internal+promotion+schemes


 * Internal Promotion Schemes**
 * Introduction to internal promotion schemes**

Internal promotion, as an incentive for employees, refers to the process in which an employee is promoted from a low-ranking position to a senior or managerial position (Malcomson, 1984). As it is known that the distribution of labour is a good way to increase efficiency, so there are many systems of positions within an enterprise, which further include different positions. This provides a precondition for the internal promotion (Byham & Bernthal, 2006). In general, enterprises will design and establish a series of criteria and plans to assess the qualifications of their employees; once some staff meet the requirements, they can be promoted to the upper-level positions. This should be the internal promotion scheme of an enterprise.

Talent is the most important resource for a business. The loss of talents can cause great losses to an enterprise, which include both obvious costs for recruitment, staff training and work taking-over and the hidden costs, for instance, the psychological influence on other staff on active service. According to relevant studies, many employees choose to leave their companies once there are not mature internal promotion schemes (Fairburn & Malcomson, 2001). In the current society, people tend to pay more attention to internal promotion schemes compared with salaries or other economic benefits. In other words, internal promotion schemes might decide whether an employee stays or leaves a company. Thus, internal promotion scheme is a topic well worth discussing.


 * The advantages and disadvantages of internal promotion schemes**

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At present, there are mainly three kinds of internal promotion schemes throughout the world, namely, seniority-based promotion, performance-based promotion and relation-based promotion. Each of these has its own advantages and disadvantages. This part will critically analyze the three internal promotion schemes. Seniority-based promotion mainly takes the years of work as a criterion. This scheme is set up on the basis of the principle that the qualities, proficiency and contributions to an enterprise of an employee have a direct relation to the years of work. As the years of service increases, one deserves a promotion. This mode is widely used in the governmental institutions of Asian countries, such as China and Japan. After a green hand enters an institution, only when he or she has worked for certain years can one have the opportunity for promotion. The advantage of this mode is that the criterion is clear and easy to operate (DeVaro, 2006). Under this scheme, the leaders cannot promote personnel due to personal preferences or interpersonal relationships, so all the members are guaranteed to have the equal right for promotion. However, it has some disadvantages. First of all, seniority might not be in direct proportion to working abilities. Although people tend to have more experiences and abilities as time goes on, it is not the sole criterion to assess one’s abilities and experience. Therefore, one might fail to undertake a position if being promoted simply based on the years of work. Secondly, seniority-based promotion prevents companies from recruiting new talents from outside sources, and meanwhile, pushes some talented and young employees to leave the companies. Beside, those who stay in a company might muddle along the days, as they do not need to perform outstandingly, but only to persist as many years as possible.

The second scheme is based on performance, which refers to that the performance of staff will be assessed and ranked as the criterion for promotion. This seems to obey the principle that one who does well in a position tends to perform outstandingly in a higher position. The assessment of performance can urge employees to work hard and achieve satisfactory results; besides, it is helpful for retaining talents and attracting excellent members. However, there are also some disadvantages. Firstly, the employees might perform well for a short time. As the current performance appraisal systems cannot assess employees from long-term and objective perspectives, some employees might present their qualities to earn a promotion. Second, the promoted employees might not be qualified for the higher positions. Promotion, as a motivator, can bring employees a certain degree of satisfaction. However, the existence of Peter Effect (Fairburn & Malcomson, 2001) reduces its positive influence. Based on Peter Principle, in the level-oriented organizations, everyone can be promoted from a position that he qualifies to one that he cannot qualify, which is only a matter of time. The outstanding performance in one position does not symbolize equal performance in other positions. Once an employee is promoted and fails to undertake the job, he or she will feel depressed and frustrated; meanwhile, his subordinates who have stronger abilities can feel indignant as well. This will lead to the lack of working motivation and the decrease of working efficiency (Fairburn & Malcomson, 2001). Thirdly, it might go against with the career objectives of employees. Every employee actually has a position in his mind, so the promotion is not always in coincidence with their expectation. For instance, one engineer might expect further development in the technical field, while performance-based promotion makes him a manager, which might generate his dissatisfaction towards work.

The third one is based on one’s relations with the leaders and other employees. The advantage is that the promoted members are welcomed by the leaders and employees, which facilitates their management and work. As for the disadvantages, without a clear assessment standard, leaders tend to promote those who have better relationships with them. This gives rise to resentment among other employees. Under this mode, staff do not have equal chances for promotion, and they tend to believe that interpersonal relationship is more effective than working performance, which can affect their attention to work. In addition, relation-based promotion might not be able to select the best qualified members, and further, cause losses for the enterprises.


