It’s Time to Do Away with “Dry Promotions”

Summary:

Instead of providing solid career opportunities, all too often companies resort to filling vacancies from outside. And when they do promote people, many employers give them “dry promotions” — more responsibility without more money. This article makes the case for revamping career development. Employers should provide more opportunities — both promotions that offer more pay and lateral moves. Internal marketplaces are one valuable way to help employees with career development.

Marta was a top performer. She had strong qualities that any manager looks for: dependable, reliable, a hard worker, consistently produced quality work. She had been doing the same job for four years. During this time, she had applied to two positions in other divisions of her company to broaden her skills. Both times the jobs went to other candidates in the division. Marta then got a promotion in her own department and a new title but no salary bump. One month later, Marta resigned.

While Marta’s story is fictional it does represent a real phenomenon that we are witnessing in the workplace. The way we manage careers and promotions inside our organizations is broken. It is driving discontent and turnover, but we can fix it with some straightforward changes in incentives.

Alarming data from ADP shows that 29% of employees like Marta quit within one month of receiving a promotion versus just 18% for employees who were not recently promoted. A big reason, as the Wall Street Journal reported, is that the number of employers offering employees promotions and new job titles but no pay increase — what some call “dry promotions” — increased 5% since 2018 to 13% in 2024. The promotion makes employees more valuable in the outside job market, so they leave. This is a great example of “pennywise and pound foolish” behavior: saving money on pay increases and losing far more from turnover.

Increasing Need for Career Opportunities

Career development is not simply about promotions. It includes lateral moves, which broaden skill sets, create new connections, and give one access to areas in the business that are growing. Planned promotions, including those that involve moving people across different functions, were once the hallmark of management-development programs. They faded, along with lifetime employment, in the 1980s. Tight labor markets in the dot.com era ushered in a different and novel approach to reduce turnover, and that was “bidding and posting” systems or internal job boards where current employees could apply for most open positions in the organization and see if a different boss wanted them. The justification, which worked for a while, is that it is better to let employees find jobs they liked better inside the organization than to make them go elsewhere to find them.

But they stopped working so well. The biggest reason is an old one: talent hoarding. Managers have every reason to want to keep a good performer, and, in most organizations, no incentive to let them go. Marta’s manager might well have tried to block her from moving, and Marta would know that even if she got permission to apply for another position but then didn’t get it, she would be back working for the manager who knew she wanted out. That would make her more likely to just find another job elsewhere. The dot.com era internal job boards largely prevented your manager from knowing that you were looking for another job in the organization, but those prohibitions weakened in the slack job market after the Great Recession when quitting was much less of an issue.

Employees who are blocked believe that their managers act only in their self-interest, and their interest in going the extra mile for their bosses declines even if they stay. A Cornerstone report published last year notes that nearly three-quarters of global workers want to know about career opportunities within their organization, and nearly half are more satisfied with work if they can explore internal opportunities. A company cannot position itself as an employer of choice and not take care of its employees’ career and development opportunities.

Closing the Gap

A talent marketplace provides a solution to these problems. It differs from internal job boards in important ways:

Employees who are looking for something different to do can post a description of what they want on the marketplace website. Managers with openings can peruse those descriptions as the potential candidates peruse job descriptions.
Employers can use them to alert those employees interested in moving to positions that might be good fits for them. Talent marketplaces are typically built using technology that can create smart matches and recommendations.
The marketplace posts jobs not just for permanent positions; it can also be used to post openings for short-term projects or temporary assignments that give employees a chance to work on something new or try out a different role even when their intention is to go back to their original job.
Managers are not permitted to block employees from moving, although there may be negotiations with HR as to when an employee can take up a new or temporary position.

In recent years, companies have been increasing their investments in internal mobility. Companies like Unilever, IBM, and Schneider Electric were early adopters of this idea. When Schneider Electric discovered that 47% of people exiting the company said they couldn’t find an appealing internal opportunity, it created, in 2019, its Open Talent Market, an AI-powered platform that allows staff to share their purpose statements and goals and promote their skills to hiring managers. PwC launched its internal talent marketplace this past year not just to retain people but to make better matches between people and emerging opportunities. Companies that have taken these moves have experienced gains in the form of greater worker productivity and satisfaction or engagement and lower recruiting costs.

Making Internal Marketplaces Work

Simply creating an internal marketplace doesn’t guarantee it will succeed. Leaders need to support them by taking these steps:

Make the broader case.

The likelihood of a marketplace flourishing is low if the culture of the organization resists them. Consequently, leaders have to make the case as to why the organization benefits from a marketplace approach. They have to make it clear to everyone in the organization that it is a business necessity, not just an HR program or a benefit for employees.

At Unilever, in addition to helping people find good work, the goal of their talent marketplace is to “democratize” the workplace so that anyone in the company can “shop for skills.” Employees are asked to build “purpose statements” and share their skills and desired skills online so that every employee becomes part of the company’s talent work.

Incentivize managers.

Leaders also have to make it clear that supervisors who try to hold back their subordinates are putting their own interests above the organizations and that is not acceptable. This could also be reflected in the managers annual performance management review and tied to monetary incentives. One way to do that is to track how well the internal market is working and identify which managers are the ones employees want to leave and which ones they want to join.

Track that the processes is fair.

Check on how the process is working. Remember, employers have the same legal liability to prevent discrimination, harassment, and so forth with internal job moves that they have for outside hires. That means companies must monitor which employee types get these assignments and which do not.

Understand the employee experience.

More generally, employers should check on the overall career-management experience by adding questions to engagement surveys that can generate that information (e.g., Do you have opportunities for internal mobility in your organization? Does your manager have regular talks with you on career opportunities? Do you feel there are managerial obstacles that may prevent you from taking advantage of opportunities within the organization?). Beyond ensuring the process is fair, such surveys can reveal where there might be talent hoarding.

Track retention.

CEOs and boards can determine how well the internal marketplace is helping retain talent by monitoring one simple measure: the percentage of vacancies filled from within. A generation ago, it was more than 90% in large companies; now the estimates are shockingly low: 15% or so. That means companies are relying on a much more expensive process to fill vacancies: outside hiring.

Use marketplaces to develop leaders.

Talent marketplaces can also solve a problem facing many organizations: a lack of breadth in individual managers’ experiences. Companies use to address that important dimension by giving managerial employees rotational assignments across functions and business areas. They fell out of favor not because they were a bad idea but because they were very expensive.

Ending Dry Promotions

When employees do develop enough skills and experience to be given additional responsibilities and promotions, employers have to stop giving them dry promotions. Getting better at making good matches internally alone isn’t enough.

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