Passed Over for a Promotion? How Companies Can Retain the Runner-up
Losing out on a promotion is tough
enough. But being passed over for a top-level position in favor of another
candidate -- either external or internal -- can be a deal breaker for even the
most loyal company soldiers.
Corporate America's top echelons are
full of examples. Just last year, Ross Levinsohn was the interim CEO at Yahoo
and widely expected to take the Internet firm's reins, but the company's board
had another idea. Seeking a chance to pump some desperately needed energy back
into the company, it hired Google vice president Marissa Mayer in July 2012 and
passed over Levinsohn, who had spent almost two years with Yahoo.
By the end of the month, Levinsohn
had left the company. In January, he landed the role of CEO at Guggenheim
Digital Media, the parent company of Adweek, Billboard and The
Hollywood Reporter.
Given the media's scrutiny of the
Yahoo succession, Levinsohn's departure was likely unavoidable. But keeping top
employees happy after they lose out on a promotion is an important part of protecting
a company's most important asset -- its high-performing talent -- and it is one
that too many firms overlook. "They don't pay enough attention to
it," says Nancy
Rothbard,
professor of management at Wharton. "Number one, because it's hard, and
two, it takes some creativity."
According to Stan Kimer, president
of Total Engagement Consulting by Kimer, a Raleigh, N.C.-based human resources
consulting firm, ideally companies should find a fulfilling role for a highly
valued executive if he or she doesn't ascend to the CEO's office, but it
happens far too infrequently. "Certainly, there could be a situation where
a company needs an external CEO to take it to that next level," he says. However,
"it would be wonderful if the company could offer some sort of incentive
to keep [the runner-up] around to provide a good mix of opinions and
backgrounds. That could be a really super dynamic, but it's not that
common."
More Than One Path
Kimer knows the disappointment of
missing out on a promotion all too well. During a 31-year career at IBM, he
tried -- and failed -- several times to get higher-grade jobs before ultimately
landing promotions within the company. Thanks to IBM's culture, he had managers
who helped guide him and cushioned his blow when he missed out on advancement,
he recalls. "If a company has a good climate where they build trusting
relationships between employees and managers, you can work through that."
Now, Kimer helps companies to develop
skills-mapping systems to guide their employees in achieving their medium- and
long-range goals, regardless of whether they are aiming for the C-suite.
Telling employees what they need to fix now is easier than addressing those
issues a decade down the road -- but it's an exercise that many companies fail
to do.
"When I'm building those
structures for companies, a lot of the message [to employees] is that career
development has many aspects," he says. "It's not always about going
up and up and up. At times, employees should be encouraged to move laterally to
a new area and learn new skills that make them even more valuable. Some
employees get real rewards out of making dramatic job shifts."
Employees also require some
emotional intelligence to moderate their reaction to getting passed over for a
promotion, and to realize that the situation has its own possibilities for
reward, Rothbard notes. In the field of systems theory, an important principle
is equifinality, or the idea that a desired end state can be reached by more
than one set of means. That's a critical concept for an employee to bear in
mind when he or she is mapping out a career path, Rothbard says.
"Flexibility needs to come from
both sides," she adds. "If an employee is in a company that has defined
success in narrow pathways, then it reinforces that mindset. If your goal is
the CEO position, there's only one CEO.... If [a career track] is construed
narrowly, then it's harder."
Those who take a broader approach to
structuring their goals are more open to creative solutions for career
advancement. Rothbard cites an example from her own experience -- a colleague
who lost out on a promotion but gained a different job within his company after
it crafted a position for him with a new title and responsibilities. The new
post gave the company extra value while engaging one of its key employees at a
point when departing was on his radar screen. "That's a great example of
how to find a creative way to retain someone. [Management talked with the employee]
about what his ideal job would be, what kinds of things would be exciting for
him and found out where his goals would be met within the organization."
CEO or Nothing
Still, it's hard for some employees
and employers to shake the time-held belief that getting ahead means getting
promoted, with anything less than that construed as a failure.