 * How internal promotion schemes vary from business to business**

Given that internal promotion schemes are so important for business development, companies have paid attention to perfecting their promotion schemes. This part will discuss how internal promotion schemes are running in different companies by citing cases.

In general, small businesses are relatively weak in this area. The bigger an institution is, the more tiered systems it has. For small and middle-sized businesses, there are few management levels due to their small scale, so only few managerial positions are available for employees (Byham & Bernthal, 2006). This, in some way, restricts the promotion chances of employees. For instance, due to the flourish of online shopping, more and more online stores are opened. Most of the stores are run by several people, so there are rare chances for promotion. Their roles have been set ever since the start of this store.

By comparison, large corporations attach more significance to internal promotion. Many of these companies choose the performance-based promotion scheme, for which, several examples will be illustrated. Take Lenovo Group as an instance. Lenovo, founded in 1984, has become one of the 500 most valued brands in China. This should largely owe to its emphasis on talents. With about 20 thousand employees throughout the globe, Lenovo has quite a good performance-based internal promotion scheme. It tries to recognize the “fine horses” during the “horse racing”, which means that Lenovo will offer the most suitable jobs for the qualified talents (Chen, 2006). Weekly, monthly and even quarterly targets are made so that the Group lead the employees to compete; those who perform noticeably have chances to be promoted to store managers, section leaders, city managers and even regional supervisors. As an international business, Lenovo possesses many levels of position which are available for those qualified candidates (Chen, 2006).

Up to the present, P& G is one of the few companies who select managers from within (Kimes, 2009). At the very beginning, this Group has been considering how to retain employees. The answer was to give them a sense of belonging. Thus, they decided to adopt the internal promotion scheme. All the senior staff are promoted from the bottom, which has been a core value of P& G. To better carry out this scheme, the Group obeys the rules: recruiting employees with development potential and resonance with the company values; making a clear and tiered career planning; establishing a mature training system; implementing a transparent promotion system (Kimes, 2009). As an internationalized corporate, P& G has enough space for its employees. It gives attention to staff’s career design and helps to position themselves in the workplace. The internal promotion scheme is carried out strictly. For example, its former president in China region, Pan Nayou, was at first only a trainee. This strategy has made a great contribution to the success of this Group.

Another mode of performance-based internal promotion widely adopted by large firms is management trainee program. A large number of transnational firms, including Walmart, McDonalds’, KFC, Dicos, Google, and Apple Group, all have launched some trainee programs. Although the specific details might be different, the core ideas are roughly the same. Talented graduates would be selected to have rotated interning in different departments within a firm so that they can have a mastery of the general procedure. Having finished the program, usually one year, or three months, these trainees will be divided into different managerial positions based on their performances during the process. Those who can achieve excellent performance in the leading positions will be promoted to higher levels of management positions. In this way, not only do the companies have a large pool of talents, but these trainees also have sufficient chances for job promotion, which should be a win-win strategy.


 * The influence of internal promotion schemes on employers and employees**

The increasingly fierce competition in the current market has strengthened the emphasis of enterprises on each link. Since employees have an overall control of manufacturing materials, they play a significant role in raising the manufacture efficiency and product quality. Thus, the reasonable distribution of employees within an enterprise has a close relation to its competitive edge; more and more companies are prone to optimize resources and positions through internal promotion schemes, so as to increase their operating efficiency.

The internal promotion schemes can impose impacts on employers from the following aspects. Above all, it is a good way to lower costs and increase efficiency. To attend job fairs or put recruiting advertisements entails quite an amount of expenses (Chan, 1996). Besides, employers need to train the new staff and direct them to get familiar with the workplace. All these in fact take a lot of money and energy. By comparison, internal promotion helps to save time and energy. In addition, current staff do not need extra time to get adjusted to the work, which increases working efficiency (Crossley, n.d.). Moreover, internal promotion schemes help to simplify the assessment procedures. The employers can spend daily time observing and examining the candidacy of employees. Also, due to their familiarity with the current staff, the assessment process can be much easier. Whereas, internal promotion schemes narrow the choices of employers, as a vast amount of outside sourced elite are exempted from the schemes, the employers can simply choose from the present members.

