What is a career path ratio?

If you want to know how to measure career development, you need to understand a career path ratio.

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

This career progression metric provides data for HR professionals to critically analyze a company’s structural organization and the placement of people within that structure.any culture of motivated and enthusiastic individuals.  

How is the career path ratio measured?

The most accurate way to measure your career path ratio is to use the human resource information system (HRIS) data, which should record all job changes and show whether they were lateral or vertical moves.

A career path ratio can be measured for an entire organization, a department, or an individual employee. It is normally measured and reported on an annual basis, although you can choose any period of time depending on the requirements of your organization.

Managers should be aware of career path ratios for their teams and individuals so they can see how they have changed over time and how that affects overall performance. 

How to calculate career path ratio

An individual’s career path ratio is calculated by dividing the number of promotions they have had over a given period by the total number of transfers or role changes.

So, if one employee had one lateral move and one promotion during that period, their career path ratio would be 0.5.

Your organization’s career path ratio is calculated by dividing the number of all promotions by the total number of transfers and promotions combined in a given period.

For example, if ten people were promoted out of a total of 25 transfers and promotions, the organization’s career path ratio would be 0.4.

As it’s impossible to have more promotions than the total number of role changes, individual or organizational career path ratios should always be 1 or less. Above 0.7 indicates a high frequency of vertical moves, while under 0.2 reveals a large number of lateral transfers across departments.

Why should HR leaders care about a career path ratio?

HR leaders 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 toward upward promotions or lateral expansions, depending on their skills and the company’s needs. This HR metric can reduce the cost of hiring and training new hires, 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 in guiding your people forward in their professional journeys.  

What is a good career path ratio?

In general, an organizational career path ratio above 0.5 can be considered good as it indicates that at least half the employees have experienced upward mobility. However, this will vary across industries and businesses as all have their own challenges and opportunities for employee growth. By keeping a record of your career path ratio over a long time and comparing it with company performance, you can spot trends and identify what a good figure for your organization is.

Lateral movements are not necessarily bad as they can help individuals gain new experience and develop their skill sets further. It’s also unrealistic in most organizations for every role change to be a promotion, so aiming for a career path ratio of 1 is usually not suitable.

However, the possibility of promotions is a good way to attract, engage, and retain staff. A low career path ratio of under 0.2 can demotivate individuals and encourage them to seek employment elsewhere as they may see promotion as almost impossible to achieve. If you have a higher career path ratio then they are more likely to push themselves, work harder, and develop more pride in their work as they see that there are opportunities for them to be rewarded.

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 person 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 their potential. Combining this individualized program with a career path ratio can propel team members upwards or sideways, depending on which direction is beneficial for them and the business. 
  • Encourage employee movement. Acknowledging your team’s promotions and lateral movements by announcing and celebrating them can encourage people 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 enables them to embark on a favorable path toward personal growth and company advancement. 

How improving career path ratios can help 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 their team members 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.