Matthew Bidwell, professor
of management at Wharton, points to another well-known example from the
corporate world of a publicized succession battle: at General Electric leading
up to Jack Welch's retirement in 2001. Three of Welch's top lieutenants, James
McNerney, Robert Nardelli and Jeffrey Immelt, were all vying for the position,
with Immelt eventually selected as chairman and CEO. Both runners-up left the
company: Nardelli moved to Home Depot and McNerney departed for 3M.
In that situation, one in which the
media was paying careful attention, it was all but inevitable that Nardelli and
McNerney would leave GE when they were passed up, Bidwell says. But even
without all of the public scrutiny, many employees may see their future at a
firm as being limited when they fail to get the promotion they want and feel
they deserve.
"The more [a promotion] is set
up as an explicit competition and the more it's seen as an important reward,
then it is seen as what [employees] should receive for their good
performance," he notes. "A lot of organizations implicitly and
explicitly use promotions as a reward." It's no surprise, then, that when
a well-performing employee loses out on a promotion, "it can be quite
damaging. The fact that you were expecting a promotion and didn't get it can be
a signal [that you] are not valued, and that limits [your] advancement."
Companies can minimize that damage
by clarifying what additional experience a runner-up might need to have in
order to eventually make the leap to a top position. "You might be senior
vice president of sales and have no development experience, so [the company]
wants you to be a senior vice president over a brand before becoming CEO,"
Kimer says.
Another option is helping a person
find a CEO position with a major customer or supplier -- a tactic IBM often
used, according to Kimer. "Planting employees in CEO roles at other
companies is a good business strategy. If employees go to those companies and
have good feelings about the move, it can help make supplier or customer
relations easier for those entities."
A 'Great Problem'
According to Beth Carvin, CEO of
Nobscot, a Honolulu-based human resources software development company, getting
passed over for promotions is a frequently mentioned reason for leaving a firm
in the exit interviews her company conducts. Companies face a double-edged
sword when they want to provide advancement opportunities for their strongest
employees: If they have four good internal candidates for an open position,
then 75% of the applicants are going to be upset when their name isn't picked.
Communicating immediately with
employees who aren't promoted -- and doing so before the promotion is announced
-- as well as offering suggestions about how they can grow and develop are
positive steps. But Carvin also suggests that internal mentoring programs can
be a great way to give employees additional attention and support if they don't
get the job they are aiming for. A mentor, for example, can help employees
understand their strengths and weaknesses and guide them toward applying for
the right types of jobs within a company. "A manager cannot always do that
type of coaching," she says. "As a manager, the employee works for
you, and you're not thinking of ways they can move away from [your] department.
The mentor can be that outside set of eyes, helping employees see strengths and
weaknesses and introducing them to new people or skills."
Most of Carvin's suggestions for
eliminating runner-up turnover are inexpensive for companies to implement -- if
managers are willing to take the time to instill the culture necessary for the
systems to succeed. "This is one of the great problems that is easy to
solve. It's not a big deal to make sure promotions are communicated to everyone
involved, and it's not hard to make sure that you're taking that extra bit of
time to explain what skills and experience the employee could work on in order
to win the next one. Thinking things through, communicating with employees,
training managers and implanting a mentor program: Those things are not super difficult."
Pitfalls of External Hires
For those who have been a runner-up
to an external candidate, enjoy this bit of schadenfreude: External candidates
tend to perform poorly and have higher exit rates than their internally
promoted counterparts, says Bidwell, who has done research on this topic.
"From my perspective, external
hiring is dicey, period," he notes. "We all systematically
underestimate how hard it is to transfer skills from one organization to
another. There's a lot of learning about an organization that [needs to take]
place that makes people not effective."
Sometimes, however, a board or
hiring manager may feel like they have no choice but to go to the outside. At
Yahoo, where sales had been suffering and the company's identity seemed lost,
the board likely felt it had to make a drastic change.
"An inside hire would have
signaled business as usual, and the company was on a downward trend. By hiring
outside, they were signaling change and hoping that some of the Google aura
would rub off on them," Bidwell points out. CEOs are often viewed symbolically,
he adds, and in cases like Yahoo's, "an external hire sends the right
signal.... Sometimes, you want new skills that are lacking in an organization,
but it's still a tricky integration."
http://knowledge.wharton.upenn.edu/article.cfm?articleid=3179
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