Regarding the influence of internal promotion schemes on employees, each coin has its two sides. On the one hand, internal promotion motivates the employees to work harder and perform better, which in turn, helps to create a favourable working environment within the workplace (Crossley, n.d.). The higher salary and status in upper positions is a good motivator to staff. Influenced by the ingrained traditional idea, people believe that positions in enterprises symbolize their abilities and status; also, some take promotion as a criterion for success. Thus, a complete internal promotion scheme urges the employees to pursue promotion. In this way, their working skills and sense of mission can be enhanced. Also, there can be a decrease in the flow of employees. On the other hand, internal promotion schemes intensify the competition among staff, which brings more pressure to the employees (DeVaro, 2006). In the meanwhile, internal promotion schemes might violate the career planning of some employees. Those who do well in current positions do not always expect management levels, but internal promotion might ignore their desires.


 * The future trend and challenges faced by internal promotion schemes**

Considering the significant role of internal promotion schemes and the drawbacks of the existing ones, it is likely that more measures will be taken to promote the development of internal promotion schemes. This part will analyze the future trend and the challenges that might be faced by its further development. Multiple tiered internal promotion schemes will be established. As promotion not only means the increase of salary, but also the enhancement of power, social status and more opportunities, many technical staff have the strong desire for promotion, even they lack of managerial experience and abilities(Fairburn & Malcomson, 2001). To promote these staff might damage the working efficiency of the organization; while refusal to promote them might make them lose confidence towards their careers. And they are likely to quit. Currently, many enterprises adopt the single promotion ladder, which cannot solve this problem effectively. The establishment of multiple promotion schemes offers some help. An enterprise can set up several paralleled promotion channels: one for management staff and the others for technical staff. By adopting different assessment standards, employees can design and choose their career development roads based on personal qualities and skills. This is very likely to become a trend of internal promotion schemes. Another trend is to set up a system of examining and assessment. After the employees are promoted to new positions, the organizations need to know whether the promotion is reasonable. The use of adaptivity assessment can help employees and employers to form a correct cognition about this promotion. Those who fail in the exams should be assigned to the former positions. The current promotion schemes only emphasize promotion, but ignore their latter performance. Sometimes, the negative response to new work of the promoted staff gives rise to the resentment and protest among other members, which is not conducive to the workplace environment. The third one is two-way selections. The internal promotion schemes help employers to select talented employees so as to provide them with promotion chances. At this time, employees should have a clear understanding about their career development stages, personal professional abilities and career orientation. Based on these, employees have the right to choose from the multiple promotion channels; also, they can refuse any promotion and still concentrate on the development and innovation of their own specialty. Through this way, employees can work with interest and sense of satisfaction, which in turn consolidates their work motivation. Two-way selection ensures the mutual win of both parties. During the process, there are some challenges. The establishment of multiple promotion channels entail a lot of investment of fund, material and human resources. It is hard for some organizations, especially those mid-sized and small ones. In addition, it takes some time for employees to accept the exams after promotion. How to deal with those employees who fail in the exam is a problem. If they are appointed to the previous positions, companies should take measures to protect their emotions. Otherwise, it can influence their motivation towards work. The proper handling of these issues requires patience, and skills.

References: Byham W. C. & Bernthal P. R. (2006). The case for internal promotions. Development Dimensions International. Chan, W. (1996). External recruitment versus internal promotion. Journal of Labour Economics, pp. 555-570. Chen, H. A. (2006). Recruitment and selection in China: an application to the case of Lenovo (Doctoral dissertation, University of Nottingham). Crossley, L. n.d. The advantages of a company doing internal & external hiring. Online. Available at: http://smallbusiness.chron.com/advantages-company-doing-internal-external-hiring-22017.html. [Accessed March 15, 2014] DeVaro, J. (2006). Internal promotion competitions in firms. The Rand Journal of Economics, 37(3), pp. 521-542. DeVaro, J. (2006) Strategic promotion tournaments and worker performance. Strategic Management Journal, 27(8), pp. 7. Fairburn, J. A. & Malcomson, J. M. (2001). Performance, promotion, and the Peter Principle. The Review of Economic Studies, 68(1), pp. 45-66. Kimes M. (2009). P&G's leadership machine-The consumer goods giant has a proven formula to nurture top talent. Online. Available at: http://money.cnn.com/2009/05/20/news/companies/kimes_lafley.fortune/. [Accessed March 15, 2014] Malcomson, J. M. (1984). Work incentives, hierarchy, and internal labour markets. The Journal of Political Economy, 92(3), pp. 486.