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Management Dilemma: Promotion Policy of a Multinational Company

Introduction

The primary purpose of human resources is to manage the workforce well and keep them motivated. Talent management, fair recruitment and selection procedures, better working conditions, and equal employee promotion opportunities are essential to an HR organization. In these issues, advertising is the most discussed issue, and many researchers study in detail about this factor that directly affects employee satisfaction and organization’s productivity in different fields (Naeem, 2013) (Muhammad Ehsan Malik et al. 2012), (Norrani Mustapha, 2013).

Within an organization, job promotion is the vertical development of a worker. According to C.Pfeifer, 2008, “Promotion is the improvision in employees’ level within the organization and also increases in their salary.”

Promotion is considered to be an essential issue in the organization for its employees. The main reason is that job promotion is linked with the career progression of employees. Most employees work devotedly and, in return, expect job promotion. Depending upon the requirements within an organization, advertising can be on a permanent or temporary basis.

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Three types of promotions are paper promotion, dry promotion, and out or up promotion. Paper promotion is given to senior employees, mostly in the government division. The parent department is considered a promotion place in paper promotion but can be shown in any other business or employee request. ​​ There is no increase in salary; employee only​​ gets​​ promoted to a higher rank. In out or up promotion, workers either get​​ promotions or​​ pursue employment in any other organization where he/she gets more benefits and other facilities. ​​ 

There are two dilemmas in the promotion plan of any organization. The principal​​ difficulty a business countenances is whether to post a job​​ position externally, internally, or both. Inner workers must feel as though they have the open door for promotion, or they start to feel as though their professions are on hold, and there is no place for them to advance unless they leave the organization. External candidates bring information and experience from outside required for the organization to develop and create. Most managers choose a blend unless an occupation requires abilities that the business knows are not accessible inside. Regardless of whether a company has time for an inner contender to get up-to-speed on the skills necessary, likewise assumes a part in whether an interior competitor is considered for promotion.

Promotion is not the correct move to make with every worker. Few workers don't need more elevated amounts of duty and specialists. They are gladly taking a shot at the employment as esteemed individual supporters. Promotion is a type of acknowledgment for workers who make critical and viable work commitments. Thus, this is a difficult moment for​​ organizations promotions are mostly concerned with the increase in administrative work and other responsibilities.

Organizations, nonetheless, have made promotion the essential technique for workers to expand their compensation and expert.​​ Higher​​ management​​ is​​ tested to give elective professional ways to​​ workers​​ who merit the advantages and acknowledgment gave​​ a promotion​​ yet don't seek to deal with different workers' work. Singular benefactors must be qualified for a​​ promotion​​ that​​ perceives​​ and reward their part as donors. ​​ 

Promotion is the stimulator of self-improvement and​​ increases​​ the level of interest in the job. Keeping in mind the following factors most organizations think about employee promotion:

  • Recognize the commitment and performance of employees and encourage them for improved performance.

  • Encourage employees to acquire skills and knowledge and develop the spirit of competition.

  • Retention of skilled employees.

  • Reduction of dissatisfaction of employees.

  • Attract competent and suitable employees.​​ 

There are two bases on which an employee is promoted, i.e., seniority or merit (competency base). Seniority based promotion is given by considering the experience of an employee. The employee who has served for an extended period gets promotion in the seniority-based promotion. Merit or​​ competency-based​​ promotion is provided by considering the skills,​​ abilities,​​ and knowledge of an employee.​​ 

There are four essential elements of the promotion​​ program​​ of every​​ organization. The four elements are:

  • Promotion Plan formulation: The formulation of a promotion plan​​ should be fair and consistent. Internal and external sources (recruitment from outside) are considered while formulating a promotion plan. Along with seniority, skills, abilities, capabilities, and performance are also given importance. The promotion ladder chart and policy of wages are mentioned in this section. Simultaneously, the policy​​ formulation, the last and essential point of consideration, is the promotion's trial period.

  • Channels of promotion: Career progression plans and analysis of​​ incomplete​​ job documentation are highlighted in this section.​​ 

  • Appraisals for promotion: Performance appraisal​​ procedures​​ are described in this section.

