The bonds of corporate loyalty were broken decades ago. It is a truism that in the post-industrial era, all bets are off, and the concepts of lifetime employment and “the company man” are relics. In theory, companies have it good, fishing for new employees in a sea of experienced workers with no strings attached. We set out to test whether new hires with relevant experience are always the best catch.
The growing instability of the employment relationship has been the subject of intense scrutiny. Fewer people follow stable or predictable career patterns within one organization, and their experiences are increasingly likely to occur across, rather than within, firm boundaries. In the late 1970s, Americans were estimated to have an average of seven employers in their working lifetimes. By 2005, the US Bureau of Labor Statistics had found that the average American worker born in the later years of the baby boom had 10.5 employers by age 40. Experience in a single firm, therefore, captures only a fraction of the total work experiences of most individuals.
The corollary to a more mobile workforce is the hiring of more experienced workers. But what do organizations get when they hire experienced workers? Yes, experienced workers can bring in diverse knowledge that enables innovation and performance. But most organizations do not explicitly hire in order to gain diverse knowledge. Instead, they seek employees whose prior work experience is similar to the current needs of the organization, because they expect that these employees will bring knowledge that enables them to be immediately productive.
An employee’s understanding of how her industry works, as well as norms from her prior experiences, may conflict with a new employer’s expectations and result in a negative effect on performance once knowledge and skill is accounted for.
While prior-related experience is believed to confer valuable knowledge and skill that can be applied to the current work context, empirical findings have been mixed. Most studies of experience and performance treat experience as a proxy for knowledge. However prior work experience may include not only relevant knowledge and skill, but also routines and habits that do not fit in the new organizational context. Indeed, these routines and habits may limit the positive effect of prior experience on performance, suggesting that when individuals move across firm boundaries, their prior experience may not be wholly beneficial.
Is the Past Prelude?
We proposed that experienced workers may carry knowledge and skill that contributes to an organization’s goals, especially when there is similarity between the prior experience and the current work. However, we predicted they also may transfer cognitive and behavioral rigidities that can impede performance in the new firm. For instance, in the insurance industry, a claims adjuster hired from another company, where haggling over claims was the norm, might take this model of industry practice to a new insurance company that charges a premium price and differentiates on service, where haggling with customers is contrary to the new firm’s customer service norms. Haggling behaviors may not be valued in this new setting, yet they may be very difficult for an adjuster to give up if it has become part of her mental model of how insurance companies make money or how a competent adjuster behaves. Performance can suffer as a result.
We addressed these issues using career history data from all applicants to the call centers of a major US property and casualty insurance firm. We conceptually and methodologically distinguished between prior-related experience and task-relevant knowledge and skill as defined by the current organization. By distinguishing prior-related experience from task-relevant knowledge and skills, we were able to disentangle the positive and negative effects of prior-related experience on performance.
Specifically, we predicted that prior-related experience has an overall positive effect on job performance because of the transferable knowledge and skill, but has a negative effect on performance once knowledge and skill is accounted for. To support our contention that this negative effect of prior experience on performance is related to cognitive and behavioral rigidities, we explored whether adaptability and cultural fit made a difference. Interestingly, we found that the effects of prior-related experience on task-relevant knowledge and skill in the current firm diminish the longer a person is employed at the current firm.
Our findings reflect the subtleties of the imperfect portability of experience and the importance of adaptability. An employee’s understanding of how her industry works, as well as norms from her prior experiences, may conflict with a new employer’s expectations and result in a negative effect on performance once knowledge and skill is accounted for. In contrast, adaptable workers and those who feel they fit well into the culture of the new firm are less subject to the negative overhang of the past. And while prior-related experience has a positive effect on task-relevant knowledge and skill, firm tenure ultimately becomes more important.
Assessing the effects of hiring experienced workers is important because human resources are mobile, and lifetime employment within one firm is a relatively small part of the US employment picture. Workers have differing portfolios of knowledge and skill gained from prior work experience, and these portfolios contribute differentially to a worker’s current job performance. Understanding how past job experiences contribute to organizations’ needs is important. If organizations understand how applicants’ work histories affect their performance, they might consider the effects of prior experience in designing selection, training, or socialization processes. n
GINA DOKKO is assistant professor of management and organizations at NYU Stern. STEFFANIE L. WILK is associate professor of management and human resources at Ohio State University’s Fisher College of Business. NANCY P. ROTHBARD is associate professor of management at the Wharton School of the University of Pennsylvania.