A promotion means an employee advances to the next hierarchical level in an organization. According to the SHRM 2006 U.S. Job Retention Poll Findings, promotion of qualified employees is a people-management strategy used to retain staff as a direct response to continuing improvements in the economy. Additionally, promotion from within the organization is frequently a method of rewarding high levels of job performance and may therefore be an effective way to motivate employees to perform well. Not surprisingly, the promotion of qualified employees was seen by HR professionals as a more effective retention strategy in 2006 than in 2004.1
These findings are supported by studies that have shown that employees who perceive more advancement opportunities within their organization or have been promoted within the past year are less likely to voluntarily leave the organization.2 Given the positive impact of promotion on employee retention, HR practitioners can capture and measure promotion activities by measuring the promotion rate: the total number of promotions divided by the overall headcount of employees within an organization.
A promotion rate that deviates significantly from the company’s past record or the industry average indicates the need to examine promotion procedures and other characteristics of the organization. For example, is the selection process becoming more lenient or stringent? Promotion rate can also be affected by the career development opportunities that the organization offers to its employees. Such opportunities are often associated with the organizational structure—with flatter structures leading to fewer opportunities within the company.
Additionally, tracking the promotion rate of employees allows HR practitioners to develop recruiting strategies to fill openings at higher levels. For example, high promotion rates within an organization may mean the organization chooses to groom its internal staff for senior-level positions, thereby using external recruiting activities to fill more junior positions. Measuring promotion rates along with other human capital metrics, such as time-to-fill, recruiting costs and performance effectiveness of promoted candidates once they are in new positions, helps to determine if promoting from within yields a return on investment.
To many employees, promotion represents a career success factor, along with pay and job satisfaction. As employee performance is increasingly valued, there is a tendency in organizations to promote individuals based on merit. With structured performance evaluation and selection processes, promotion can be used as an incentive to retain top performers in the company. For more information on human capital metrics and to learn how the SHRM Customized Benchmarking Service can take your HR department to the next level, please visit our Web site at www.shrm.org/Research/CustomizedBenchmarkingService/Pages/default.aspx/ or call 1-800-283-7476 ext. 6366.
1 Frincke, J. (2006). SHRM 2006 U.S. job retention poll findings. Retrieved April 20, 2007, from www.shrm.org/Research/SurveyFindings/Pages/default.aspx.
2 Stroh, L. K., Brett, J. M., & Reilly, A. H. (1996). Family structure, glass ceiling, and traditional explanations for the differential rate of turnover of female and male managers. Journal of Vocational Behavior, 49, 99–118.
Project leader: Belin Tai, Research Consultant
Project contributors: John Dooney, Manager, Strategic Research; Steve Williams, Ph.D., SPHR, Director, Research
Editor: Katya Scanlan, Copy Editor
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