  • Unified​​ records: The employee's personal (skills, abilities), academic (education), and work record (working behavior and work​​ performance)​​ are maintained in this section.

In this​​ paper,​​ the management dilemma concerning the promotion policy of a multinational company is discussed. Moreover, both the​​ basis​​ of promotion, i.e., merit/competencies or seniority, and their predictable & unpredictable outcomes are also discussed. ​​ 

Aims of​​ Research​​ 

Talent management and granting promotions to express gratitude for the worker’s efforts are crucial aspects of HR. However, recently, due to changes in work settings and living standards, many workers have demanded and raised their voice for their right to​​ promotion. On the other hand, management faces a dilemma due to the factors of demand and supply. The government wishes to keep the cost at the lowest point. Thus, these two opposing ideas may bring the conflict in the workplace.

 

An organization can exploit promotions as a strategic tactic to show gratitude to its workers' contributions, and by doing so, they can influence their enthusiasm and job performance. This research's findings would signify the importance of promotion, and the strategy followed for promoting the workers. The study would enable the organization to decide on a suitable advertisement plan and bring forth a significant recognition and performance management structure. This research can also inspire the company to contemplate a more organized method to promote its employees and gain high performance. ​​ This research aims to examine the best possible option for promotion. The study will also explore whether the advertisements should be based on seniority or competencies.

Objectives​​ 

The objectives of this research are:

  • To understand the process of promotion.

  • To comprehend different systems of promotions exploited as a reward or compensation to the workers’ efforts.​​ 

  • To decide whether a relationship exists between rewards and recognition and employee motivation and satisfaction.

  • To determine the impact of promotion as a reward on motivation and satisfaction.

  • To determine the effect of credit in the form of promotion on motivation.

  • To determine which variables contribute to motivation and satisfaction at work.

Company of Research

The study is focused on a United Arab Emirates-based international express, mail delivery, and logistics services company.​​ Aramex, known for its personalized services and innovative products, has quickly developed into a global brand. Listed on the Financial Market of Dubai (DFM) and headquartered in the UAE, Aramex is strategically located at the East-West intersection, enabling us to efficiently offer tailor-made logistics solutions anywhere in the world and meet more businesses and customers regionally and internationally.

 

However, the research was limited to its HR management division, which administers and supports the workers. Despite being one of the significant business divisions, this HR management unit lacks implementing an effective, rewarding strategy. This unit tries to satisfy its workers by rewarding their workers by promoting them. This organization's team can recognize the​​ worker’s​​ efforts and follow a specific promotion system. The efficiencies of this division are vital to the organization. Thus, the insurance company is under continuous pressure to review its promotion strategy and opt for seniority-based or competencies based promotions. Adopting this strategy would enable the organization to create a unique performance culture. A motivated workforce​​ reinforces the performance level of workers in an organization. Thus, the organization must revise and enhance its strategy and opt for seniority or competencies based promotions. ​​ 

Literature Review

Promotion changes the content and designation of work; along with this, the responsibility,​​ power,​​ and remuneration also increase. There are many researchers on the rise​​ (Asvir Naveed, 2011),​​ (Taslim Khan, 2013),​​ (Conrad, 2009). There is an established hierarchy in many multinational companies that involves promotion as an essential aspect and used as a pillar to motivate them. ​​ Organizations can have a​​ competitive​​ advantage and earn the​​ desired​​ level of profits if their employees are satisfied as satisfied employees devoted themselves to work. Studies also find a​​ major association between work satisfaction and satisfaction​​ promotion rather than job satisfaction and salary​​ (Jirjahn, 2006).​​ 

Moreover, sensibly administered, promotions and transfers increase effectiveness, morale, and career progression to employees. Like any other HR​​ practice,​​ the objective of advertising is also the same that is to improve the efficiency and productivity of the​​ workforce. The main feature of the promotion policy of any organizations includes:

  • Planning: Every company has its promotion policy in written form and known to everyone in the organization from the higher management to the employees. The management team​​ needs​​ to include the external and internal sources (on the one hand through recruitment and between ability & merit on the other hand) of​​ promotion. In the​​ planning​​ phase,​​ the necessary policies related to advertising are framed. ​​ 

