Normally, we don’t provide a full reprint of an article, but this one from Harvard Business Review is something used to repurpose into an original article you can write with AI support. Here’s the original link for those of you who have a HBR membership.

 Here’s the full article (again, not written by us)

 For a moment, let’s flash back to 2020: a year when disruptions triggered by the Covid-19 pandemic forced many firms to freeze hiring or lay off workers, creating a labor market in which those looking for work far outstripped open positions. One year later, as the pandemic eased and the economy reopened, firms found themselves in the opposite situation, struggling to fill an excess of open roles. This economic shift helped catapult the Great Resignation, a period lasting from 2021 to 2023 when well over 100 million U.S. workers, finding the market in their favor, quit their jobs, often in pursuit of higher salaries or better benefits.

Although the speed and scale of the shifts during the Great Resignation were historically unique, the systematic ebb and flow of labor markets is not. Labor markets regularly swing from firm-friendly to job seeker–friendly, causing firms to cycle through periods of feast and famine regarding the number of workers available to serve customer needs. But need this be the case, or are there actions leaders can take to buffer their firms from labor market fluctuations?

To answer that question in part, we returned to the scenes of the pandemic and Great Resignation labor markets. We drew on turnover data for over 11,000 managers from 2018 to 2023 to explore whether promoting employees during employer-friendly labor markets (when strong external candidates are readily available) reduces the likelihood that these employees will quit later when the job market shifts in their favor. Indeed we found that when employees are promoted can have a big impact on whether they decide to stay with a company down the road. Our findings help shed light on ways employers can future-proof their workforce amid changing markets.

 The Employability Paradox

 The notion that promotions will make employees more loyal may seem intuitive. However, well-supported research complicates evidence of its retention benefits, finding that promoting employees to a higher position makes them more valuable on the labor market and thus more likely to leave in the future. This tension between the bright and dark sides of promotions for employers has been dubbed the employability paradox.

 Our study, which is forthcoming in the Journal of Applied Psychology, tested the employability paradox by analyzing employee turnover in a large international restaurant chain between 2018 and 2023. This time frame allowed us to compare turnover rates between internally promoted and externally hired employees from before the pandemic (2018 to 2020) against those at the start of and during the Great Resignation (2021 to 2023).

We first looked at the pre-pandemic turnover rates of internally promoted versus externally hired managers and found that, generally, promoted managers were slightly less likely to quit than those hired externally during this time period. We then looked further ahead and, unsurprisingly, found that quitting among all managers in this firm dramatically increased after April 2021 (the approximate start of the Great Resignation). To put it in perspective, after the start of the Great Resignation, the risk of managers quitting increased 102% at the 30-day mark.

Finally, we turned directly to the employability paradox. We found that after April 2021, as job opportunities abounded, internally promoted managers were more than 47% less likely to quit than their externally hired counterparts. Worth noting here is that we confirmed that promoted and externally hired managers were equivalent on pre-hire metrics, including amount of previous experience, which indicates that this difference in turnover was driven by the promotion itself, rather than differences in prior qualifications.

 How Promotions Create Long-Term Loyalty

To better understand whether the findings of our field study extend to workers outside of the restaurant industry, and to examine the psychology behind why the loyalty side of the employability paradox won out, we ran an experiment that mimicked the conditions of the field study. We assigned 300 working adults in the U.S. to a hypothetical managerial role and told them that they either earned the role through promotion or were hired externally. We then presented them with the first of two simulated economic scenarios. First, they read about and imagined that they experienced an AI-caused global crisis that created widespread job insecurity. We measured their feelings of job security and organizational support in the face of this crisis. In a subsequent scenario, participants experienced an economic recovery with abundant job opportunities, during which time they were presented with an attractive competing job offer.

