What is career path ratio?

Career path ratio is an HR metric used to calculate an employee’s rate of growth, based on vertical and lateral movement within the organization.

This metric provides data for HR professionals to critically analyze a company’s structural organization and the placement of employees within that structure.

The formula to calculate career path ratio is total promotions/ (total promotions + total transfers). The resulting number should be less than 1. Above .7 indicates a high frequency of vertical promotions, while under .2 reveals a high amount of lateral transfers across departments.

Why should HR leaders care about a career path ratio?

HR professionals can use career path ratios to track employee development and engagement and encourage growth and success. The numbers are a quantifiable reminder to guide employees towards upward promotions or lateral expansions, depending on the employee’s skills and the company’s needs. This HR metric can reduce the cost of hiring and training new employees, and support employee:

  • Retention
  • Engagement
  • Growth and development

The translation of employee movement into numbers provides concrete data for HR leaders to share with other department leaders and to use to guide employees forward in their professional journeys.  

What can HR leaders do to encourage balanced career path ratios?

HR leaders can use career path ratios to help them better assess employee movement within the company. Each employee is unique, so the career path ratio formula can be most effective when combined with human guidance.

HR leaders can:

  • Define job tiers. HR professionals can use an HRIS to display the job levels within the hierarchy; this clarifies whether an internal movement is a promotion or a transfer.   
  • Incorporate an employee development program for career pathing. A framework that helps employees pursue career paths and encourages their development can maximize employee potential. Combining this individualized program with a career path ratio can propel employees upwards or sideways, depending on which direction is beneficial for them and the employer. 
  • Encourage employee movement. Acknowledging employees’  promotions and lateral movements by announcing and celebrating can encourage employees to expand their area of expertise, and continue progressing on their journey upwards and outwards. 
  • Identify and communicate career path expectations. HR leaders can promote talent development and company advancement by explaining career path goals. A formal policy of three lateral moves for every promotion, for instance, aligns employees with company objectives. Whatever the approach, communicating guidelines to employees enables them to embark on a favorable path towards personal growth and company advancement. 

How can the implementation of career path ratios improve company culture?

The career path ratio metric provides managers and leaders with indisputable data about each employee’s job movement. The more involved and informed HR leaders are in employee movement, the more guidance they can offer employees as they forge their career paths. Supporting employees in their journey can increase job satisfaction and engagement, and build a company culture of motivated and enthusiastic individuals.