  • The​​ creamy base of promotion is one of the critical​​ aspects​​ of this policy. The higher management​​ makes​​ sure that the execution of the promotion strategy is consistent. ​​ 

  • It avoids the dead-end posts. Career progression is clearly defined.​​ 

It usually is a higher management decision while giving promotions to any employee. Usual advertising policy is the merit (skills, abilities) consideration while sometimes seniority is given preference. Criteria​​ for​​ selection​​ are​​ the most challenging part of the promotion plan.  ​​​​ 

Studies also discussed the importance of a need​​ for​​ a transparent and fair promotion plan​​ (P.Lahiri, 2016). According to​​ P.Lahiri, 2016 review, there is a need for a transparent and fair promotion plan because an unclear and unfair promotion plan can lead to high employee turnover and skirmishes among employees. Moreover, indistinct promotion plans appear to be discriminatory. To avoid these problematic situations, there should be a transparent promotion plan.

Researchers demonstrate that organizations use different techniques to retain theiremployees, such as having compensation, training and development, a competitive workenvironment, and other benefits. Employee retention is the main aim and the primary concern for most organizations (Deckop, Konrad, Perlmutter, & Freely, 2006; Moncarz, Zhao & Kay, 2009). Promotion is the most critical component of the employee-employer relationship (Sharabi, 2008). It is an expression of gratitude and reward for employee input and a source of career advancement and satisfaction. It​​ motivates and binds the worker to the firm to prevent the brain drain. It is necessary for a firm and is an essential tool (Human Resource Management) (Bore, 1997). Equity and​​ McClelland Theory​​ provide theoretical background and help understand employees' needs to retain in a firm.​​ 

Armstrong (2010) concludes that monetary reward is the most extrinsic reward that most workers want, but it lacks intrinsic meaning. Moreover, people who work just for money may find their tasks less pleasurable. Financial compensation is used to retain highly skilled employees, but sometimes cash lures people to companies. Higher pay cannot be the only source to keep employees; therefore, firms need to provide competitive rewards such as profit sharing and other perks to retain skilled employees (Beardwell​​ et al., 2007). The organization offers bonus and gain sharing as incentives, which are often based on performance. ​​ These rewards are provided to the key contributors when a goal set is achieved (Metcalf​​ et al.,​​ 2005).people should not only be rewarded with money, but opportunities should also be offered to them to grow within the organization. Stagnation will cause demotivation in employees. They will not be motivated to stay if they don't receive high pay, high status, position, promotion opportunities, and moving up in the firm's hierarchy ladder (Dockel, 2003). The degree to which employee perceives chances to grow and promoted in the firm is referred to promotional opportunities. The employee expects to be enabled to new and challenging tasks in the firm.

According to Zvavaherato(2013), information that we get from the organization's performance management process helps in human resource allocation. The employees who perform well should be compensated, and employees who perform ruthlessly​​ should expand their performance through the different training courses. Performance evaluation is used to determine salary, training, and employee promotion in other departments (Zvavaherato P., 2013). Employees are rewarded and compensated in different​​ companies​​ based on project performance numbers (PPN); it is also used to assess training needs required to accomplished tasks most efficiently. In most organizations, promotion activity is started in the organization, level performance number (LPNs) is collected for different job levels. An employee who gets the highest level performance number is moved to the next position, called promotion (Jitendra, 2012).

Promotion is considered a delicate issue in the lifecycle of employees. Through advertising, the organization recognized the excellent performance, which motivates him to perform in a current way. Promotion is the transition of an employee to a better job; we can take a better job in terms of increased status, responsibilities, and financial benefits that employees get due to good performance as a reward (Pigors & Myers, 1971). But promotion doesn't always need to increase salary and other monetary benefits. Sometimes, additional responsibilities and charges are given to employees to train him or another person's absence. But according to some researchers, salary and other monetary benefits are essential during the promotion (D. Yoder, 1972). Advertising can be horizontal or vertical; horizontal promotion is the advancement of an employee from the company, lower to the upper floor. The steep climb may be the advancement of an employee from one level to another higher level or may retain at the same level. Still, the additional charge is given to him. Dry promotion does not increase salary, allowances, and bonuses. However still, according to a psychology perspective,​​ advertising is a source of superiority, career advancement, satisfaction, and motivation for employees, which increase employee urge to enhance further their skills, abilities, and performance, which both workers and the company profit from it. (S.D. Geet and A.A., 2008). ​​ The performance evaluation system of PEPSI is annual; performance evaluation is an essential element used to determine an increase in salary, yearly increment, bonus, and employee (Park & Kim, 2013).

