If you stop promoting from within, soon you can’t.

I’ve been around and inside of tech companies enough to know that, as a general rule, they don’t promote from within. Why? One VC-specific reason is the extreme amount of power held by venture capitalists, who function as managers rather than passive investors. VCs’ buddies, middle-aged underachievers who need to pull a lucky connection to snag an executive position in a fast-growing company, tend to be inserted into such companies at high levels. That sets a tenor: that internal achievement matters less than the story you can tell as a free agent, especially if you can play the press and the investors’ social network. The issue doesn’t stop there, of course. Even for mid-level management positions and the higher engineering distinctions (once those exist) the best slots and projects tend, over time, to go to external people.

Two things drive this. The first is the social climbing mentality that a growing technology company has. Most founders think that they’re a higher calibre of people than the first engineers they hire. (Are they right? It depends on how they hire.) The first round of hires are often brought on with a bit of compromise: not exactly what the company wants, but good enough “for now” and affordable on a startup’s shoestring (relative to investor demands) budget. Now, a good entrepreneur will find talented people who’ve landed in the “bargain bin”: wrong schools, wrong career choices, or coming back into tech from something else. (Keep in mind that, at the level I’m talking about, “bargain bin” is still the $75-150k salary range– reasonable, but not the level seen at hedge funds or for established tech people. I’m talking about top-1% talent. Don’t bet your company’s start on anyone else.) That’s almost an arbitrage, for those who can detect talent at high levels. But for each of those “diamond in the rough” hires, there are 9 who are equally cheap but correctly priced (i.e. not very good). In the startup phase, these companies tend to assume that their early technical hires were “desperation hires” and throw them under the bus as soon as they can get “real” engineers, designers, and management. That social-climbing dynamic– constantly seeking “better” (read: more impressive on paper) people than what they have– lasts for years beyond the true startup phase. The second driver is the tendency of almost all companies to overpromise in hiring. Authority is zero-sum, and when authority is promised to external executives being sought, internal people must lose some. The end result is that the best projects and positions go first to people the company is trying to sell on joining it. Only if there are some goodies left over are they allocated to those who are already there.

Executive turnover hits morale in two ways. The first and more obvious one is that it makes it clear that the straight-and-narrow, pay-your-dues path is for losers. The second is more subtle. High-level turnover and constant change of priorities and initiatives means that the lower-level people rarely get much done. They don’t have the runway. Ask a typical four-year veteran of such a company what he’s accomplished, and he’ll tell you all about the work that is no longer used, the project canceled three months before fruition because a new CTO arrived, and the miasma of unglamorous work (i.e. technical integration, maintenance necessary due to turnover) generated by this volatility that, while it might have been necessary to keeping the company afloat, doesn’t show macroscopic velocity. That doesn’t make the case for promotion or advancement. Eventually, the high-power people realize that they can’t get anything done because of all the executive instability, and they leave.

At a certain point, companies get to a state where they no longer trust their own people to rise to any challenge beyond what can fit in a single Jira ticket. Promotion from within essentially stops. Titles will go up (especially because salaries won’t) but true advancement will be hard to find. Then, people stop leading.

One concept often used in corporate-speak is the distinction between “confirmational” and “aspirational” promotions. In a confirmational regime, people are promoted when they’re already operating competently at that level. If you’re a Senior Engineer, it means you’ve been performing as one for some time. Aspirational promotions indicate a belief that the employee will achieve that level at some time. Of course, every company will claim that its promotion system is confirmational. No employee wants to answer to a manager the company “decided to take a chance on” (that’s a sign that the employee is marginal or an underperformer) and no company would ever admit that some of its promotions are mistakes. One would argue that confirmational promotion is the right way to do things– even if it’s usually cited as an excuse for stinginess. (The company myth is that people are fairly evaluated, thus given roles, and compensated based on that role. The company reality is that people negotiate what compensation they can get, and then titles and managerial authority are back-filled to match payroll numbers.) Let’s, however, ignore these complexities and agree, for the moment, that confirmational promotion should be the goal. People should lead, and later be recognized; because “pre-recognizing” people as leaders tends to generate the culture of managerial entitlement that we know to be toxic. Okay, so what does it mean to lead?

I would say that leadership is to do things (1) for the benefit of a group, and (2) that one wasn’t asked to do. One doesn’t need to be a manager to lead: most good programmers are leaders, since the truly excellent ones can’t help themselves from doing work that isn’t in any Jira ticket. Some managers are leaders– they protect the group from external adversity, and drive it toward a coherent shared vision– and some aren’t. In hierarchical companies, managers tend to “manage up”, which means they fail both criteria: they’re favoring their own advancement over the group’s needs, and they’re taking orders from on high. In those sorts of companies, managers become puppet chieftains, mostly there to prevent the group from selecting a leader (who might become an agitator, or even a unionist) of its own.

The idea behind making promotion confirmational is that people should lead, in a genuine positive-sum sense, before they manage. I’d tend to agree. Should promotion be confirmational (i.e. conservative) rather than aspirational? Sure, absolutely. So what’s the problem? Where is the cause of dysfunction?

