As if there hasn’t been enough fallout from the Great Recession and its lingering aftermath, here’s another one: a new survey found that organizations are promoting fewer employees into better positions, and, that even when people are promoted the size of the pay increase that comes with the promotion is less than in the past.
In other words, promotions are fewer and the pay increases smaller.
This is an odd wrinkle in the economic downturn, because with so many workers experiencing salary cuts, wage freezes, furloughs and other cost-cutting strategies that have clamped down on salary budgets, promotions were one of the few ways that high-performing employees could still push their salary up.
Average promotional raise down as well
Yet according to the “Promotional Guidelines” survey recently released by WorldatWork (a not-for-profit organization focused on global human resources issues including compensation, benefits, work-life and integrated total rewards), survey respondents report that only 7 percent of the employee population received a promotion in 2010, down from the 8.1 percent employees who receive a promotion in a typical year.
And, the survey also found that the average size of promotion has declined as well, though one employee group seems to be feeling the pinch a bit more. While all employee groups — nonexempt, exempt, officers/executives — saw declines in their average promotional increases, officers/executives saw the biggest decline from 11.4 percent in 2005 to 9.5 percent in 2010.
The most influential factors in determining the amount of the increase in promotions are the pay range of the new position (66 percent), the rates paid to other employees in similar positions (60 percent) and external pay data (36 percent).
And one more thing in the survey that surprised me: “Despite the fact that career advancement and more challenging job opportunities are key elements of a total rewards package, most organizations do not communicate these opportunities to potential employees during the recruitment process. Nearly two-thirds indicated that they do not feature or market promotional opportunities as a key employee benefit when attempting to attract new employees.”
“A perceived lack of opportunity for career advancement and promotion can be demoralizing, especially to top performers,” said Kerry Chou, CCP, CBP, GRP, a senior practice leader with WorldatWork. “Our study shows that organizations continue to plan for promotions and many even proactively budget for it separately from other pay increase budgets. Organizations ought to communicate and raise the visibility of promotions as one of the key elements of their total rewards packages.”
Respondents mainly from large organizations
Data for the “Promotional Guidelines” survey was collected from Sept. 15 to Oct. 1, 2010. There are 720 responses in the final dataset. Survey respondents are WorldatWork members employed in the HR, compensation and benefits departments of mostly large U.S. organizations; 71 percent are from private sector and 29 percent are from public sector and not-for-profits.
The complete survey is worth taking a close look at if you are into this topic, but as someone who isn’t particularly focused on the rate of promotions during the recession, I didn’t find the results particularly surprising. That’s because I know that many organizations simply reduced or eliminated positions when people left or moved into another job, and that seriously limited the total number of positions available for promotions.
I also know that cutting costs became a mantra during the past few years, and i can’t tell you how many people I know personally who turned their nose up at what would normally be a nice promotion when they heard how little additional money they would be getting with it. For many, it simply wasn’t worth the extra work and stress for so few additional dollars.
That’s what happens when cost cutting becomes the overriding goal, and you skimp on money for high performers you want to promote. In the end, the high performers decide it’s not worth their while to take a promotion, and in many cases, that leads to them eventually leaving the organization.
Companies everywhere have gotten into so bad and terribly short-sighted habits during the long and lingering economic downturn. This WorldatWork survey is just another reminder of that, and how much that American business needs to do to get their workforce back on board with them again.