According to Gathungu, Iravo & Namusonge (2015), promotion influence the commitment of contractual employees. Similarly, promotion is also linked with increased motivation and performance at both employee and organization level. If an organization wants to improve an organization's productivity, the upgrade should be done on merit; the process should be transparent and clear. The HR manager should personally intervene in the promotion process.

Promotion; Seniority vs. Competencies

Usually, there are two criteria for promotion in any organization, i.e., seniority or merit (competencies based). ​​ In organizations considering employees' working experience​​ in advertising,​​ terms​​ are​​ like rewarding the experienced workers and seniority base promotion. While when management​​ believes​​ the performance,​​ skills,​​ and abilities of a worker and increase her/his rank (with a salary​​ increase), its merit base promotion.

P.Lahiri, 2016 defined seniority and merit (performance) based promotion as:

“​​ Seniority is the tenure of a worker in the organization. Seniority comes with working experience in a particular field or department in an organization. While performance​​ is related to the behavior, involvement, and quality of work an employee is giving in the organization".

Seniority is the preferable base, but it cannot be given preference over skills and performance. Considering seniority base promotion might be the reason to choose as a promotion strategy is to encourage senior employees' devotion and loyalty, but ignoring the other aspect is not acceptable.

Furthermore, P.Lahiri, 2016 also discussed the expected and unexpected outcomes of both the basis of promotion. Although senior employees are experienced, they better understand their vision, mission, goals, and culture and have better team management & leadership skills. Still, it does not mean that every senior employee who is promoted can give productive results. But at the same time, seniority base promotion leaves no room for favoritism or any type of discrimination. Whereas, competency base promotion creates a healthy competitive working environment and might result in discrimination or dissatisfaction of senior employees​​ (P.Lahiri, 2016).​​ 

Promotion systems and procedures can play a significant role in retention, affecting the need to leave for career progression elsewhere. Since it is not possible to promote all employees, Kipkebut (2010) recommends that the promotion procedures must be seen to be f, air, transparent, and objective, thereby mitigating the negative feelings of employees who are not promoted. According to Armstrong (2010), the aim of a company's promotion procedures should be to facilitate management to find the preeminent talent and endow the employees with the prospects to progress in their careers within the company. However, the employees should make this progress under the opportunities available (taking into account equal opportunity policies) and their​​ abilities. In any organization where there are frequent promotional moves and promotional arrangements that cause problems, it is advisable to have a promotion policy and procedure known by both the management and employees and always adhered to.

Research Methodology

According to Punch (2015), qualitative research recognizes and holds the problematic interaction of people's emotions and attitudes. In qualitative research, interviews can be used to judge people's attitudes and expectations (Tesch, 1990; Wolcott, 2001). Research participant's moods and emotions can be predicted through the open-ended question. To obtain real results, timely response, and reliability, we used qualitative research in which we conduct interviews in which we ask a different question related to the promotion. In interview research, participants can express their opinion, which is beneficial in obtaining reliable and valid results. I conducted an unstructured interview with the Human Resource Manager in the company with approximately​​ seven-year​​ experience and master level education. It was an unstructured interview of about 10 minutes, in​​ which​​ different questions​​ were asked​​ to judge the company's promotion process. Question asked during the interview are attached in the appendix section

Research Tool

The qualitative research method is used as a research tool in this paper. As one of the types of qualitative research methods, interviews have been implemented to analyze​​ Aramex's promotion plan or policy. Talk with one of the​​ organization's HR managers​​ was conducted to get management opinion about this dilemma.