The problem

Simply put, the system falls apart when one set of people gets confirmationally promoted and others are aspirationally advanced. The latter group, the ones who get the benefit of the doubt, will always win. However, companies typically find themselves forced to promise authority to attract executives, and they’re doing this while knowing nothing about what they’ll do at the organization. External executives are, by definition, aspirationally placed. A good negotiator with strong on-paper credentials, facing a social-climbing company, can always get more authority than his demonstrated ability (passing an interview) merits. Over time, those external hires begin to dominate, and the company has an escalating sense of being run “from elsewhere”. Moreover, this incentivizes both political behavior and job hopping. Now, I’m notoriously pro-”job hopper”. Ethical job hoppers (and most “hoppers” are far more ethical than traditional ladder climbers; when they lose faith in an institution, they leave it instead of abusing it) shouldn’t bear the stigma they do, because when the norm is for companies not to recognize internal achievement, it’s the best individual strategy. (Hate the game, not the player.) What I recognize, however, is that it’s not healthy for individual companies to have high turnover; but that’s exactly what they encourage when they fall into the pattern I describe.

Most companies, internally, have slogans like “leadership is action, not title” or “act like an owner”. They tell people that they should rise to the occasion and lead (as I defined the term, above) regardless of whether they’re given official authority. Those slogans are mostly empty talk, but even the most hierarchy-friendly executive will agree that the alternative (an army of disengaged clock-punchers who don’t do anything unless explicitly told to do it) is worse. If, however, a company loses faith in its own people (as constant external promotion suggests) then this is a really bad strategy for the individual. In most companies, attempting to lead without authority is a fast-track to getting oneself fired. Now, losing a job often comes with severance, but it might not, especially as companies replace honest layoffs with phony “performance” cases. The risk of losing 2-4 months of income (not to mention starting over, having another thing to explain in future interviews) is pretty much never justified by whatever upside “acting like an owner” might have. (A 10% “performance” bonus on the upside? Not worth risking getting fired. Trust me.) People (even managers) just stop leading after a while. This tends to make a company “comfortable” insofar as individual performance expectations become very low and the clock-puncher mentality becomes the norm– as long as you’re not obvious about it, you can coast– but it’s not what anyone really wants.


The core of the problem, I think, is that companies are inherently going to make sweeter promises to those it is trying to entice to join than it will offer to those who are already there. Later hires usually get better deals (“salary inversion”, in HR terms). Traditionally, technology startups offset this issue by offering superior equity slices to early people; but, in 2014, employee option grants are so pathetic that this is no longer true. Just as much as this is true of salary and bonuses and titles, it also seems to be true of authority.

Perhaps the problem is managerial authority itself. Now, I’m all for a conceptual hierarchy. That’s just how we think, as humans. We can’t hold more than about six or seven things in short-term memory at once, so for anything complex (high entropy) we need clusters, modules, and pruning of relationships. I just don’t think that rigid managerial hierarchies do much good. They create massive conflicts of interest and elevated classes whose sole purpose becomes to perpetuate their superiority, regardless of whether it benefits the organization.

I’ve written a lot about open allocation, and it seems that the biggest issue with it is that it makes it difficult for a company to hire external executives. They can’t be promised managerial authority if there isn’t much of that to go around. So, the dinosaur types who are used to “being executives” are displeased by the concept of a company where they have to convince people that their ideas are right, rather than just threatening to turn off plebes’ incomes, can no longer be enticed to join. I say: good. Fuck ‘em. Those wankers only cause problems anyway. Open allocation, at least in technology, is the way forward.

Under closed allocation, control over what people work on becomes, like anything else, a bargaining chip or commodity. At that point, this bargaining chip will be used to perform one of the company’s most pressing needs: recruiting. External promotion will become the norm, and internal advancement will cease as the leadership opportunities that might permit them to demonstrate their ability (assuming that promotions are confirmational rather than aspirational– but we all know how complex that little issue is) disappear. Internal promotion is the first to go. But then internal lateral mobility (already reduced to enforce the closed-allocation regime) ceases as well, to pre-empt the chaos that might ensue as people jockey laterally for the best (read: externally career-advancing) projects. Soon enough, not only can internal people not get promoted, but they can’t really move laterally either. Then, people develop a total sense of “stuckness” and the company is asleep. If stack ranking is imposed in an attempt to “wake them up”, you get the warring departments dynamic that tears a company to pieces. There’s no good there. In technology, closed allocation is just a dead end not worth exploring for any reason.

A company that wants to excel needs its people to excel. Externally hiring those who are attractive “on paper” won’t work, because often those executives (who join mediocre companies) are the ones looking for sabbaticals, and those who aren’t will have one foot out the door. But as soon as companies make control over what gets worked on a bargaining chip, the slide to mediocrity is inevitable. External hiring is no solution specifically because those external hires won’t jolt the company into excellence, but be brought down (or repelled) by the mediocrity.

Open allocation– the framework in which “promotion” takes the self-motivated form of greater challenges and larger achievements rather than increasing control over others (a zero-sum game)– is the only answer that I can see.