Career Path Ratio

What is a career path ratio?

A career path ratio (CPR) is an HR metric used to evaluate employee growth opportunities within an organization. It measures the number of promotions compared to the number of internal lateral moves (employees who take on new roles and responsibilities).

The career path ratio is important because it offers insight into career growth and internal mobility within an organization. Tracking employee mobility also helps identify areas for improvement in professional development, performance management, succession planning, and retention strategies.

For example, your career path ratio might reveal many lateral moves but few promotions. In that case, your organization might review its promotion policies, leading to clearer advancement criteria and increased opportunities for upward mobility. 

The ratio can be measured using HR data about vertical moves (promotions) and lateral transfers (internal job transitions other than promotions). It can be done in various ways, such as for the entire workforce, specific departments, or on an individual level.

What is a good career path ratio?

A “good” CPR can vary depending on several factors, including the industry, the company’s size, and its specific growth dynamic.

However, a ratio of 0.5 is typically considered to be good, as 50% of employees receive opportunities for promotions, and the other half develop new skills and experience through lateral moves. A low ratio of less than 0.2 can lead to poor employee engagement and high turnover because of a lack of career growth opportunities.

Again, what is considered a good career ratio will depend on organizational and industry standards. For example, a rapidly growing tech company might focus on a higher promotion ratio to quickly elevate high-performing individuals into leadership roles. In contrast, a mature company in a stable industry might emphasize lateral moves to help employees build diverse skills and maintain engagement without necessarily moving up hierarchically.

Factors affecting the career path ratio

There are several factors that can influence an organization’s career path ratio, including:

• Industry dynamics: Some industries, like technology and finance, might have more rapid changes in skill requirements and job functions, leading to more frequent promotions as employees acquire new skills and roles evolve.
• Organizational structure: Companies with a flatter organizational structure may have fewer opportunities for promotion, leading to more lateral moves than promotions. Conversely, a hierarchical organization might have more tiers and, thus, more opportunities for upward mobility.
• Business growth: Organizations experiencing rapid expansion often have more promotion openings as new roles and departments are created. Stagnant or contracting businesses might offer fewer promotional opportunities, affecting the ratio.
• Employee preferences: Employees with a strong desire for leadership positions will seek promotions. Conversely, other employees might prefer lateral moves to gain diverse experiences without the pressure of higher responsibilities.

HR tip

Involve employees as much as possible when creating and communicating career paths. This not only contributes to transparency about internal mobility but can also empower employees to take ownership of their professional development.

How to calculate the career path ratio

Calculating your organization’s career path ratio is a rather straightforward process. You can follow this simple step-by-step guide:

• Step 1: Define the time period: Choose the specific period for which you want to measure the career path ratio (e.g., annually or quarterly).
• Step 2. Identify promotions and lateral moves: Use HR data to determine promotions (higher position with increased responsibilities, change in pay grade) and lateral moves (change in role/different responsibilities, within the same pay grade) within a desired period (e.g., a year).
• Step 3. Use the CPR formula: Calculate the ratio by using the formula:

Career path ratio = Number of promotions / (Number of transfers + Number of promotions)

Career path ratio calculation example

Over the past year, a medium-sized consumer goods company experienced the following internal mobility:

• 50 promotions
• 30 lateral moves

Here’s how to apply the career path ratio formula:

50 promotions / (30 lateral moves + 50 promotions) = 0.625 career path ratio

How to improve your organization’s career path ratio

A strong career path ratio can create a work environment that promotes growth and engagement. Here are five actionable tips that you can use to increase this ratio in your organization:

1. Clearly define career paths: Outline the career paths for all roles in your organization, making sure employees are aware of the potential vertical promotions and lateral moves that can lead to their professional development and career progression.
2. Provide comprehensive professional development: Having a robust learning and development program can enable employees to develop the skills needed for promotions and lateral moves.
3. Communicate internal mobility processes: In addition to HR, ensure managers share how promotions occur within your organization and outline the evaluation criteria for upward mobility.     
4. Create a talent mobility program: Initiatives like job shadowing, job swapping, or job sharing, as well as cross-functional projects, can help employees gain diverse experiences and broaden their skill sets, making them better candidates for future promotions.
5. Train managers: Ensure managers have the necessary training to identify and nurture employees with high potential for promotions and lateral opportunities. Encourage managers to have regular performance management discussions that include career development goals alongside performance evaluations.
6. Integrate succession planning into career development paths: Develop an internal talent pool by aligning career path development with succession planning. This will help build strong internal candidates for future leadership roles.

HR tip

If your organization is not meeting its career path ratio targets, conduct a skills gap analysis to identify gaps in current skills and those needed for future roles. This effort will help you design targeted learning and development programs to boost your internal talent pool for promotions and job transitions.