Career Path Ratio

What the career path ratio is

The career path ratio is a figure that describes how the movement of employees within an organisation over a period was divided between upward moves to a higher grade and lateral moves to another job at the same level.

The ratio is easy to calculate and hard to interpret, for two reasons. Its numerator and its denominator both depend on an internal definition of promotion rather than on something observable, and it covers only the people who moved, who can be a minority of the workforce.

Two ways of dividing the career path ratio

Take a year with 20 promotions and 30 lateral moves:

• The first form: promotions divided by lateral moves, 20 over 30, which gives 0.67.
• The second form: promotions divided by all movement, 20 over 50, which gives 40%.

Both figures describe the same year, and they are not interchangeable, because the denominator of the first is only part of the denominator of the second. Confusing them changes the result: someone who takes “0.67” and reads it as a percentage will report that promotions made up 67% of movement, when the share is 40%.

The figures in this example, and in every example that follows, are hypothetical. They are there to show the calculation, and they are neither a benchmark nor taken from any source.

A career path ratio should therefore not be quoted without its form, and should not be compared with a figure from elsewhere until the division used on each side is known. The second form has a ceiling of 100%, and the first has none. Both forms are in circulation, and the definition of the ratio does not settle which of them is preferable; what it requires is that the form in use is stated.

What the denominator of the career path ratio includes

The denominator counts internal movement only. People who joined the organisation and people who left it are outside it, because the ratio describes how internal movement is distributed, not how much turnover there is. Putting leavers in the denominator mixes two separate measures, and the figure then falls whenever resignations rise, even if promotions are unchanged.

Two questions have no fixed answer. Does a transfer between branches in the same job count? Does a change of title with no change of work count? Both are definitional decisions made inside the organisation, and either of them can move the figure without any change in how employees are developed. Classifying the moves themselves falls under internal mobility.

How the definition of promotion sets the career path ratio

Three definitions of promotion are in use, and each produces a different numerator:

• A change of grade in an approved structure. Grade changes are recorded events that leave no room for opinion, which makes this definition precise. How jobs are placed in grades is covered under job classification.
• A change of job title. The scope here is broad: it takes in title changes that bring no change in responsibility or in pay.
• A rise in pay above a set threshold. Counting by pay is loose, because it mixes promotion with the annual pay review.

An organisation that counts by the second definition can show a higher figure than one that counts by the first, with no difference between them in practice. The ratio can therefore be compared between two organisations only when the definition of promotion used in each is known, a condition that cannot be assumed. No single definition of promotion comes with the term: the choice belongs to the organisation, and it carries straight through to the figure.

In the sources we reviewed, we found no published reference value for the career path ratio in the Saudi market, and we draw no conclusion from that silence.

One career path ratio, two opposite situations

Consider two organisations with 200 employees each:

• The first organisation: 10 employees moved in the year, or 5% of the workforce, of whom 4 were promoted and 6 moved laterally. The ratio in the second form is 40%.
• The second organisation: 60 employees moved, or 30%, of whom 24 were promoted and 36 moved laterally. The ratio is 40% again.

The two figures are identical and the situations are not alike. In the first organisation only one employee in twenty moved; in the second, three in ten did.

This happens because the ratio is calculated on the people who moved and leaves those who stayed out of view. It should not be presented on its own, then, but alongside the number of people who moved as a share of headcount. Taken together, the pair shows whether movement was low or high, and then how it was distributed. Either figure alone leaves that question open.

The career path ratio in a small unit

Take a department with 6 moves: 4 promotions and 2 lateral moves, a ratio of 66.67%. Add one lateral move, and there are 7 moves and a ratio of 57.14%.

A single event has lowered the figure by 9.52 percentage points. That is not a flaw in the calculation but a property of any ratio with a small denominator: the smaller the denominator, the larger the effect of each unit.

It follows that calculating this ratio for a team or a small department measures chance, and that tracking it quarterly in an organisation of medium size can produce swings that attract explanations with nothing behind them. The ratio settles over a period in which the number of moves is large enough to absorb one or two events without a sharp change in the figure. That threshold varies with the size of the organisation, and we found no published value for it.

