Product companies produce things. Service companies produce people at the right place at the right time with the right skills and tools to provide an effective service for customers. To evaluate a service organization, it is critical to assess the morale of the workforce.
IN an earlier post, “Organic v. Commodity Growth,” we mentioned how organic growth creates jobs within the organiazation, while “growth ” by acquisition creates horizontal pressure on jobs. When genuine growth is created by new sales, the organization expands vertically. Higher- level technical and management jobs are created. This in turn creates promotional opportunities for current employees.
Promotions are a rare occurance in an individual’s career. They are life-changing events, creating not only a nice salary increase, but also a whole new career ceiling. Promotions create high levels of job satisfaction. If we are achieving significant real revenue growth–say,20%+–then we should be able to sustain a promotion rate of at least 10%.
An unfortunate tendency that has been around forever is that sometimes weaker managers will block promotion opportunities for a high-performing employee–because they selfishly do not want to lose the employee’s productivity. Healthy organizations protect against this behavior. Heathy organizations have consistently high promotion rates, created by effective HR management and genuine growth.
Promotion rate is a useful metric to measure the morale and motivation levels within a service organization.