Often, in exchange for lower pay, an individual is willing to become part of a closed organization, like a university, because of the security and benefits such organizations offer. The dangers of static membership are that the ideas of a closed organization can become quickly outdated. Attrition may also occur if more creative employees feel as if they are not adequately rewarded in performance reviews, and only seniority is valued. Civil service jobs are paradigmatic 'closed system' jobs, where focus tends to be on ranks and grades in advancement rather than demonstrable performance at the job (Berman 2000: 125). On the other hand, having an open organization can mean that it is difficult to keep top talent at the company, because of the fluidity of the organizational culture. Fewer benefits and less stability foster less secure organizational loyalty. High rates of turnover can make job analysis and evaluation more difficult, given the constantly changing personalities at an open organization.

Should lateral entry at higher management and supervisory positions be encouraged? Are open organizations vulnerable to lower hiring standards than closed organizations?

Openness and lateral entry into higher management...

Lateral promotions are a good way to incorporate new and valuable skill sets, such as technological knowledge, into a department. While it is true that open organizations such as sales may be more vulnerable to lower hiring standards than closed organizations, given there are fewer barriers to applying, so long as new hires are carefully tracked during their first year and there is an extensive orientation process, many of these organizational risks can be mitigated. The danger exists at higher levels of organizational management, when someone might wish to assume a temporarily assume a high-level managerial position more as a 'career booster,' not because he or she cares about the organization's long-term future.
References

Berman, E. (et al., 2000). Human resource management in public service. Sage Publishers.

Life at Google. (2010). Google. Retrieved October 26, 2010 at http://www.google.com/international/en/jobs/lifeatgoogle/

Open and closed systems. (2010). Reference for business. Retrieved October 26, 2010 at http://www.referenceforbusiness.com/management/Ob-or/Open-and-Closed-Systems.html