Research Strategy

Aramex-an international Dubai-based company needs no introduction where executives are known to possess extraordinary leadership traits, encourage new talent by creating work opportunities for them, and motivate others to do their best. Multinational companies have a diverse workforce, and higher management plays an essential role in setting fair HR policies and provides equal opportunities to everyone. So, in this paper, Aramex-one of the multinational company is selected to have its HR manager's opinion about its promotional policy or strategy.

Data Collection and Analysis

Aramex is known for its code of ethics, in which it is stated clearly that it stands in the market due to its workforce's collective efforts. This means that every employee is devoted to the work and is accountable for every action. In any issue, the organization’s executives focus immediately on the problems to not adversely affect the brand image. While discussing the management dilemma of promotion policy and its base either seniority or competency, the HR manager addressed the culture of the organization as:

​​ Aramex​​ is an equal opportunity employer, and it means that there is no discrimination about color, race, origin, age, gender, marital status, disability, or any other. This equal opportunity policy is applied to every phase of employment, whether its recruitment phase, training phase, termination phase, or promotion phase."​​ 

Moreover, he also said that every employee has the responsibility to follow this policy. When asked about his opinion about the promotion base, i.e., seniority or competency, he said:

“​​ The objective base of promotion is seniority, and every senior employee is sure that he/she will get promoted. While the competency base promotion brings the most skilled and specialized worker ahead."

Continuing this topic, he further told the expected and unexpected outcomes of both the basis as:

“​​ The possible outcome of seniority base promotion is that the senior employee will be well aware of organization system, procedures and might help achieve the desired targets quickly due to more exposure and experience in handling the situations. The employee loyalty levels also increase in case if the promotion is given on a seniority basis. On the other hand, the expected outcome of the competency-based promotion is that new employees can also enhance their knowledge, skills, and experience. In this way, a competitive yet healthy working environment is created."

Furthermore, he also discussed the advantages and disadvantages of both promotion basis as:

Seniority base promotion help in the creation of a pleasant working environment. Keeping in mind this aspect, employees will be well aware that the promotion will complete that particular period. Seniority based advertising decreases the employee turnover rate. There are no chances of favoritism or discrimination in seniority base promotion. The drawback of seniority base promotion is that it is linked with​​ entitlement despite the improvement of self. ​​ In this way, the experienced employee may also have zero acceptance for change. The culture of mediocrity develops in the organization when seniority is given preference in promotion strategy.

Competency-based promotion is a challenge for the HR department to retain the talent to enlist the high & best performers and then rise accordingly. A sense of accountability develops in every employee with a competency-based promotion strategy. Chances of self-improvement are given, and it helps to fit the right person at the correct designation at the right time. The major disadvantage of this promotion base is that although the proper method of appraisal is used still, it might create discrimination, nepotism, and favoritism by the higher management."

Highlighting the promotion policy of​​ Aramex, the HR manager said:

"Aramex​​ is an equal opportunity company, so we have a sound promotion strategy that is seniority cum merit base. In seniority cum merit base, both aspects are considered while formulating a promotion strategy. He also said that​​ the organization​​ knows the important tactics of retaining employees. Therefore the company offers extra benefits like paid holidays, worker stock acquisition plans, health & retirement plans, discounts in public transportation and tuition assistance, and many others. The company also motivates employees by appreciating, recognizing, and empowering employees."

Conclusion and Recommendations

One of the most perturbing choices that HR has been confronting in choosing who to promote within the company for offering higher duties, regardless of whether they are serving senior and experienced representatives of the association or those brilliant people who have demonstrated their value by their execution. Unarguably in this manner, the most troublesome part of the promotion strategy that can be actualized by any company is to choose the criteria for presenting higher duties to a current worker, in particular rank or designation. There is no apparent response to this puzzle, as there are some factual contentions on both sides of this problem. A successful promotion strategy concentrates on propelling workers in light of their abilities and execution while avoiding preference. It is essential to decide the base criteria for progress and make workers aware of the models they should meet to acquire promotion. The promotion plan ought to make it clear to workers about the specific time each worker needs to spend in an organization before he/she can be considered for promotion. The significance of a worker's ability and execution and the base time frame over which these credits are to be assessed, the concentration now moves to another similarly imperative benchmark for progression at work encounter earned. Additional time spent inside the association gives an understanding to any worker about occupation and an ideal approach to performing. The skilled worker is an advantage for any organization, as much time and assets have now been put resources into such a person. Numerous HR experts also trust that rank increases a worker's value regarding capability because of a more prominent introduction. As needs are, it adds significance to give the senior​​ individuals an association with open doors for professional success alongside advantages that accompany higher age.

