It is also useful for organisations that focus on promotions to gauge success of internal grooming of managers, performance management process of controls or compensation cost management.
Number of employees internally promoted for every employee internally transferred to a new position.
Promotions / Transfers
Career Path Ratio indicates the ratio of promotions to transfers occurring within a given period. A Career Path Ratio of .5 (i.e. a ratio of 1:2) means that there were two transfers for each promotion that occurred within the period.
Promotions, or upward movements, can occur either when someone is promoted through the performance management process or when someone assumes a position that is at a higher level than their current one. Such events ideally signify strong individual performance and readiness to assume higher levels of responsibility. Promotions can be viewed as an essential component of the organisation’s recognition of and reward for strong performance.
Transfers, or lateral movements, are considered by many organisations to be a positive contributor to development, where employees are gaining additional experience from new functional areas or business units.
This new experience broadens employees’ skill sets, exposes them to a wider scope of activities performed by the business and expands their personal networks throughout the organisation.
However, excessive employee movement can result in productivity losses from vacancies and ramp-up time in employees’ new roles. Therefore, organisations must balance the development opportunities and organisational agility benefits of movement with the risk of fostering identity crises among employees.
Comparing upward to lateral movements helps organisations understand the employee experience in terms of the movement opportunities available and the mix of movement they see happening for others.
The mix of movements is part of the organisation’s ‘offer’ to employees, helping to drive engagement and retention as well as employment brand strength.
High results signal that promotions are a frequent occurrence and there is formidable opportunity to move up through the ranks, or that lateral moves are rare.
Low results may mean that promotions are more tightly controlled or that vast opportunities exist for lateral movement.
Organisations typically source data related to transfers and promotions from the job table of an HRIS. An alternative method of capturing transfer data is to use only those transfers that are documented as filling a requisition in a recruitment system.
This is a more difficult method of capturing and benchmarking transfers, but it might suit certain organisations for the particular information they seek from this measure.
Career Path Ratio is commonly analysed across a broad range of analysis dimensions aimed at understanding how various populations gain new experience within the organisation. Such dimensions include tenure, ethnic background, gender, employment level, occupation, job function and pay grade.
To identify the potential issue of performance management process controls, it is helpful to analyse by organisational unit, manager and performance rating.
This measure does not indicate the volume of transfers or promotions relative to the size of the workforce. It does not differentiate among transfers between highly-related cost centres, transfers between functions and transfers between diverse business units or divisions.
It does not address whether promotions occur in the normal course of performance reviews or as movements into higher- level positions in other units. Nor does it indicate at what hierarchical level promotions take place. The measure does not represent the productivity costs of employee movement and resulting vacancies.
Targets will vary based on employers’ performance management strategies and policies as well as individual employee performance.
For example, employers aiming to make fairly liberal use of promotions in the movement mix would likely target moving results toward the 75th percentile of a benchmark group, as might high-growth organisations wishing to groom internal managers. Employers aiming for limited awarding of promotions or focused on developing cross-functional expertise might target moving results toward the 25th percentile.
Benchmark data must be used with the understanding that other employers’ strategies and policies around transfers and other movements may differ substantially.