Career Path Ratio
What is a career path ratio?
The career path ratio shows how people are moving within your organization (vertical and lateral movement). It compares the number of sideways moves against the number of promotions which in turn helps you understand the way in which you are developing your workforce. This understanding helps HR professionals understand organizational structure, identify potential gaps and plan for future talent development.
This ratio can be calculated for an entire organization as well as by department or geography.
There are two different trajectory path ratios: career path ratio and career path length. These career paths can show how people move up the career ladder and stay within the organization or leave it for another company. The career path shows whether employees take lateral movements (in which they remain at their level but change departments) or career advancement moves which are promotions. In any case, this ratio analyses the internal movement of employees.
The trajectory path length is the number of career paths divided by the number of employees in an organization. This career path shows how long it takes to go up each career ladder in an organization and how many people there are at every level. By using this ratio, HR professionals get a broad understanding of career development, workforce retention, employee movement (vertical and lateral movement) and also employee development through diverse business units.
Why do we need to know about the career path ratio?
Career trajectory ratio helps inform career development, talent supply and retention. The trajectory path length shows how people move from one level to another in an organization. This career path also illustrates the number of available positions at every level of an organization's workforce.
The career path ratio can show career development opportunities in an organization. For example, career path length shows the career time from entry-level to the director within a company. The ratio divides this trajectory path by the total number of employees at every career level. If there are 1,000 employees and approximately 200 have been promoted from an entry-level position to a director position in this career path, the career trajectory ratio equals 50%. If the trajectory path length is typically two years and lasts four years, the ratio doubles.
This career path shows that employees have a higher career development rate of promotion from entry-level to director level than the organization's average trajectory path length. In addition, you can see that people tend to stay at entry-level positions for a longer time before they move on to another position within the company.
Career planners use the career path ratio to understand career development opportunities within an organization. HR professionals can use this employee movement ratio to identify career growth rates at specific career levels, compare career growth between career paths, determine career development trends and visualize if the employers performance management strategies are efficient.
How is the career path ratio calculated?
The trajectory path ratio is a simple calculation. You divide the number of promotions by the total number of role changes over a set period.
Here is how to calculate career path ratio :
Number of promotions ÷ Number of role changes = Career path ratio.
For example, if you promoted ten people in your organization last year and saw a total of 46 role changes over that time period, your career path ratio would be 0.3.
Numbers of 0.7 or above indicate a high number of promotions. A ratio of 0.2 indicates a high number of lateral moves.
Organizations with very flat or non-hierarchical structures can sometimes find it difficult to establish their career trajectory ratio. For this reason, it’s important to ensure there is sufficient differentiation between what constitutes a promotion and what is classified as a sideways move regard internal movement.
If the ratio is low, it may indicate career development opportunities are limited, or career paths are too rigid with few career advancement opportunities. Low trajectory path ratios can point to a stagnant management culture - where few people are advancing in terms of career growth.
In some companies, vast opportunities exist. The hr team is responsible to benchmark data of tmployees and for capturing transfer data to increase internal upward movements.
Companies operating in the same sector as each other often have similar trajectory path ratios. For example, insurance companies and advertising agencies tend to promote between five and seven employees every year for every 100 employees they hire or promote into new positions.
How is the career path ratio measured?
Organizations usually collect their career data directly from an HR information system and extract career path values. Some companies also ask managers to report each employee's promotion rates at the end of an annual appraisal cycle. If you prefer to use your own company's data specifically because you think it is complete, make sure managers know the ratio calculation. Managers should be aware of trajectory path ratios throughout their career planning programs in order to instaure good individual employee performance management process within their teams.
Career path ratios are usually reported on an annual basis, although some companies track career paths hourly, weekly, or monthly. If you need career data for a shorter period, find out which months give you the most reliable numbers and work with that data only.
Many career development professionals use employee development scoring systems to determine career trajectory ratio values. For example, one part of Pareto's rule suggests that 20% of your employees contribute 80% of value to the company -- so ask yourself where your high performers fall within your organization's career paths.
The trajectory path ratio is a valuable career data analysis tool that can help you determine career development trends over time. And as the career landscape continues to evolve, trajectory path ratios are likely to become increasingly important in assisting companies in understanding career development opportunities within their organization.
How does this ratio differ between professions?
High career path ratios are common for administrative positions, whereas low trajectory path ratios are common in professional or management positions. Administrative careers have a high percentage of lateral moves, which take up less time than promotions do. This means that people spend more time on the same career ladder compared with their counterparts in managerial roles, which typically move up the career ladder quickly but stay on each rung for less time before they're promoted again.
The importance of having a high trajectory path ratio is that it shows career growth opportunities for employees. These career paths can be used to identify career development opportunities, career movement patterns, and career planning.
Focusing career development strategies on career paths with low trajectory path ratios can help organizations retain talent and achieve career growth for their employees.
Why is it important to improve a company’s career path ratio?
Using a career path ratio gives HR professionals an understanding of how many lateral moves or promotions occur within their company. With this knowledge, they can:
Prevent the organization from becoming too ‘top-heavy’.
Having a top-heavy structure can create several problems. It increases costs due to higher managerial salaries. It can also make a company less reactive and increase conflict due to the number of people involved in decision-making. Finally, having too many managers can create a culture of frustration for workers who have more levels of approval to contend with.
Plan for future recruitment needs.
With an understanding of the career trajectory ratio, HR professionals can easily plan for future recruitment needs. Perhaps more entry-level employees are required to free up internal candidates for promotion. Or maybe the company needs employees with specific skills because the current internal talent pool doesn’t have suitable candidates for internal promotion.
Identify potential for cost savings.
If lateral moves are being used as an employee reward or promotions are being given too frequently, costs can rise out of control. Retraining employees in lateral moves can become costly, as can compensation expectations from newly promoted managers. By analyzing the career path ratio, HR professionals may be able to identify opportunities for reducing future training or compensation budgets.
Identify potential issues with management style.
A low career trajectory ratio can indicate a problem with management style. Perhaps managers aren’t developing employees enough or giving them the autonomy they need to develop their skills. In addition to creating a poor company culture, this can contribute to weak retention figures. In contrast, excessive employee movement can illustrate a lack in the performance management process controls. Developing cross functional expertise from an expert could be cost saving for a company and will help the managers to better ajust its compensation cost management regarding the lateral movements of employees within the company.
In conclusion, the trajectory path ratio is a valuable career data analysis tool that can help you determine career development trends over time. And as the career landscape continues to evolve, career path ratios are likely to become increasingly important in assisting companies in understanding career development opportunities within their organization.