Promoting a top performer doesn't always guarantee they'll stay — in fact, it's often their ticket out. ADP chief economist Nela Richardson shares the surprising data, and how to navigate these transitions better.
Transcription:
Dan Hood (00:03):
Welcome to On the Air With Accounting Today, I'm editor-in-chief Dan Hood. Promotions are supposed to be win-win, right? With the employee getting a warm feeling of recognition and they're advanced in their career, and the employer, building its future leadership ranks and cementing a long-term relationship with their top talent. But to a surprising degree, it turns out it doesn't always work out that way. According to a new report from payroll and HR services, giant, ADP, and its ADP Research Institute here to talk about. All that is their chief economist and the head of the ADP Research Institute, Nela Richardson. Nela, thanks for joining us.
Nela Richardson (00:31):
It's my pleasure. Thanks for having me.
Dan Hood (00:33):
Why don't we start, maybe this all came to our attention from the Today at Work report that you just recently issued. Maybe you could tell us all about that and then I'll give a sense of where this information is coming from.
Nela Richardson (00:45):
Absolutely. We actually just issued today at work this year, and it was really a collaboration on two major sources of data that we have access to at a d p. One is one that's kind of familiar. It's the A D P payroll data, which is over 25 million workers. But within that data, it's not just about pay. We actually have some really fine-grained analysis and data points on teams, team structure, skill development, and promotions, which we'll get to in a second. We also paired that data with worker sentiment data because we found out during the pandemic, it's not just what workers report doing to their HR firms and to their employers, but how they're feeling that's driving action and sentiment is a really important indicator of future action. And so we've leveraged in this report about a decade's worth of survey data, global survey data from over 29 countries on what really goes into worker sentiment.
(01:53)
And we've leveraged that data on a monthly basis for the United States. So really rich data sources here, but the whole goal of today at work is to be a conversation, much like the one we're about to embark on today. Now, Dan, it's a conversation that starts with, you'll never guess what happened today at work. It's a conversation that people have all the time, usually around the kitchen table or a dinner table, maybe in a restaurant, and it's a conversation that draws you in because something is about to be told. There's some kind of story that comes out of, guess what happened to me today at work? And so today at work, the A D P platform is really the tip of the spear of the research showing all the things that workers are experiencing today at work, and we're using data to tell some really rich stories.
Dan Hood (02:49):
Well, yeah, and the inaugural one of this is fascinating, right? And that's what we're going to dive into now, which is some really fascinating discoveries about promotions and how they work and the impact they have and whether they actually deliver the value to both employees and employers that you would expect. So maybe we could talk about what's going on there. It's weird, it's unusual, it's a little counterintuitive, but sort of what's that headline discovery of this first one about promotions?
Nela Richardson (03:17):
Well, the headline is that transition even a great thing, a great opportunity like a promotion is a transition for the worker. And so we see an effect in the first six months after a promotion that leads to people who are promoted more likely to leave their firms. In fact, we find that 29% of the population we studied left their employer within one month of being promoted. Now, there's context to that, okay? The context is we examined a very specific period of a four year period that bookends a really revolutionary time in the labor market before and after the pandemic. So we can dive into what that means, but this was a very unique time in labor market. We know that there was a great resignation. We know that there was a lot of churn, there was a lot of job loss, there was a lot of hiring after that job loss. So all of that is embedded in this finding. The second thing we found is if these workers, we created a statistical model, if these workers had not been promoted, only 18% of them would've left. And so what the suggest is that even a good transition is still a transition, and employers need to be aware of what could happen during this transition.
Dan Hood (04:40):
This is an audio only podcast, so you can't see the enormous number of spit takes I'm doing throughout this. It's just, I mean, it's really, you would not expect people to, when you hear the fact that, yeah, within a month, a lot of a serious percentage of people who've just been promoted leave you spit your coffee all over the desk and say, how could that possibly be? Because it really is, as you say, when you phrase it in the context of it, it's a big transition, right? Anytime there's transition that's going to come with just levels of upheaval and disruption and so on, but you would think this wouldn't be the one that would bring this, and we'll call it flight risk, for lack of a better word. That's the one area where you wouldn't think a promotion or a raise would be the thing that keeps people on board, but the notion that you give someone a new title and they're suddenly like, bye. Maybe you could talk a little bit more about are there categories of employees who are more or less likely to leave after getting a new title? You said you've got this enormous pile of rich data, and I'm sure there's different levels of different groups of people maybe are more or less of a flight risk. Does that play out in the data?