Neither competency (merit) or seniority can be the sole reason for promotion. Choosing seniority as a promotion base will not provide learning and improvement opportunities. To secure a promotion, employees have to wait for the right time. While not considering seniority as a promotion base will not identify experienced workers' importance when there is any vacancy for promotion, a fair and well-planned promotion strategy needs to be implemented.

Similarly, competency base promotion should have organized appraisals, and workers should be aware of appraisal systems. The sound promotion strategy should incorporate both seniority and competence-base. Both prospects should be given equal weight when skills are noticeably equivalent; then, seniority should be considered. While in specialized departments, skills, abilities, and competencies should be considered.​​ 

 

For different posts, a two-track promotion framework might be detailed. In the ordinary track, a few posts might be filled on the premise of position just, given the senior worker meets a ​​ benchmark of execution set by the organization. In the other track of height, which can be named a most optimized plan of attack, a representative who has put in a base qualifying time of administration can be assessed with a marginally more requesting measuring stick of execution to secure promotion. The promotion strategy should not be static and should be looked into at clear interims to satisfy an organization's development and offer its workers scope for their career & skills​​ progression. Furthermore, organizations need to incorporate the seniority cum competency promotion criteria to satisfy senior and skilled employees.

References

  • Armstrong, M. (2017).​​ Armstrong's handbook of human resource management​​ practice​​ (1st ed.). ​​​​ New York: Kogan Page Limited.

  • Asvir Naveed, A. U. (2011). Promotion: A predictor of Job Satisfaction: A Study of Glass​​ Industry of Lahore (Pakistan).​​ International Journal of Business and Social​​ Science, 301-305.

  • C.Pfeifer. (2008). An Empirical Note on Wages in An Internal Labour Market.​​ Economics Letter, 570-573.

  • Conrad, H. (2009). From Seniority to Performance Principle: The Evolution of Pay Practices in Japanese Firms Since the 1990s.​​ Social Science Japan Journal Advance Access, 1-21.

  • Jirjahn, U. (2006). A Note on Efficiency Wage Theory and Principal-Agent Theory.​​ Bulletin of Economic Research, 235-252.

  • Kipkebut, D. J. (2010). Organizational commitment and job satisfaction in higher educational​​ institutions: the Kenyan case. Retrieved from​​ http://eprints.mdx.ac.uk/6509/

  • Muhammad Ehsan Malik, R. Q. (2012). The Impact of Pay and Promotion on Job Satisfaction: Evidence from Higher Education Institutes of Pakistan.​​ American Journal of Economics, 6-9.

  • Naeem, N. (2013). The impact of Organizational Culture and Promotional Policies on Employee Satisfaction: The Case of Pakistan.​​ Journal of Business and Finance, 63-68.

  • Norrani Mustapha, Z. C. (2013). The Effect of Promotion Opportunity.​​ International Journal of Academic Research in Business and Social Sciences, 3.

  • P.Lahiri. (2016).​​ Merit or Seniority- Better Criterion for Promotion.​​ New York: Concept Research Foundation.

  • Taslim Khan, D. G. (2013). Promotion As Job Satisfaction, A Study on College of Muscat, Sultanate of Oman.​​ European Journal of Business and Management, 56-62.

 

Appendix

  • Inform about the culture of your company? Structure, policies, procedures, working conditions?

  • As an HR manager, what factors do you consider for promoting an employee?

  • What is the benefit of promotion for both the employees and the organization?

  • What do you think does seniority matters in employment? Should promotion be based on seniority or competencies? What​​ are the criteria​​ for advertising in your company?​​ 

  • Do you think it is fair to promote an employee on a seniority base while the other employee is known for the best competencies?

  • Do you think your promotion policy is sound? If not, then discuss the essentials of sound promotion policy.

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