As Q1 wraps up, many organizations are putting the final touches on the merit increases for their employees. Promotions tend to be a big topic during this time, especially in companies that use performance-based pay processes. Annual performance reviews are a big component and high performing talent is easily identified. The high performers are natural candidates for leadership roles or higher level individual contributor roles.

But how many promotions are too many? Are certain groups being targeted for promotions more than others? Are your promoted employees successful in their roles?

Promotion rate is an HR metric that can help answer some of these questions.
To calculate the promotion rate, take the total number of promotions during a given timeframe and divide it by the number of employees. Multiply the result by 100 to determine the percentage of employees promoted. Once calculated, you can begin to dig deeper into the story behind the number.

The best way to know if your company’s promotion rate is too high or too low is to compare it to benchmarks. SHRM provides benchmarking tools that take into account industry, region, and organizational size.

Knowing how your promotion rates stack up against others is not the only way to look at the HR metric. You should look at the culture of your organization and its history.

A high number of promotions are an indication that your company was experiencing a lot of change. Acquiring new business or merging with another organization all require major shifts in labor allocation. People will take on new tasks and be promoted into various roles based on new needs. This is especially true in new, startup companies as employees are asked to take on various roles as the company grows.

Low promotion rates can also be tied to the organization’s culture and engagement initiatives. Employees have to stay long enough to be promoted. If employee engagement is low and turnover is high, most likely there won’t be any employees to promote. Additionally, a culture that supports employee development through leadership training programs will have a larger talent pool to promote from. Having defined paths to leadership roles will also support this culture.

Promotion rates can also help to identify inclusion issues. By comparing the overall promotion rate by the promotion rate of the organization diverse employees. How do they compare? Are women or people of color promoted at the same rates? If not, start asking why. Maybe they’re being overlooked for those opportunities. Maybe they’re not being given the same chances at projects or challenges that would put them in the spotlight for promotions. Or, maybe they’re feeling included and are not staying with the organization long enough to be promoted.

Once you start looking at promotion rates, it’s important to know if the promotions are beneficial. First, analyze the average retention of promoted employees and why they are leaving the company. If the retention rate is low, you might not be promoting the right people into the right roles. It’s crucial to complete exit interviews to gain feedback on why they’re leaving the company, even after a growth opportunity.

Promotion rates seem like a simple metric but it can provide a lot of insight into various aspects of your workforce. It can shed light on the organization’s employee engagement, leadership development, inclusion practices, and change history. An HR dashboard can help with managing your metrics and analytics. It provides an easy tool to visualize your data so you can skip straight to the analytics. Sign up today for a free demo of our automated HR dashboard.