Our experimental findings mirrored those we saw in the field, but gave us some insight into why promotions are effective buffers against economic shocks. Participants who were “promoted” reported significantly higher perceptions of job security and organizational support during the crisis. Although these perceptions did not initially influence turnover intentions in the firm-friendly labor market, their effects manifested when participants later faced a job seeker–friendly labor market with an attractive external offer. Those in the promotion condition were far less likely to want to quit, suggesting that their earlier sense of safety and support helped reinforce long-term loyalty, visible when the market shifted.

 Warren Buffett has a well-known quote to describe how economic downturns expose companies that are not well run: “It’s only when the tide goes out that you discover who’s been swimming naked.” Our findings point to an extension of this logic related to talent management. It is only when the tide comes back in, and the labor market tightens, that the positive effects of promoting employees pays off for employers, in terms of lower turnover.

 Recommendations for Leaders

Our research addresses an evergreen question facing organizations—to hire or to promote?—but also provides a nuanced understanding of when promoting from within versus hiring from outside will be most impactful. As such, our research provides actionable insights for business leaders and HR professionals seeking to improve retention.

1. Adopt a promotion-first approach to filling positions.

It can be tempting to turn to the external labor market to lure new talent, especially given that promotions come with some headaches, like having to backfill the vacancies they create.

However, our findings demonstrate the long-term risks of this approach. External hiring does not come with the accompanying boost in employee loyalty that promotions do—boosts that pay off by reducing turnover risk when the economic winds change and retention is most critical.

Beyond retention, our study also found that, on average, internally promoted managers outperformed their externally hired counterparts. Promoted managers received higher performance ratings, generated more revenue, and had lower rates of subordinate turnover, reinforcing the business case for prioritizing internal mobility.

2. Promote employees when external hiring is most tempting.

Many companies shift their focus to internal promotions only when external hiring becomes difficult, but our research suggests the opposite tack is more effective. Promoting employees in a firm-friendly labor market signals that the firm values its workforce, reinforcing employees’ sense of security and commitment. By promoting in uncertain times for employees, employers increase the chances of retaining employees in uncertain times for themselves.

3. Take a long-term view on talent management strategy.

Many HR decisions are reactionary, driven by immediate labor market conditions. However, our findings point to the value in taking a consistent approach to talent development. Like all relationships, employees’ emotional bonds to their companies develop over time, and thus companies should cultivate those bonds by prioritizing existing employees through policies that signal career development and advancement. By fostering employee growth and advancement regardless of market fluctuations, organizations create stronger long-term retention.

4. Don’t overweight the employability paradox.

When a newly promoted employee quits, it can sting, and make leaders regret giving the promotion in the first place. While this dark side of promotions will inevitably rear its head from time to time, our findings suggest that such incidents are the exception, and their prevalence will pale in comparison to cases in which promotions lead to retention.

 Some Caveats

Large, external shocks that cause changes in the labor market will undoubtedly happen in the future, and our research suggests that promotions can help firms weather the economic ups and downs these events create. However, we cannot conclude that our findings will apply to all types of major external events. Other forms of shocks, ranging from political instability to war to disruptive technological innovation, each come with a unique set of circumstances that can influence the effect of talent management strategies on employee retention.

Additionally, our field study looked at restaurant employees promoted to managerial roles. It’s possible that other industries or promotions, for example from a managerial role to a more executive position, could have different impacts on retention. However, our follow-up experiments provide evidence that the security and organizational support conveyed by a promotion during uncertain times is likely to trigger higher loyalty and lower subsequent turnover in all workers, regardless of rank and industry.

The Great Resignation provided leaders with a stark reminder of the importance of effective employee retention strategies. However, these lessons are often forgotten as soon as markets return to normal. Our research shows that internal promotions create a strong foundation for long-term employee loyalty—rather than faster departures, as the other side of the employability paradox suggests—particularly as opportunities to jump ship become more plentiful and attractive to workers. A consistent promotion-first approach signals job security and organizational support, fostering a stable workforce that can better weather economic cycles. By prioritizing internal talent development, companies can enhance retention, mitigate turnover risk, and build a resilient organization prepared for future labor market shifts.