Recently, I meet with a client in Germany taking about the Workforce Analytics module of SuccessFactors. During the meeting we spoke about careers within organizations and how workforce analytics can improve the career management process. This meeting made me think about the topic of career management.
From my perspective, the career management process in most mature organizations is broken. Its broken because of the disconnect between what companies promote as a career, namely promotions, and what organizations can practically provided, limited promotions. The reality is that most organizations can only provided limited promotional opportunities because they do not have the rate of growth in the size of the total workforce or they do not have sufficient labor turnover to provide enough promotional opportunities to satisfy the career aspirations and expectations of all but a minority of the workforce. At first glance this may appear inconsistent with the discussions on the war for talent but I think they are two sides of the same coin.
We may think that the war for talent will provide enough career opportunities for any high performer within an organization, but I don’t think this is necessarily correct. The primary focus of the war for talent is for those positions within an organization where there is a moderate to high turnover. When the high turnover rate is combined with a lack of supply in the external labor market for selected occupational groups then the war for talent is very obvious. Under this scenario the shortage of talent in the external labor market will typically increase labor turnover which in turn builds the magnitude of the war for talent. However if an organization has low turnover in certain occupational groups, or more often low turnover in the higher grades for certain occupational groups then we have the reverse of the war for talent. In this case its how do we retain high performing, often younger talent, in the face of limited career opportunities. The best predictor of labor turnover in any organization os organizational tenure. In most organizations, when organizational tenure is between 5-10 years then the turnover will typicall be less than a quater for individauls with less than 5 years tenure.
I think its important that we don’t confuse the war for talent with career management. Most mature organizations are not growing their total workforce by more than 5% compound per annum, and few are growing specific job families/occupational groups by more than 5% per annum. In fact most mature organizations are growing their workforce by leas than 1% per annum. Many mature organizations try to maintain a constant workforce headcount, or a slight reduction due to continual advances in automation. Virtually all companies try to keep their workforce growth well under the percentage of revenue growth in order to continually improve productivity. How does the rate of growth of the workforce impact careers. In my experience, based on the analysis of the workforce of our client organizations, if an organization is not growing its workforce by more then 3% compound, then somewhere between 40-60% of the workforce will never have a promotion again in their career with the organization. I would also estimate that less tan 20% of the workforce will have two or more promotions in the rest of their career. In making these predictions I have made the following assumptions:
1) Mature organizations have relatively low turnover. There will also be pockets across organizations with high turnover. These will typically be for certain occupational groups/job families, with low organizational tenure in certain locations etc. Generally in most industries labor turnover is low once an employee has reached more than five years tenure. Turnover in organizations is similar to add odometer in a car. At one end we have relatively high turnover with that part of the organization with low tenure. At the other end turnover is very low as organization tenure increases. In almost any company their is a tipping point in the 5-10 years of tenure. Once an employee reached this level of tenure then its unlikely they will leave before retirement. Many of these employees become “conscripts” rather than than remaining “volunteers” regarding their employment. Low turnover combined with low headcount growth destroy vertical careers within organizations.
2) Based on our research of mature organizations, in reviewing promotions by occupational group by employment grade we can make the following conclusion. Within a given job grade for a particular occupational group that has a number of employees at the same grade at a lower age band, typically measured in 5-10 year age bands, or at a higher grade in the same age band then few of the people at that age/job grade, or any other employees at a higher age for that job grade will ever get promoted again in their career with the organization. Clearly any one individual might get promoted who are older but the evidence shows that very few ever get promoted again once this circumstance has been reached. By applying this analysis across large mature organizations 40-60% will never get a promotion again and less than 20% will receive more than two promotions in the rest of their career. In making these assumptions I’m assuming that a organization has 6-10 levels of job grades across the organization.
Organizations need to change the paradigm of what is a career. Organizations need to make careers more lateral and diagonal rather than vertical. If organizations continue to focus on vertical careers there will be a number of unintended consequences:
1) Given that 40-60% of the workforce will have no promotion opportunities, what will be the motivational and employee engagement consequence on this large segment of the workforce?
2) By focusing on vertical careers organizations will miss out on the opportunity to build the next generation of evolving competencies. I believe that new competencies required in the future can be built internally if we move individuals through new diagonal career paths. By moving individuals through new diagonal career paths, complimented by targeted projects and secondments its possible to build new future competencies. To do this effectively we need a workforce planning processes which forecasts both workforce numbers required by critical job roles over the next 5-10 years and also the future competencies required for each critical job role. The forecasting of future competencies is the prerequisite to develop new career paths to build future competencies.
An important outcome of reviewing traditional vertical careers is the realization of how limited traditional vertical careers are. A useful metric to monitor is the Career Path Ratio which is defined as the number of promotions in a period, eg one year, devide by the number of lateral transfers. A transfer is moving between positions which roughly have the same grade and same salary band. If the result is greater than one, which in my experience is gerally the result for most companies, then this means more people move positions for promotions than for transfers. In many organizations the results are often as high as 6-7 meaning that for every 6-7 individuals who are promoted only one person is transferred laterally. While a simplistic assessment might think that this is a good result, I believe there are many unintended consequences. In a large mature organization if the Career Path Ratio is great than two then this means that few employees are moving between jobs. The career options are: be lucky as one of the few individuals who get promoted, leave the organization or accept that you will have 10 – 20 years in the same position. If large segments of the workforce are going to have long tenure in the same position then there can be several negative consequences. There is a risk that a percentage of this group will become partially “brain dead” and partially retired on the job. This can have negative implications on customer service, quality, innovation and productivity. To minimize these negative consequences mature organizations need to ensure there is continual movement of most of their workforce between different job roles. To achieve this I believe organizations should aim for a Career Path Ratio of 0.25. This means there are four lateral transfers for every promotion.
Clearly all organization need a percentage of deep specialists where individuals need 5-15 years of job experience to build the necessary job mastery. With deep specialist job roles we need to ensure that there is good job design to ensure the motivational potential of the deep specialists job roles as well as having managers who are skilful in prescribing performance goals and expectations and are skilful in giving continual feedback on performance.
In summary I think all mature organizations need to rethink what a career means in their organization. Having most careers paths that are vertical means we are not building future competencies and the vast majority of the workforce will have no career. While we often lalk about high turnover and the war for talent, in many organizations there is an invisible problem of large segments of the workforce having high position tenure and the prospect of spending the balance of their career in the same position.