Costs of Experience-based Promotion
By: Eugene Oskin
Tags: Performance Reviews, HR, Careers, Promotion, Management And Leadership

The prevailing idea I heard when I worked in a Russian IT outsourcing company was that one needed to work for a certain amount of time to get a raise. It’s a simplistic way to measure one’s work experience. I believe this is an unsustainable approach that weakens a staff’s eagerness to work and slows down a company’s growth.

An experience length-based promotion process is an alluringly low-effort policy for the company that can cause trouble later on. At first glance, it takes only a matrix of how many years one must work to get to middle and senior positions without taking into account the responsibilities, skills, and knowledge of the employee. The problems come later when the time for promotion arrives as dictated by that matrix.

To the employee, the matrix indicates that any promotion and raise will be given immediately, but I’ve never seen anyone agree to spend more money without getting more value. To management, simply having the same person continue the same work but with a new title as specified on the matrix brings no extra value to justify a salary raise. This conflict creates a relationship problem between the employee and company. To the employee, management broke its promise as stated in its matrix.

It could happen that the promise is held, and someone is promoted to a higher position. In this case, a bigger problem arises with higher pressure placed on this person and jealousy among those who remain in their current positions. As a result, the work culture decays and relationships are damaged. It will take time and willingness to restore them.

As game theory experts recommend, a better approach is to design a compensation policy unique to a company and specific to each role so as to stimulate employees to have higher performance based on the company’s needs. This would encourage an employee to do what the company needs without spending a lot of resources on micro-management and over-communication.

The most general approach I found is described by Andrew Grove in High Output Management. The approach consists of two processes: salary progression and promotion. Salary progression is an idea to pay more when an employee shows high performance, and promotion is a process whereby one gets a title with higher compensation. It’s a general but not easy approach because the management must assess performance consistently for each employee, define the rate for different performance levels and titles, and review them periodically for adjustment based on the business’s needs and the state of the job market. It takes a lot of effort for the management, and there are no templates for this.

A company with an experience length-based promotion process can change it. The company can get help and heal the culture and fine tune its HR processes with the support of experienced HR professionals or outside consultants. If there is time pressure and a need to promote someone urgently, it’s better to buy some time without harming the culture, e.g., by postponing the decision or making a temporary decision in the provided context.

A restored healthy culture and work relationship are costly to create and only pay off in the long run. The cost comes with the time needed to create a culture and make mistakes. The effort pays off because team members draw closer to each other and can tolerate mistakes and push the company forward. A company does not grow from anything. It takes employee and management resources to make a change in the world. When an employee grows, the company benefits and grows, too. When a healthy company hires a new skillful employee, the whole organization strengthens.