Nela Richardson (05:42):
It does, and when my colleague Ben Hannah and I discussed these findings, we really drew a little bit from our own personal experience, and that was the point of today at work, Ben Hanwell leads people analytics for the a d P research and this finding kind of accorded with what we've seen in our own careers. We both left our employers shortly after a promotion. And so when I saw this putting numbers on this experience that was, maybe we are weird, maybe it's just unique to Ben and I, but we suspected that we were indeed strange, but not in labor market ways. Strange. We thought maybe this is more common than you'd think. And I also wrote a short note to my boss saying, look, these numbers don't mean that I should not be considered for promotion, and I would encourage any employer not to change their promotion plans, but be more holistic about worker transitions in general.
(06:47)
The fact is, Stan, very few people actually get promoted. In fact, when we looked at 52 million workers over 90,000 employers during this four year period, we found that only four and a half of those workers received a promotion. So promotions are rare to begin with, but once you start dissecting this group of promoted workers, you see some really interesting things that make total sense during this pandemic period. Let's start with the fact that people who have low skilled jobs or more likely to leave. So these are jobs that require very little entry requirements. You may not even need a high school diploma to do these jobs. And honestly, Dan, it's hard to signal that you are a high quality worker when you're in a low skilled job. There's no certification. You may not need a high school diploma. There's no degree from a big academic school to signal how high quality you are.
(07:51)
So this promotion is a really important labor market signal in a sector of the economy that's defined by low scale work. And that's what we saw in this data. People in low school jobs were six times more likely to leave when they're promoted. A second factor of this, of course, is we've seen huge amount of wage gains for this particular population over the last four years. So there was a labor market that really supported those decisions where pay was increasing at 9% from 2019 through 2022. That's like twice the pace of what people who were high income earners were making over the same time period.
Dan Hood (08:35):
Now, I think there's sort of a feeling abroad in labor markets of all kinds that some companies give a promotion in lieu of salary. But as you say, when you there, I dunno if there's any basis to that, but I mean when you say people get, I haven't been getting many promotions throughout the pandemic and so on, when you suddenly discover, Hey, I've got this, you say this badge of achievement, right? Having gotten this promotion, it's natural for a lot of people to say, well, and the only way I'll get a big jump with this badge is to take this badge out into the market and say, look what I've done. Look what I've achieved. And it seems like, and you guys have all the payroll data free chips, I'm assuming, is it fair to say that that's the best way to get a big jump in salary is to go for a new job as to take your newly earned credential of having a promotion and take it out into the job market?
Nela Richardson (09:24):
Well, staying with low-skill workers, that's certainly the case in this four year, sorry,
Dan Hood (09:28):
I should say that's where we're
Nela Richardson (09:29):
Now. We've seen the highest pay growth in this group over 16% at peak. It's come down a lot since then. But yes, that's where you are seeing tremendous demand by employers because it was the sector that was most hit by the pandemic. A lot of these workers were in low-skill jobs that were consumer facing and received huge losses during the pandemic in terms of jobs, and then they were in hot demand after the pandemic. But it's worth noting, Dan, that we didn't see those kinds of wage increases before the pandemic. This is a new phenomenon, and so is the churn in this population. So the question is, will this continue the further we get from the pandemic? And I think that's an open question.
Dan Hood (10:13):
Absolutely. Absolutely. Well, maybe we can flip to the other, not the other end of the job spectrum, but as our audiences, primarily accountants and professional services professionals, what does it look like for people who have those already have those kind of market signaling credentials? They're a C P A or they're an ea or they have an advanced degree in accounting or something like that. Do these trends play out there or is it different?
