Key Takeaways

• Businesses may adopt different structures regarding tiered pathways in employee development programs. The suitability of the programs adopted depends on the nature of the business model and the sector in which they operate.
• Businesses like Goldman Sachs have adopted a rigid hierarchical structure. It is pyramid-shaped with the majority of employees working at entry- and mid-level positions, with a select few working their way up to upper management positions. This structure tends to result in significantly higher employee turnover.
• Alternatively, businesses like Microsoft and Hewlett-Packard have a more flexible tier structure that enables their employees to select between at least two career pathways, depending on their skill set and contribution to the organization. Flexible career development programs tend to result in lower employee attrition.

Goldman Sachs: Rigid Hierarchical Structures

• Goldman Sachs considers itself a talent-centric organization that invests heavily in the people it hires and retains. At the top of their tiered pathway is becoming a partner. As evidenced by the achievements of former Goldman Sachs partners, who have gone on to become CEOs, senior members of the European and United States' central and federal banks, as well as government officials, their implemented talent management strategy could be considered highly effective.
• Like many other investment banks, Goldman Sachs' approach to career progression is hierarchical. Each tier has well-defined requirements that candidates must achieve before being considered for the role. Additionally, each tier comes with certain minimum benefits, as well as added responsibilities.
• Their first step to their talent development program begins with their recruitment practices. Upon selection from a pool of highly talented graduates across the globe, new hires are skill development and leadership programs, with some offered through Goldman Sachs University. New hires are typically analysts and associates. They typically progress to a vice president role and further from thereon.
• Furthermore, there are expectations regarding the time spent at a certain tier. While others are promoted relatively quickly, those who stagnate at a certain level are likely to find themselves under pressure to look for job opportunities elsewhere in order to make room for rising talent.
• This creates a possible bottleneck issue. For example, the organization recently promoted 495 new managing directors in 2019 to bring the total count of MDs to approximately 2,500 — about 6% of the total employee count.
• Also, this possibly creates a cut-throat environment in which employees are in direct competition with each other. Undoubtedly leadership positions available in the career progression path are few and are possibly getting more scarce, with fewer individuals promoted in the most recent rounds.
• As a result, a large proportion of trained hires leave voluntarily within the first three years of hire or during their tenure at the vice president level. It must be noted that a factor influencing the relatively high turnover rate at Goldman Sachs could be an issue regarding high workload, long hours, and unrealistic deadlines. The organization thrives despite high employee turnover because it continues to attract top talent and candidates are well aware that the career progression will be extremely challenging but highly rewarding.

Microsoft and Hewlett-Packard: Flexible Career Progression Paths

• Some organizations value a more flexible approach to the career development of their employees. Microsoft's approach to a tiered employee development program involves two streams. An individual may select between an individual contributor or management career path.
• Generally, individual contributors (IC) are more concerned with tactical decisions whereas management attends to strategic decisions. Both career paths have a tiered hierarchy. As such, leaders in the IC path determine how to do certain projects and get the desired results while leaders in management discern which projects are worth tackling and the overall direction that the organization should take.
• Such a set-up allows skilled individuals to not be pressured into positions in which they engage less with their preferred roles. Some individuals are fulfilled in technical roles and having two streams of employee development allows technically gifted individuals at Microsoft to continue developing upwards and become technical leaders, rather than reaching a ceiling with the only way up being through management roles.
• However, the two paths are not mutually exclusive and an individual may switch streams. Further, technical leaders may adopt both roles, maintaining their technical contributions and expertise while simultaneously taking responsibility for the performance of their teams. Further, it is also possible to switch from being a manager to an IC.
• Hewlett-Packard (HP) takes flexible career progression tiers a step further. Through the Start2Grow Graduate Program , HP enables new hires to customize their own career paths.
• The Start2Grow program includes individual development plans, an accelerated learning journey, job rotations and opportunities to receive coaching from leaders in their fields.

Additional Findings

•  Succession planning, which is the identification of talented individuals through their performances or development, is an essential practice for implementing a tiered development program. Individuals chosen to progress to the next level are more likely to succeed when selected according to varying criteria rather than utilizing an arbitrary and rigid set of prerequisites measured without context.
• For effective succession planning, organizations should identify and differentiate between high performers and high potential employees. Although high performing employees tend to produce consistent results and exhibit a great depth of knowledge in their roles, they may not have high potential - the ability to develop new skills and competencies and to adapt to an ever-changing environment.
•  Job rotation programs are effective for businesses that have multiple pathways in their employee career development programs. These have been successfully implemented in businesses such as Allstate.
•  Flat and flexible organizational structures, instead of hierarchical ones, may significantly increase employee retention rates and result in higher productivity, depending on factors such as the applied business model and the sector of operation.