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HR Metrics

How to Calculate & Benchmark Your Internal Promotion Rate


As your organisation grows, it becomes necessary to promote top performers to lead and manage other employees, allowing for more efficient business processes and operations. Promotions, particularly internal promotions, are a crucial way employers can show they appreciate and recognise employee effort and mean to continue investing in their careers.

But how many promotions are necessary for a company, and how many are too many? In this blog, we’ll dig deeper into how to calculate and benchmark the rate of internal promotions in your business.


What does promotion rate mean?

Promotion rate is a human resources metric measuring the frequency at which employees are promoted within an organisation. It’s calculated by dividing the total number of promotions in an organisation in a fiscal year by the total number of employees. Promotions can be internal or external and are usually accompanied by increased pay or job titles. They can also be vertical, horizontal, or dry (more on this later).

What is a good promotion rate? 

“Good” promotion rates vary based on the industry, size, and circumstances of the business. If your company is growing, merging, or acquiring new businesses, it might have a high number of promotions to keep up with the change. SHRM’s Customised Human Capital Benchmarking Report suggests that the average promotion rate for organisations is 6%.

In the US during 2022, the five industries with the highest promotion rates were:

  1. Technology, information, and media
  2. Professional services
  3. Financial services
  4. Utilities
  5. Manufacturing.

While the industries with the lowest promotion rates in 2022 were:

  1. Government administration
  2. Education
  3. Hospitals and healthcare
  4. Consumer services
  5. Hospitality.

Factors affecting promotion rates

Promotion rates can be influenced by several factors from within and without an organisation. Some of the more common factors affecting promotion rates are:

How to calculate promotion rate

You can calculate your promotion rate with one simple formula:

Promotion rate: (Total number of promotions/Total number of employees) x 100

Step 1: Determine the time period

First, determine the time frame you’re measuring promotion rates for. This can cover a year, several months, or another period of time that’s relevant to your business and its operations. Let’s assume that you’re trying to find the promotion rate over the financial year.

Step 2: Define promotions

The next step is defining what, exactly, you’re considering a promotion. This comes down to what, specifically you’re trying to measure (think: internal mobility). So, consider what promotions you want to calculate the rate of.

Both forms of promotions come in different types:

Let’s say you don’t want to include external promotions in your calculations, and only want to calculate the rate of employees moving up job levels internally. Your calculations will involve only the internal vertical promotions that occurred over the time period.

Step 3: Identify the population

Are you calculating promotions organisation-wide, or just within a specific department or team? Looking at promotions across the entire organisation can be used in evaluating company-wide growth and scaling. On the other hand, promotions in specific teams or departments can break that down into more detail, by indicating which teams are experiencing the most growth within the company.

For our example, let’s say you want to look at the promotion rate of the whole organisation, which has only 100 employees.

Step 4: Find the number of promotions

Now that you have defined what to consider as a promotion for this metric and you’ve also identified the relevant population within the organisation, you can find the number of promotions that occurred within that population during the set time period.

Let’s say that over the course of the financial year, your 100-person organisation saw five promotions given to internal candidates.

Step 5: Calculate the promotion rate

Finally, you can calculate the promotion rate with the formula above.

So, if:

  1. Promotions are defined as both vertical and internal
  2. The promotion rate of the whole 100-person company is being measured for the specified financial year
  3. There were five promotions company-wide over the course of the financial year

Then your formula will look like this:

Example promotion rate: (5/100) x 100 = 5%

If your organisation is operating as expected across the year, this is a good promotion rate, as it lines up with the average promotion rate according to SHRM. But if your organisation is currently growing, this could indicate that your rate of promotion isn’t matching your growth rate. If this is the case, your leadership team is probably feeling stretched thin across the whole organisation, affecting employee engagement and productivity.

The challenges of measuring promotion rates

Measuring your organisation’s promotion rates is useful for understanding the rate of upwards mobility and all that entails, but measuring your promotion rate comes with some challenges, especially if you’re relying on this metric alone.

As with all HR metrics, you need to use promotion rate in tandem with other metrics like retention rate, turnover rate and revenue per employee to determine if your rate of promotion is actually beneficial to your business. Focusing solely on promotions doesn’t reveal improvements (or otherwise) to engagement, productivity, or business revenue.

Let’s come back to our previous promotion rate example. If your organisation is going through a growth stage, a 5% promotion rate could be considered low, and might indicate underlying issues in the workforce. Think: A toxic workplace culture, lack of employee engagement, low morale, or job dissatisfaction. This is why measuring other metrics alongside your promotion rate helps to contextualise the rate of promotions in your business.

And, while promotions are generally given to your leadership-capable, high-potential talent, you need to remember that promotion rates on their own don’t indicate the performance of promoted employees, just that they’ve been promoted. Combining performance metrics with promotion rate can explain that, though. That’s why here at Acorn, we’ve pioneered the first performance learning management system (PLMS), which helps guide employees through their roles’ specific capabilities in order to drive organisational performance.

This is all to say that organisations should evaluate the underlying causes of promotion rates to identify and address any issues that may be negatively affecting it, because those causes will affect engagement, retention, productivity, and your organisation’s bottom line.

Key takeaways

There’s no singular right or wrong answer to what a good promotion rate is, so organisations need to be sure to measure their rate of promotions against specific industry benchmarks. It’s better to focus more on what promotion rates are affected by, like:

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