By Claudine Kapel
Many employees place high value on opportunities for advancement. But does that mean you should be promoting what the organization has to offer in the way of upward mobility?
It depends on the extent to which the organization can actually deliver such opportunities. And for many employers, promotional opportunities have become scarce in the face of flatter organizational structures with fewer layers of management.
To that end, it’s not really a surprise that a recent WorldatWork study found organizations are generally reluctant to engage in broad-based communication around promotional guidelines and policies.
The study found that in 2012, only 16 per cent of organizations indicated they wanted every employee to fully understand the organization’s promotional guidelines and polices – down from 22 per cent in 2010.
The study analyzed the promotional practices of 873 member organizations, primarily in the United States.
While organizations may not want to overemphasize advancement opportunities, it’s still wise to have clear guidelines for managing the process. Such guidelines help ensure promotions are both consistently managed and meaningful to those being advanced.
Some key questions that should be addressed include:
- How is a promotion defined?
- How much should someone receive as a promotional increase?
- What considerations should influence the size of a promotional increase?
- How should promotional increases be funded?
- Should an employee receive a promotional increase for making a lateral move?
The findings of the WorldatWork study offer some insights into how organizations are addressing these questions.
According to the study findings, the top two criteria used to define a promotion are:
- An increase in pay grade, band or level (81 per cent).
- The addition of higher-level responsibilities (76 per cent).
In terms of promotional increases, study participants reported that in a typical year, about eight per cent of the employee population receives a promotion, and those individuals receive a seven to 10 per cent salary increase, depending on the employee category.
In 2012, salaried employees received an average promotional salary increase of 8.7 per cent, up from 8.3 per cent in 2010. Hourly employees, meanwhile, received an average promotional salary increase of 7.4 per cent, up from 7.1 per cent in 2010.
The study identified key factors organizations consider when determining the rate of a promotional wage increase, including:
- Pay range for the new position (69 per cent).
- Rates paid to other employees similarly situated within the organization (60 per cent).
- External pay data, if available (38 per cent).
- Performance level of the individual being promoted (28 per cent).
- Qualifications of the individual being promoted, compared to the qualifications of other employees in the same job within the organization (27 per cent).
Only 21 per cent of respondents indicated using a fixed percentage increase for most promotional salary increases.
With respect to the funding of promotional increases, the study found 43 per cent of organizations budget for promotional increases separate from other pay increase budgets. A further 28 per cent said they pay for promotional increases with savings from vacant positions, while 18 per cent indicated they budget for promotional increases as part of their merit budgets.
When it comes to lateral moves, 57 per cent of respondents reported employees are typically not eligible for a promotional increase when moving to another position at the same level. An additional 35 per cent indicated it depended on the position.
Ultimately, promotions represent a key part of any staffing strategy. An effective approach – even without fanfare – is critical for both employee retention and organizational performance.
Claudine Kapel is principal of Kapel and Associates Inc., a Toronto-based human resources and communications consulting firm specializing in the design and implementation of compensation and total rewards programs. For more information, visit www.kapelandassociates.com.