I'm an internal audit senior in industry and was recently passed over for manager in favor of an external candidate with official manager experience. This has left me with the question of how do people make manager if companies hire out those jobs externally and almost no one in industry hires seniors into manager roles?

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Sounds like that's not a good group for career growth. Not all dept are like that. Either you haven't demonstrated you are ready for the role or it's not a good environment. Or both. Force the convo on why you were passed over. But likely you need to look elsewhere.

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1) go to public and get on the conveyor belt that promos are almost automatic unless you're not very good. If you don't like it, exit as a manager.
2) be very open in your interview discussions of what you're looking for. Candidates are not shy with me with their career goals and it's helpful to know where on the development ladder to place them. Or helpful to know if it won't work out because I can't give the person what they are looking for. If I'm looking for a senior and need a solid 3-years of a senior, and a candidate is looking for a promo next year, that's not going to work. If I'm looking for a manager or high performing senior to fill the pipeline and a high performing senior applies, we know I'm bringing you in as a senior and expectation you'll be a manager next year. Everybody is happy.

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Unfortunately this is common in industry. It comes down to luck. If a manager leaves and the IA leader likes you and thinks you’re competent enough to take on the role, you may get promoted to manager. Managers are more likely to leave if there’s something wrong with the environment or pay.

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This is the situation you warned about when people leave B4 early. You leave for more money and better wlf but in exchange you give up rapid progression and breadth of experiences. Those are the people you are competing against.

Go into B4 where your real life experience is valued or get to a larger internal audit shop.

More work = more experiences per year = more rapid advancement.

Seems like things are working out in line with expectations.

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