless employers adjust existing employees’ wages soon after making a higher-paid new hire, employees tend to resign — and that top performers tend to resign even faster than others.

As such, employers should be aware of the psychological effects that hiring higher-paid external talent can have on their teams, they should conduct regular pay equity analyses to ensure that any disparities are fully explainable, and they should develop the agility necessary to adjust wages as soon as inequities are identified.”

Passing on a good employee for somebody flashy

HERE’S MY TAKE: I remember incidents where really solid performers — and first-rate employees — quit because they got passed over for a raise or promotion. And in many cases, the person they were passed over for either left after a short time, or, just wasn’t nearly as good as the employee who walked.

The most memorable of these incidents was when I was an assistant managing editor at a large Southern California newspaper (not the Los Angeles Times) that had reporters covering the area’s two professional basketball teams — the Los Angeles Clippers and the world-famous Los Angeles Lakers.

When our Lakers reporter left (to open a bar in the north of Scotland, of all things), the longtime Clippers reporter requested a promotion to the Lakers beat.

He was a hard worker and solid writer but not terribly flashy. I didn’t supervise him, but I thought he had done a good enough job covering the then-lowly Clippers to merit a shot as the beat reporter for the just-past-the showtime-era Lakers.

But the managing editor was big on hiring flashy people, so she passed over the male African-American basketball writer who was already in our employ and covering the Clippers. Instead, she brought in a younger, female African-American sports reporter from USA Today to handle our Lakers coverage.

Well, you probably know what happened.

What happens when flashy doesn’t work

The young lady from USA Today was a flashy personality but a so-so writer and reporter. She only lasted a single year covering the Lakers before she jumped to a bigger and more prestigious newspaper because they liked her flashiness too.

There’s nothing wrong with being flashy, of course, except that flashiness doesn’t always get the work done.

The fallout from hiring somebody flashy was that the guy who was passed over for the Lakers reporter job got fed up and quit. On top of that, we also lost another sports writer who thought he was going to get the Clippers beat job but didn’t because the Clippers guy never got promoted.

We lost two solid and committed sports writers respected by everyone for one flashy writer from the outside who used her job on the Lakers beat as a springboard to another job elsewhere.

It sent a clear and unmistakeable message to the rest of the staff: if you really want to get ahead, you need to go someplace else.

It is not unusual for organizations to pass on people they already have for someone new, and there’s a  reason for it: Employers overvalue experience collected elsewhere.

A Bloomberry.com article from January 2024 described it like this:

“This is a phenomenon … in many companies, where experience built elsewhere is often valued higher than the one built in house. I’ve personally experienced this many times in my career, when my company would bring in a new ‘shiny’ person from a competitor, with decades of experience and armed with fresh insights/knowledge.

I would often wonder: “’ have the same exact experience as that person! Like… why didn’t you just promote me?!’ Unfortunately, from a company’s perspective, their thinking is: our current team led to us being in a stagnant market position: So we need someone new, exciting to revamp everything and put us in the right course!

Unfortunately, I think this is just a psychological habit among people. We hate price increases on products/services we already purchased, but easily spend more on new things. The same goes for employees.”

So much for old and dependable

IT’S SAD TO SAY, but some workplace issues never seem to go away.

The new and the flashy always gets chosen over the old and dependable. It’s a sad but expected part of the human condition and always has been, it seems.

The HBR article gets to the point of all this, but until somebody truly wants to fix the problem, people will keep grousing about it.

And maybe the investment so many organizations are making in their employee experience is a good place to start.

Other trends and insights …

And if you need your weekly fix of AI news … 

• India reverses AI stance, requires government approval for model launches (From TechCrunch.com)
• How employers are using AI to manage healthcare, burnout and more (From BenefitsNews.com)
• AI is already screening job resumes and rental apartment applications and even determining medical care with almost no oversight (From Fortune.com)
• Needed: Visionary Leadership for the Generative AI Era (From ChiefExecutive.net)
• 86% of Chief Information Officers have implemented formal AI policies (From SecurityMagazine.com)
• Employees need AI skills — but what does that training look like? (From HRDive.com)
• LinkedIn makes $1.7 billion — thanks to AI (From MSPoweruser.com)
• New Slack research shows accelerating AI use and quantifies the “work of work” (From Slack.com)
• AI won’t replace someone’s job — but the person who knows how to use it might (From Quartz.com)

ALSO: Sometimes, a workplace story comes along that you MUST read even if you know it won’t be terribly helpful. So it was this week with: Your Employee Thinks They’re God’s Gift. How to Break It to Them. It’s not what you expect from The Wall Street Journal, but you need to read a story that says some employees, “believe they’re God’s gifts but are actually employees from hell, and if you’ve been a manager at any level then you’ve probably had one. In fact, the odds that you’re managing a delusional worker may be higher than ever.”

Readers: I’ve been writing this wrap-up in one form or another for 20 years — from Workforce.com to TLNT.com to Fuel50 and now here on The Skeptical Guy. Let me know what you think at johnhollon@yahoo.com.