Internal Vs. External Promotions: Evidence from Professional Football Coaching Careers

Abstract

We examine the job movements of professional football coaches both within and across employers and compare the mechanisms governing internal and external promotions. We find that the likelihood of an external promotion is strongly related to individual performance measures and only weakly related to team performance. In contrast to external promotions, we find that the overall likelihood of an internal promotion is unrelated to an individual's performance. This difference between internal and external labor markets appears to arise from the process governing job openings within the internal hierarchy, as the likelihood of an internal job opening up is negatively related to performance. Conditional on an internal opening occurring, we do find that increases in individual performance increase the probability of being promoted. Relationships matter a great deal in this labor market in the sense that coaches appear to be fired and hired as a group, suggesting that the value of an individual to an employer depends on the identity of the entire set of individuals who work together. We argue that our findings have implications for several issues related to incentives and organizational design.

Keywords: Promotions, Internal Labor Markets, Hierarchies, Performance Evaluation, Careers, Football, Teams

JEL Classification: D23, J41, L22, L83