Promotion Rate

What a promotion rate is

The promotion rate (معدل الترقية) is the share of employees promoted in a given period out of the number of employees included in the measurement. The numerator is the number of promotions carried out. The denominator is the group that could have been promoted. Between the two sit two decisions in the definition that the organisation takes before it calculates anything: what counts as a promotion, and who goes into the denominator.

The rate answers one question: how many employees moved up in the structure during the period? A closely related question lies outside it, namely how movement divides between moving up and moving sideways. That question belongs to the career path ratio, which sets out how different definitions of promotion change the figure.

Which denominator to choose

The promotions stay the same and the denominator changes the figure. Take an organisation of 240 employees in which 18 were promoted during the year.

• All employees: the rate is 7.5% (18 ÷ 240).
• Excluding the top grade: that grade holds 20 employees with no grade above them, so the denominator becomes 220 and the rate 8.2% (18 ÷ 220).
• Only those who have served the qualifying period: the organisation sets the period for each grade. If 192 employees have completed it, the rate is 9.4% (18 ÷ 192).

Decimal figures in these examples are rounded to one place, except in the retention comparison below, and all the figures are hypothetical, given to show the structure.

The last denominator counts those who could actually have been promoted, but it needs a written eligibility rule. Without one, every denominator can be justified after the figure is known. We suggest writing the rule before the calculation and stating the denominator beside the rate every time the rate is shown.

Why the structure limits the rate

A promotion needs a seat in the higher grade, and in a pyramid structure the seats at the top are fewer than those below. Return to the same organisation and suppose its middle grade holds 70 employees. The grade above it has 20 seats, of which 3 fell vacant during the year. The most that could be promoted out of the middle grade that year is 3 of 70, which is 4.3%, even if all 70 employees were ready. That low figure is not anyone’s neglect. It is the result of the number of vacant seats.

In the lowest grade, which holds 150 employees, 15 opportunities appeared in the middle grade and 15 employees were promoted, so the rate is 10%. The gap between 10% and 4.3%, in the same organisation and the same year, describes the shape of the structure. It says nothing about anyone’s effort.

The calculation also assumes that seats are filled from inside. If every vacant seat is filled by an outside hire, the internal promotion rate is zero however many opportunities arose. That is a decision measured by a different indicator, and its subject is internal mobility.

What a rising or falling rate means

On its own a change in the rate means nothing, and that is what makes it hard to interpret. A rise can point to a structure that is growing and opening new seats. It can point to departures that have multiplied and left vacancies behind. It can also point to an organisation that has begun changing job titles without changing the work. A fall can point to a stable, full structure. It can also point to a blocked road, which is called a career plateau: an employee has reached a point beyond which no promotion is available.

A high rate does not prove that promotion decisions are good. If the only criterion is mastery of the current role, the result is what is called the Peter principle: an employee is promoted for doing the present job well and not because they are prepared for the larger role. A high rate may then carry a price that shows later. We suggest that a promotion decision rest on written evidence of the employee’s capacity for the larger role, and that is the subject of potential assessment.

Promotion rate by group

The rate is useful when it is divided by group: departments, grades, years of service or gender. If the rates of two groups in the same grade diverge, the reason is asked for. If the divergence continues for years, it is a pattern worth examining as a possible sign of a glass ceiling, a barrier that appears in no document and shows its effect in the distribution.

Small groups, however, mislead. Consider two departments of 25 employees each. In the first, 3 are promoted and in the second 1, so the rates are 12% and 4%. If one more employee were promoted in the second department, its rate would be 8%, and a single event would halve the distance between the two. For that reason a group is not judged on one year, and the numbers are looked at before the percentages. Results are set beside the number of vacant seats in each grade: if no seat fell vacant in a grade, its low rate has no managerial meaning.

How a promotion differs from a pay increase

A promotion is a move to a higher grade or a larger role. An increase is a rise in pay within the same grade. An increase can happen without a promotion, and a promotion can come with a small increase. Take an employee paid 9,000 who receives the annual increment, an increase added to pay once a year under a known rule, so that pay becomes 9,720, an increase of 8%. This is not a promotion and does not enter the numerator of the rate.

Another employee on the same pay is promoted to a higher grade with an increase of 6%, so pay becomes 9,540. This is a promotion and enters the numerator, even though its increase is smaller. The rate measures movement in the structure, and the rise in pay is a separate matter. An organisation that counted every increase as a promotion would raise the rate without a single promotion taking place.

How the rate changes when the structure changes

If every two adjacent grades were merged into one, the actual path of employees would not change, but some moves that used to be promotions would now happen inside the same grade. Suppose that half of the eighteen promotions took place between grades that were merged. Only 9 remain at the boundaries of the new grades, and the rate falls from 7.5% to about 3.8% (9 ÷ 240) without a single employee changing position.

This is why comparing two rates from before and after a restructuring is a comparison between two different things. The transition year is calculated under both definitions together, and the report states which structure each figure was built on.

Whether promotion is linked to staying

The rate is examined alongside the retention rate, since both relate to what employees see of their future. Go back to the organisation of 240 employees, 18 of whom were promoted. Twelve months later 17 of those 18 remained, which is 94.44%. Of the 222 who were not promoted, 190 remained, which is 85.59%. The difference is about 8.9 points.

The difference does not prove that promotion is what kept employees, since those who were promoted may have been more inclined to stay in any case. Nor does it prove that the absence of promotion pushed the others to leave. It does direct the next question: which of the employees who were not promoted have left, and how many of them were candidates for promotion?

What happens when the rate becomes a target

If departments are asked to raise the promotion rate, one route to the target is to widen the definition of promotion. Steps are added between grades or titles are changed, and the figure rises while everything else stays as it was. For that reason we suggest that the rate remain an indicator to be examined, and that managers not be held to account for it.

Managers are held to account for what brings a decision closer to merit: written evidence of readiness, a review of promotion decisions before they are approved, and a written explanation for whoever was not promoted. Each promotion is recorded with its reason and its effective date.

How long an employee waits to be promoted

The rate is examined alongside a companion figure, the average time those promoted spent in their grades before promotion. If five employees were promoted after 2, 3, 3, 4 and 5 years, the average is 3.4 years (17 ÷ 5). The rate can rise while the average wait lengthens, which means that the promotions that took place came after a long wait.

The average has a flaw that should be noted: it counts only those who were promoted. An employee who has waited eight years does not enter the average, because no promotion has occurred in that employee’s case. For that reason the average is accompanied by the number of employees whose time has passed the average without a promotion. Designing the path an employee is expected to follow is the subject of career pathing, whereas the rate measures what actually happened along that path.

A promotion is counted in the period in which the decision took effect, not the period in which it was discussed. A midyear review, for instance, produces no promotion in the rate, because pay and promotion are not decided in it.

How the rate is presented in a report

It is not enough to write “promotion rate 7.5%”. The report gives the definition of promotion adopted, the period, the denominator and the reason it was chosen, the actual number of promotions, and the rate by grade or department together with the number of people in each group. Groups with fewer members than a threshold the organisation writes are merged, so that the rate of a group of three employees is never shown as though it proved something.

What promotion rate to compare with

In the sources available to us we found no published promotion rate that an organisation could use to measure itself. The reason lies in the figure itself: the definition of promotion differs, the denominator differs, and the number of grades in the structure differs, so two rates that carry the same name may not describe the same thing. The comparison that helps is the organisation against itself in successive periods, with the same definition and the same denominator, and then between its own groups. At every examination two questions are asked: has the number of vacant seats changed, and has the definition of promotion or its eligibility rule changed?

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