Nela Richardson (10:38):
It's definitely more modest. The impact. So the more expertise it's required by the job, the less likely you're going to see these big numbers. In terms of people leaving soon after promotion, there is similarity. In fact, people with advanced degrees like graduate school or an advanced technical degree, they were 52% more likely to leave in the first month after being promoted. Compared to our statistical model, they were that much more likely, but the risk drops off by the fifth month. So to underscore for both low skilled and high skilled workers, this is a short-term effect. It's only in the first five months that we really, I would argue maybe the first six months that we see a big impact. After that, they look very similar, promoted and non promoted people. And you think about these actions occurring, they're not occurring in a vacuum. The time in which employers are thinking about a promotion is likely to be the same time in which an employee is thinking about their next stage of their career. So they may have already put feelers out, they may have already lined up interviews. And what we're seeing is a correlation of both the employee timing and the employer time.
Dan Hood (12:02):
Right. So yeah, actually when you put it that way, it makes perfect sense. You would assume some proportion of this is literally even, Hey, if you stay, we'll give you a promotion. You go in and you say, Hey, I've got an offer and I'm going there, and they say, wait, stick around. We'll make it better. I mean, is it safe to assume that that's some portion of it?
Nela Richardson (12:21):
That could be some of it. It could be. I've been two years on this job, two to three years. I'm at the stage of the career where I'm thinking of the next step, and I've put feelers out here to increase my positioning internally, but oh wait, this is a hot jobs market, by the way, and maybe this external offer is a pretty good one, so we could be conflating some things. But I also think it's this issue of transition, and this is where the ADP data also shows a really interesting finding in terms of how individual contributors treat a promotion versus managerial contributors. So I think maybe we can dive in there.
Dan Hood (13:05):
Absolutely, I do. I want to dive deeply into that. I think it's very important, and I think that's, at least for our audience, I think that's going to be one of the big takeaways. But before we do that, we're going to take a quick break and we're back. We're talking with a d p chief economist, Neil Richardson, about a fascinating finding in their recently inaugurated today at work report. This one is talking about promotions and the fact that they are devastating. You should never give them to anyone who works for No, I'm kidding. But there's this fascinating discovery that there's actually a not insignificant proportion of people who leave very shortly after getting a promotion, which raises a question of all kinds of issues about what a promotion is for and what you hope to achieve with it as an employer and what it means to people as an employee.
(13:53)
And we've talked about the fact that particularly for low-skill jobs, it's often a way to signal quality that you go and say, look, I got a promotion at my last job that makes means I'm raise up slightly above the sort of mass of unskilled labor. But there are some others, other aspects of this. And one is, as you mentioned before, the difference between an individual co contributor and a manager and the sort of transition between when you're just being promoted to a higher level of individual contributor versus switching to being a managerial point. And that seems to be, from your research, seems to be one of the most dangerous points. That seems to be where there's a lot of flight risk. Maybe you could talk a little bit about that.
Nela Richardson (14:32):
Yeah, and I think this is where the punchline of this report really comes to play on worker transitions. So let's take the individual contributor after a promotion, an individual contributor, a person who doesn't manage anybody, they're actually more likely to stay on the job after a promotion. And it adds in our data about 37 days a promotion to what they would otherwise work if there was no promotion. What does that mean? Well, it means that if I'm in my job and I'm doing pretty well at it, I'm doing a well enough to get promoted and I'm acknowledged in the job I'm doing, maybe given greater responsibility, but still the same job, I'm more likely to stay at that company. However, if I have to do a transition maybe from individual contributor to manager, then I do see, and we see it in this data, an increase in what you call hand flight risk.
(15:31)
And it could just be that we as employees are not always trained on how to be managers. It's a transition. How do you become a manager just because you're really good at something? Maybe it's engineering, maybe it's scientific discovery, maybe it's really good at being an accountant. It doesn't necessarily mean that those skills translate. A C P A skillset may not necessarily translate to managing a group of CPAs and working people through that transition with career development with support could help mitigate any kind of flight risk that goes from individual contributor to maybe a first line manager.
Dan Hood (16:12):
Right. I'm going to go ahead and say that it is absolutely a hundred percent true, a hundred percent fact that having been good at all the things you mentioned will not make you good at managing people. It is an entirely different skillset. And yet in industry after industry, it's absolutely true, the accounting profession that you get promoted to manage other tax repairs because you're a great tax preparer regardless of whether you're actually a good manager or have any skills in that. And this is true of every facet of the economy. So I don't want to give Accountantss a hard time for it, but it is a hundred percent of a fact and a problem that as you say, when you're switching from that, you're great at being an individual contributor and you rise and rise and rise and rise and rise until you're doing the best possible work you can do there.
