Getty Images; Alyssa Powell/BI
In March, Jessica, a marketer at a financial-services company, showed up for her annual performance review expecting a promotion and a big raise. Her boss had already told her she deserved it. She'd had a stellar year, receiving great reviews along the way. She was pretty sure she was the top performer on her team.
But when she met with her boss, he gave her the bad news: There just wasn't enough money in the budget this year. All he could give her was a measly 3.5% raise — just barely enough to keep up with inflation. He also loaded her up with extra work and new responsibilities, without giving her a promotion. If she performed her additional duties well, she was told, she might have a shot at a 6% raise next year. Maybe.
Gone are the frenzied days of 2021 and 2022, when employers were handing out bigger titles and pay packages like gold stars at a kindergarten art show. In 2023, according to data compiled by Workday, companies across every industry promoted fewer employees than they did the previous year. The cutbacks were especially stark in tech, where promotion rates plunged by 25%. And corporate America has only gotten stingier since. In a recent survey conducted by Mercer, an HR consulting firm, companies reported that they expect to promote only 8% of employees this year – down from 10.3% last year.
Why have employers suddenly gotten so stingy? The short answer is: Because they can. Yes, high interest rates and slower economic growth means that companies are being forced to tighten their belts. But two years ago, cutting promotions and raises wasn't an option. Back then, in the midst of the Great Resignation, employees denied a title bump or a bigger paycheck could simply look elsewhere. "A lot of companies honestly felt held hostage by folks," says Kelli Dragovich, an HR advisor who has served as chief people officer at several tech companies. "Everyone was afraid of the chaos of the talent war." But these days, as I recently reported, hiring rates for high-salaried employees are down to some of the lowest levels we've seen in a decade. And that's allowing employers to tighten the screws without risking an immediate exodus.
Even when the job market begins to heat up again, we may not see promotion rates recover to 2022 levels for some time — or ever. Tech companies are currently scrambling to flatten their organizations by eliminating roles for middle managers. The aim is not just to cut costs, but to encourage teams to make faster decisions. Meta, for example, is aiming to eliminate around 50 of its 300 vice presidents — a title that apparently includes five different levels. In this new structure, there just aren't as many senior-level positions for employees to get elevated into.
"There's a feeling that we got fat and happy these last eight years or so," says Dragovich. "You look at some of these organizations and the pyramid was almost inverted. You get questions like, who's doing the work if everyone's a director and above?"
For employees, it's a tough new reality to accept — especially for Gen Zers, who have come to expect frequent advances up the corporate ladder. When the employer-review site JobSage surveyed workers at the height of the Great Resignation, 58% of Gen Zers said they expected to be promoted every 18 months. That's compared with only 20% of boomers and 27% of Gen Xers.
To soften the blow, some companies are offering one-time retention bonuses to their highest performers. Even in the worst of job markets, employers realize, star employees can always go elsewhere. "It might not make sense to give them a promotion because the organization has flattened," says Dragovich. "But they're saying, stick with us. We'll get through this, then we'll start growing again. Until then, here's a huge equity grant to get you through." The grants are sometimes as large as what an employee would have received with a promotion.
But what about all the other disgruntled employees, the ones who aren't getting hefty bonuses? How can companies keep them motivated in an era of vanishing promotions? One solution to offer them is something that many younger workers have been demanding: more transparency. Often, employees are left in the dark over how promotions are decided, and what they need to do to get one. That opacity makes it hard for them to trust that they'll get more opportunities down the road. Helping them understand how they can move up will keep them more engaged.
"The experience of employees is going to be different if their company provides some clarity around career mobility, versus if career mobility is just a black box," says Michael Citron, a principal at Mercer who specializes in compensation and rewards. "That transparency provides more confidence and more understanding around what it really takes to move." If you can't give an employee a promotion, you can at least give them a road map of how to get there.
In the meantime, the downturn in promotions is leaving even the best employees, like Jessica, with stalled careers. They can't move up at their own companies. And they can't move elsewhere, because so few employers are hiring right now. In the midst of the Great Stagnation, many employees are stuck in the same, boring roles they've already outgrown, and they have nowhere to go.
But that doesn't mean they have no options. Companies need to remember that even though employees can't afford to quit their jobs in the current hiring slump, they can still quiet quit. After all, if they're not going to get rewarded for their hard work, why bother in the first place?
That's what Jessica has been telling herself. Two days after her disappointing review, she started looking for a new job. So far, she's applied to some 200 positions. And while she's preparing to jump ship, she's resorting to something totally out of character: She's refusing to work a minute past 5 o'clock.
"I'm just so checked out at this point," she says. "I've always been a type A kind of person, an overachiever. So it's discouraging when you put in all that work and they're just like: no."
Aki Ito is a chief correspondent at Business Insider.