Let’s face it, not everyone in an organization is on their way up the ladder. With few top jobs in every rung and with many people vying for a promotion, organizations face the ultimate challenge of keeping employees motivated when there are no promotions to give.

Researchers Jin Li and Michael Powell, both of whom are assistant professors of strategy at Kellogg School of Management, Northwestern University, in their article in Kellogg Insight, speak about how companies can make sure their workers are motivated even when there are not plentiful promotions to hand out.

Li and Powell, along with Rongzhu Ke at the Chinese University of Hong Kong, found that promotions were the most effective way to motivate workers, using a mathematical model.

“When employees are striving to move up the career ladder, the firm can get the workers to do well while paying the lowest amount of money," says Li.

But it all depends on the size of a company. In larger firms, with more entry-level employees for every manager, it is more difficult to get one of the few top jobs. In such a scenario, all that companies can do to keep workers motivated is to pay them more.

Promotions are the most motivating when the next step upward is never too far out of reach.

“Firms that are expanding are going to find it easier to use career-based incentives," says Powell. “When the firm’s growth starts to level off, you have to adjust expectations, because you have significantly less flexibility."

Firms that are not growing may have to compensate for the lack of advancement opportunities with stock options or award more bonuses, says Li.

“If you’re going to promise people that if they work for you for three years they’re going to get promoted, you need to make sure that you need people at higher-level positions three years from now," says Powell. “When you’re managing your workforce, you need to manage the careers of the workers themselves."

The authors point out that when the job offer itself is already pretty good, the promotion becomes less important.

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