How the number of grades moves the career path ratio

Compare two organisations in which the distance between the lowest and the highest pay is the same, but the first divides that distance into 12 grades and the second into 6. An employee who covers the whole distance passes through 11 promotions in the first and 5 in the second.

So the first organisation produces more than twice as many promotions as the second for the same path, and the employee gains no more in one than in the other. What differs is the number of steps on the way, not the distance travelled.

A high ratio may therefore reflect the structure rather than the people. By their nature, many grades raise the ratio, and broad bands lower it and push movement towards the lateral side. The ratio should be set against the number of grades in the structure; otherwise a feature of the grade table is counted as employee development.

What the career path ratio does not show

The figure leaves these questions unanswered:

• Whether a move was worthwhile. A lateral move chosen with care and a move made to escape a difficult manager enter the denominator in the same way.
• Where the movement takes place. An organisation whose movement is all in one department and another whose movement is spread across every department can have the same figure.
• What happened to the people who stayed. Some of them may have reached a career plateau years ago, and that information is not carried by the ratio.
• Which way the figure is heading, from one year of data. A single reorganisation can produce dozens of lateral moves at once.

The question behind the career path ratio

An organisation that offers its employees only upward progress runs into an arithmetical limit: there are fewer positions at the top than lower down, so not everyone can rise. Equating progress with upward movement alone promises something the organisation cannot deliver.

The ratio is a way of testing that promise. If nearly all movement is upward, the organisation runs on a single track, and anyone who has not risen is regarded as standing still even if their work has changed. If a meaningful share of movement is lateral, a second route is in use and the organisation acknowledges it, and that route eases the pressure on the few positions at the top.

The figure does not show whether employees themselves recognise that second route. A lateral move that the organisation regards as development and the employee regards as being sidelined enters the denominator in both cases. That is why the ratio is set beside the reasons for leaving gathered in an exit interview, which show how movement was understood rather than how it was classified.

How the career path ratio differs from nearby ideas

The ratio sits beside ideas that describe something else:

• Career pathing is design work done before any move, setting out the routes that are possible; the ratio is a measurement taken afterwards, describing what actually happened. An organisation can map paths and see no movement, and can see movement with no paths mapped.
• Succession planning deals with particular roles and who will fill them, while the ratio covers movement as a whole without regard to the role. The ratio can be high while a critical role in the organisation has no successor.
• Target setting turns a measure into something people are held to. Once the ratio becomes a target, it can be raised by changing titles rather than by developing anyone, the easier and cheaper of the two routes.

What distorts the career path ratio

• Changing the definition between periods. Counting title changes as promotions one year and excluding them the next produces movement in the figure with no source in the work.
• Calculating it over a short period. In the department example, a single event moved the figure by more than nine points when the denominator was six.
• Including new joiners in the denominator. The figure then rises or falls with external hiring, which is outside what the ratio measures.
• Presenting it without the share of the workforce that moved. In the example of the two organisations with 200 employees, identical figures described opposite situations.
• Measuring it in a year of reorganisation. Lateral moves then become a collective administrative event rather than progress in anyone’s career.

Before a career path ratio goes into a report

Four things are written beside the figure: which form was used, which definition of promotion applies, how many moves are in the denominator, and what share of the workforce those moves represent. Without the first, the figure can be mistaken for the value of the other form, as with “0.67” and 40%; without the second, it cannot be compared with anything; without the third, there is no way to judge how much it may swing; and without the fourth, a static organisation can pass for a mobile one.

Then comes the question the ratio does not answer: how many employees have not moved in three years? That figure can be more useful than the ratio itself, because it describes the people who stayed rather than those who moved, and because its answer does not change when a title is changed or a job is reclassified.

This is an explanation of the concept, not legal advice.

Related terms

• Succession Planning
• Exit Interview
• Job Classification
• Peter Principle
• Employee Growth Rate