The problem with promotions

MANY congratulations on your promotion. It’s probably downhill from here. This deflating prognosis is not true of every job, person or organisation. But, too often, a promotion is a precursor to problems.

That is partly because promotions are often a tool for rewarding past performance, not a way of selecting for future success.

A paper published in 2018 by Alan Benson of the University of Minnesota, Danielle Li of the MIT Sloan School of Management and Kelly Shue of the Yale School of Management sought evidence of the Peter principle – developed by Laurence Peter, a “hierarchologist” – that people are promoted to the level at which they are no longer competent. They found it.

The paper examined data on sales transactions and job moves across a panel of more than 50,000 workers at 214 American firms between 2005 and 2011.

It showed that being a good salesperson increased the probability of being promoted into a management position, but was a negative predictor of managerial quality.

In other words, the performance of a sales hotshot’s new subordinates tended to go backwards.

In 2009, Alessandro Pluchino of the University of Catania and his colleagues put together a computer simulation of the Peter principle. An organisation where promotion depends on competence in a previous role and where the new job requires different skills will indeed end up elevating people to a position they do badly in.

Random promotions would be a better system, the researchers concluded. That would certainly add suspense.

Promoting people based on how well they are doing in their current job is not bonkers. Some rungs of the ladder do not require new skills: a senior customer-service representative might be doing something very similar to a junior one.

There should be rewards to incentivise people to perform well in their current job. And to the extent that promotions are awarded to people who are motivated and hard-working, these qualities ought to be useful in any position.

But when a role is genuinely different, fresh qualities matter. The transition to management is an obvious breakpoint. The analysis by Benson et al found that prior experience working collaboratively on sales – being able to work in a team – seemed to predict better performance as a manager, for instance.

Other factors at play

Promotions can go wrong for other reasons, too.

Some managers try to hoard talented people rather than encouraging them to apply for bigger roles. A recent study by Ingrid Haegele of the Ludwig-Maximilians University of Munich looked at the behaviour of bosses in the German operations of a large manufacturer.

She found that managers suppressed the ratings of productive workers when these were visible to others in the firm, and that the number of applications for other jobs internally surged when a team’s manager was themselves about to move and had less incentive to hoard.

Bias also distorts promotion decisions. Another paper by Benson, Li and Shue examined the ratings given to almost 30,000 management-track employees at a large retailer in North America. This company did look beyond current performance; it used the nine-box grid, which assesses workers on how they do their present job and on their future potential.

But sexism seems to have clouded the judgment of reviewers. Female employees received higher performance ratings on average, but lower scores for potential.

Wind the clock forward, and women were more likely than men to have outperformed their ratings for potential; even so, they continued to be scored lower than male counterparts.

This wasn’t just the patriarchy at work: a gender gap still existed under female bosses. It may be that leadership potential conjured up male stereotypes: confidence, assertiveness, the emotional range of a kettle.

But promotions may also have been a retention device. Men are more likely to leave if they are passed over for promotion; the authors find evidence that higher flight risk is correlated with higher ratings for potential.

In other words, decisions about promotions are muddied by all sorts of things, not least what they are for: a way to put the best people into managerial jobs; a way to motivate people to try hard in their current roles; or a way to retain people who might otherwise leave.

These are all reasonable goals. But using a single instrument to achieve them is bound to cause trouble.

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