Workers who get promoted are more likely to leave the company than those who did not — but luckily for managers, there’s a fix for that.
The findings, from a new Today at Work report by payroll provider ADP, stem from data on 25 million workers and a decade of structured surveys. The results paint a broad picture of employee commitment, including some surprising results.
About 29% of workers leave their employer within a month of their first promotion, according to the report. That’s more than the 18% of workers who would have left on their own, without a promotion. Bottom line: A promotion increases the risk an employee will leave by two-thirds.
That higher risk of a newly promoted worker leaving continues over a six-month span. After that, the rate of a promoted worker departing levels off with the departure rate for workers who hadn’t been promoted.
“One would think that promoting excellent workers would only increase their motivation and commitment — and reduce their risk of leaving,” said Ben Hanowell, director of people analytics research for the ADP Research Institute, in the report. “Think again.”
It’s worth noting that promotions are relatively rare. Only about 4.5% of workers are promoted within their first two years of being hired, according to ADP’s research. That limits the fallout from the workers leaving after their first promotion.
Why do promoted employees leave?
The ADP data highlights two scenarios at play when it comes to promoted workers leaving. Do employees quit because they are unsupported in their new position and lack the skills needed to thrive? Or, do these promotions make employees more marketable, and that allows them to leave for better positions at other companies?
ADP found that workers who were promoted while at jobs that required little to no training or education were nearly six times more likely to leave in the first month after a promotion than if they had not been promoted — and they were more than twice as likely to leave the company over the balance of a nine-month period.
“These findings reflect the economic conditions that followed the coronavirus pandemic,” the report said. “As the economy reopened in 2022, demand for services and goods skyrocketed, with workers in the lowest wage brackets benefiting most from the labor market boom.”
For jobs that required extensive preparation or had high requirements, such as graduate school or an advanced technical degree, a promotion made those workers 52% more likely to leave in the first month. But by the fifth month, they were less likely to leave than those who had not been promoted.
But what happens after a worker’s first promotion? According to the ADP findings, as workers rose through the ranks, managers were far more likely to leave after a promotion than “individual contributors,” who were far more likely to stay after being promoted.
Rising through the ranks also means an employee ultimately is likely to attract the interest of recruiters looking for C-suite talent.
So what should companies be doing?
- Make sure to account for recently promoted worker turnover. That includes building in redundancies and having a plan in case an employee leaves.
- Ensure you are promoting the right people. Finding the right people and promoting them could boost their loyalty to the company, while promoting the wrong ones could lower the bar and undermine the motivation of others to work harder.
- Experiment with new ways to incentivize retention of recently promoted employees.
Companies need to recognize that there are valuable rewards for employees other than promotions, said ADP Chief Economist Nela Richardson in the report, stressing that companies often confuse the need to reward good work with the need to promote.
“If a person is taking on work with increased responsibility and scope, by all means promote them. But if your outstanding employee is doing excellent work in their role, there are potentially more effective ways to reward that performance — think bonuses or merit pay increases, for example,” Richardson said. “Promote people, but make sure you’re promoting for the right reasons.”
Employers focus on retention
The ADP report comes at a time when companies also are shifting to retention strategies after years of frantic, competitive hiring during the pandemic. Companies are dropping signing bonuses from their job postings and shifting to an emphasis on benefits.
The share of job postings on job-search website ZipRecruiter offering signing bonuses was growing substantially during the course of the pandemic, from 3.3% of all jobs offering such an incentive in 2019 to 6.7% in 2021. That number fell in 2022 to 5%, and, so far in 2023, it’s slid to 3.7%, nearly on par with before the pandemic.
Instead, employers have been adding other benefits, with the percentage of employers offering health insurance in job postings growing from 3.8% in 2019 to 6.7% in 2023, according to ZipRecruiter. The number of companies advertising retirement plans has grown from 10.3% in 2019 to 17.2% in 2023.
Employers also are overhauling salaries, with ZipRecruiter finding that the number of job titles with a pay increase over the course of 2023 has fallen — the opposite of last year. But worker expectations are still high. The annual expected salary of a job offer jumped to $67,416 in July, up from $60,310 in July 2022, according to the Federal Reserve Bank of New York’s SCE Labor Market Survey. The July 2023 figures is the highest mark the survey has recorded.
Companies additionally should be braced for a “forever” labor shortage, even amid a cooling job market, because fewer people will be working by the end of the decade.
Fresh projections by the Bureau of Labor Statistics paint a stark picture, with the labor force participation rate expected to drop from 62.2% in 2022 to 60.4% in 2032. It was 63.3% before the Covid-19 pandemic and had generally been falling from a height of 67.4% in 2000. This is driven in large part by population shifts, as baby boomers retire and the number of Gen Z workers entering the labor force is smaller than previous generations, trend lines economists and demographic watchers have long viewed as a slow-burning structural problem exacerbated by the pandemic.