Here are a few things we know about talent management:
- Recruiting is expensive
- Replacing employees is expensive
- Hiring senior talent is very expensive
And here are some things we know about retention:
- Increased retention is correlated with increased profitability
- Low retention is a warning sign of toxic culture
- Promoting from within promotes engagement and retention
Hiring from within is a proven engagement-boosting, retention-increasing, cost-cutting practice. From the moment an employee is hired, their manager should be invested in their positive trajectory, helping them grow not only as a professional but within their role to eventually become a leader.
Using the career path ratio, HR can keep track of individual performance on a macro level to see how employees are growing, changing, and adapting within the organization. Let’s discover what “career path ratio” means and why it’s a critical metric for HR leadership to measure.
Defining career path ratio
Career path ratio is a metric of internal movement, measuring lateral movement versus promotions. It is considered a measurement of effectiveness.
To calculate this metric, divide the total number of promotions by the sum of all role changes, both upward or lateral moves. If the number is more than 1, check your calculator and try again.
Want to read more about HR metrics that matter? Check out our guide here.
Organizations can offer upward movement potential as a recruiting selling point for recruits whose priority is growth and advancement. High career path ratio results—a number above .7—signal frequent promotions and opportunity to take on greater responsibilities. Low results—under .2—signal a problem with the promotion process or too many lateral movements.
Why should we measure career path ratio?
Lateral movements aren’t all bad; they are often considered to be a sign of growth and can help employees develop existing skillsets and experiences. However, they also can decrease productivity with continuous onboarding programs, increase recruiting costs because of vacancies, and cause employees to feel uncertain about their existing positions.
Promotions, on the other hand, are often used to promote engagement and retention. The possibility of promotion drives motivated employees to push themselves towards a goal; managers can use promotion paths as a means to get employees to develop pride in their work and seek more opportunities to show initiative.
The reasons to promote an individual include:
- Proven drive to succeed
- Strong individual performance
- Recognized potential
Employees who take the time to think about how they can contribute to their team and organization beyond the constraints of their job description are the ones who often pursue, and receive, promotions. Low numbers of promotions vs lateral movements may show a lack of drive among employees or highlight a problem at the managerial level with empowering employees and encouraging growth.
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The importance of HR metrics
For those HR admins and leaders among us who want HR to have a more significant presence in their organization, metrics are the key to getting what you want.
Numbers are indisputable and can be used to communicate insights to folks who don’t understand HR speak. By knowing how to communicate ideas to non-HR folks—for example, the need for a formalized employee development program—you have to successfully make the argument that the numbers prove the need.
Career path ratio is only one of many HR metrics that show employee development, engagement, and growth through the numbers. Keeping an eye on your organization’s career path ratio will help you encourage your employees’ growth and help them succeed.