(16:50)
And then they say, Hey, run a bunch of other individual contributors. It's just not the same. It's not thing at all, but it's a problem they say in every industry, in every profession, but no one seems to have figured it out. Are there any advice for employers and particularly maybe for accounting firms that they should be thinking about as they make promotions? You don't want to give somebody a promotion and suddenly discover they leave, and that's a retention to such a huge problem for accounting firms. They would. Any thoughts you have on how to keep people from turning a promotion into a one-way ticket out of the firm would be great?
Nela Richardson (17:22):
Well, I have a couple, and you're right. It's not just accountants. I'm an economist. Many economists operate as individual contributors their entire careers. And I can tell you the skill sets between being a good economist and being a good manager, there's little intersection.
Dan Hood (17:39):
It's not much of a
Nela Richardson (17:40):
Venn
Dan Hood (17:40):
Diagram.
Nela Richardson (17:41):
No. Even if they understand, they could study for research purposes management and still be terrible management, which is rather ironic, but it is a different skillset. And I think, so the first takeaway is really understanding where your individual contributor is in that skillset and supporting them. It doesn't mean not promoting to managerial ranks, it just means providing that transitional support. Secondly, having a good career ladder for individual contributors in professional roles I think is really important. As the world becomes more complex, our jobs have become more specialized and there is a contribution for that individual contributors can make that is really big and should be acknowledged without them actually having to manage other people. The third takeaway from this is it's thinking about your bench. I use sports analogy. I only watch sports stand for the analogy impact, but you would never see a professional sports team only train their first string players, right?
(18:50)
Having a skill development, career development for your bench is really important. Just in case your key person for that team leaves, you'll have a group of people who can take on that responsibility, who may thrive in that responsibility. The last point I'd like to point out here is that not every manager treats promotion the same way. Yes, managers are more likely to leave, but second level managers, so those are the manager of managers, they're in a different part of their career than let's say third level managers. So that's when you're pretty high up on the senior management track. You might be like a stone's throw from executive management, and that is a time where you might raise the brows of a headhunter, for example. So understanding where the career journey is and what the levels of demand from outside employers for each level of that hierarchical level of experience is going to be really important.
Dan Hood (19:56):
So just to be clear, you're not saying that no one should ever be that no company should ever promote people ever. You're not suggesting that people stop promoting.
Nela Richardson (20:03):
Just to be clear, my boss at a d p promotions are a good thing. Promotions
Dan Hood (20:09):
Are alright. You
Nela Richardson (20:09):
Keep doing them. Promotions are a great thing for the worker, for the employer, but the transition period, that six month period, remember this effect peters out by nine months is critical for success. So whether you're onboarding to a new team, you're getting new responsibilities, you're moving up that managerial ladder. This is a time of vulnerability because it's a time of transition.
Dan Hood (20:34):
And so firms should not, well, all employers, but I'm going to say accounting firms in particular should not think of the promotion as the end, right? It's not the end of the thing, Hey, you got promoted. Great. We'll see you in two years for your next promotion. It's the beginning of, as you show, should be treating it like onboarding, almost like they're a new employee in a new role, and you need to explain it and support them and bring them aboard and keep them on board. Otherwise, I mean, sorry, go ahead.
Nela Richardson (20:58):
No, I was just agreeing with you. I was shaking my head emphatically, but your audience could see that,
Dan Hood (21:04):
Oh, audio only is limiting us so much. The spit takes, the nodding, the things you all at home are missing because it's fascinating the whole for a lot of people, some people, I think particularly at that transition point you mentioned between individual contributor and manager, suddenly feel like when you get into managing and managing is very difficult and occasionally a thankless task. Some people feel like, I'm being punished for having been really good at doing this work before I'm being punished by having to manage other people do it. That's a little extreme, but it sometimes, particularly if you're not getting the support you need to become a good manager. So it's worth bearing all that in mind. There are some other, we could dive forever into this. I could talk about this. I think it's a fascinating subject forever, but there are some other things, some other elements of the Today at Work report, some other takeaways and some other, there's an index there. Maybe we can just take a minute or two to talk about what that's all about.
Nela Richardson (21:54):
Oh, thank you. Thanks. I appreciate you bringing that up because another part of this report that we're really excited to roll out this month is how do you understand and measure employee motivation and commitment? So this is directly related to this idea that you want to keep your good talent. I think that especially after the pandemic, most employers have been, and especially in accounting, have been dedicated a lot of time about how to engage their talent, how to retain their talent, how to develop their talent in order to make their firms as productive as possible. And so this work, which was led by Dr. Mary Hayes is based on worker sentiment and psychometrics. And Mary is an expert in this field, really defined it in terms of what it means in the labor market. And what we did is to build an index. Mary's contention, which I think you'll see as we walk through the data, is that employee motivation and commitment is not a state.
(23:04)
It's not like Nila grew up in Richmond, Indiana and became a very motivated and committed person. It's more that this trait can vary depending on employer or macro movements and shocks, maybe dependent on the sector activities and that it can change over time. And what we were able to uncover is that during this period of time, and the data starts for the US in this monthly survey in December 21, we do see a big change in at an aggregate level, employees motivation and commitment. And this is a demographic sentiment survey based on, like I said, a decade's worth of research in which we really explore and measure an employee's relationship with their employer. Do they feel valued? Will their good work be recognized? Do they see a future for their company? Do they trust their leadership? Do they trust their manager? So we were able to elicit all these responses and refine them in a way that measures something real.
(24:14)
And we actually see the data follow what's going on in the economy. So the data peaked in terms of employee motivation and commitment in December of last year. Now think about what was happening last year. You had widespread adoption of remote work. You had employees really having more opportunities with job openings that peaked during that year. You had a big recovery comeback from the pandemic, all of this coming together. Now since that time, we've seen employee motivation commitment drop a lot over the summer. It's now down to a hundred versus 108 last month. So anything over a hundred is higher than where we started. Right now we're kind of flat, but we've seen it decelerate over the summer as the labor market conditions have gotten tighter.
Dan Hood (25:06):
Well, and the interesting thing with all that data, we'll be seeing what it looks like going forward, and I know you guys will be measuring and remeasuring it, and it'll be fascinating to see how that plays out. Very cool. How often will that index be coming out? Is it quarterly or is it monthly? Is it
Nela Richardson (25:22):
The monthly? We can provide the motivation and commitment score monthly, and you'll be able to see that on the adri.org website. But today at Work Report is quarterly and every quarter there will be a different component of the labor market that we will dive into. But you can always go deeper with data at the sector level on our website, ADP i org as well.
Dan Hood (25:47):
Excellent. And adp i.org, is that the place to look for today at work, or is there a better place for them to find that?
Nela Richardson (25:54):
That's where you'll find today at work. You'll find all of our assets put out by the A D P Research Institute, like the Main Street Macro, which is a weekly digest of all the economic news of the day Data lab, which is a deep dive that I mentioned on some of the work we highlight in today at work, but other components of the labor market. So our view here with a D P research is to really leverage all that data we have at our fingertips to tell compelling stories and provide insight on the world of work,
Dan Hood (26:24):
And to explore you and Ben Hallowell's personal career paths, which I'm fascinated by. I want to know what data you guys decide to look into next based on your next water cooler conversation. I think it'd be very cool. But for now,
Nela Richardson (26:37):
And tell us your stories. I mean, we have in our Today at Work reports of opening if you have stories, and I, accounting is full of stories in terms of employee commitment and motivation and productivity and labor and demographics. So we plan on highlighting those at the macro level, but also at the sector level too.
Dan Hood (26:59):
Excellent. Alright. I highly recommend people take a look at today at Work quarterly and particularly this inaugural one is fantastic. It's really fascinating all the implications of what promotions mean and what employers should be thinking about as they hand them out. But for now, we're out of time. So I want to thank Nela Richardson, chief Chief Economist at ADP. Thanks for joining us.
Nela Richardson (27:20):
Thanks for having me. I really enjoyed the conversation.
Dan Hood (27:22):
It was great. And thank you all for listening. This episode of On the Air was produced by Accounting Today with audio production by Kevin Parise. Rate or review us on your favorite podcast platform and see the rest of our content on accountingtoday.com. Thanks again to our guest, and thank you for listening.