Latest / Hiring & Firing with Fexingo: Recruitment, Performance, and Workforce Decisions / The Cost of Internal Promotion Failures
Transcript
- Lucas: Let’s talk about the single most expensive mistake most companies make with their talent pipeline. It’s not hiring the wrong person from the outside. It’s promoting the right person into the wrong role. Luna: You mean the classic trap of turning a stellar individual contributor into a mediocre manager? Lucas: Exactly. And it’s expensive because you lose your top performer twice. First, they leave the work they were great at. Second, they fail at the work they weren’t trained for, creating a void in both areas. The data suggests that nearly half of new managers fail within their first eighteen months, and a huge chunk of those are promotions based purely on tenure or past performance rather than aptitude for leadership. Luna: But isn’t it cheaper to promote from within than to hire an external leader? The recruitment costs alone must add up. Lucas: They do. But let’s look at the real cost. When a high-performer leaves because they’re miserable in a management role, you don’t just replace a manager. You lose the institutional knowledge and the output of that senior IC. Plus, you have to hire someone else to fill that IC seat. So you’ve now replaced two people instead of one. That’s a double hit on productivity and cash flow. Luna: So the organization is paying for a failed experiment while losing its best assets. How do we break this cycle? Lucas: We need to stop treating management as the only form of career advancement. Most companies have a binary choice: either you manage people, or you stay in the trenches. If you want to reward seniority without forcing everyone into leadership, you need a dual-track career path. Luna: A dual-track system. Like having a technical ladder that runs parallel to the management ladder. Lucas: Right. Think of it like this. At firms like NVIDIA or Alphabet, there are distinguished engineer tracks. A principal engineer can earn more than a director of engineering. They don’t manage people, but they own complex projects and mentor juniors. Their compensation reflects their impact, not their headcount. Luna: That makes sense. It aligns the reward with what the employee actually wants to do. Not everyone wants to run meetings. Lucas: No one does. Unless they think it’s the only way to get a raise. But here’s the tricky part. Even if you have a dual track, you still have to decide who becomes a manager. And that decision is usually made too late, or based on the wrong signals. Luna: What signals? Past sales numbers? Being the most helpful team player? Lucas: Those are terrible predictors. Being good at selling is not the same as being good at coaching sellers. Being popular is not the same as being able to give difficult feedback. We often promote based on reciprocity—we want to reward the person who has been loyal and productive. But loyalty doesn’t teach you how to delegate or resolve conflict. Luna: So we’re promoting based on gratitude rather than capability. That’s a dangerous mix. Lucas: It is. And it leads to what I call the 'Peter Principle' on steroids. People rise to the level of their incompetence. Once they’re stuck in that role, they become toxic. They micromanage because they don’t trust others. Or they disengage because they hate the administrative burden. Either way, the team suffers. Luna: I’ve seen that happen. A brilliant coder gets promoted to tech lead, stops coding entirely, and then struggles to communicate with the non-technical stakeholders. The project stalls. Lucas: Classic case. The company lost a world-class coder and gained a confused middle-manager. Now, how do we fix the selection process? You have to test for management potential before you hand over the keys. Luna: How do you test for something that’s largely behavioral? Is it a formal assessment? Lucas: It starts with observation. Look for people who naturally elevate others. Who share credit? Who step in to help when things go wrong without taking over? Those are early signs of servant leadership. But you also need to offer a trial period. A six-month acting lead role where they manage a small scope. Luna: A probationary phase for leadership. That’s smart. It removes the finality of the decision. Lucas: Exactly. And during that time, you provide intense training. Not just HR compliance, but actual skills. One-on-one coaching, running retrospectives, handling underperformance. Most companies throw new managers into the deep end with a manual and a laptop. That’s negligence. Luna: And if they fail the trial? Do they go back to their old job? Lucas: Ideally, yes. That’s the hardest part. Companies rarely allow demotions. It feels like a loss of face. But if you can bring them back to an IC role, you preserve the relationship and keep their talent. You show them that the experiment didn’t work, but they are still valued. Luna: That requires a lot of emotional intelligence from the leaders making the call. It’s not just a HR policy. Lucas: It’s a cultural shift. You have to decouple self-worth from title. When a leader says, 'You’re better at building than managing, and we want you to build,' that’s a compliment. It’s not a setback. Luna: But many employees interpret it that way. They feel rejected by the company. Lucas: Only if the company hasn’t communicated the value of the IC track clearly. If you have a strong dual-track system, no one feels rejected. They just find the lane that fits their strengths. The key is transparency. Publish the criteria for both paths. Show the salary bands. Make it clear that neither is superior. Luna: This sounds like a long-term play. It’s not a quick fix for a staffing shortage. Lucas: It’s never a quick fix. It’s about building resilience. When you stop promoting people blindly, you reduce churn. You keep your best builders building. You ensure your managers are actually ready to lead. The ROI is in stability and output. Luna: Stability is undervalued in today’s fast-paced market. People want growth, but they also want security. Lucas: Security comes from knowing you’re in the right seat. Let’s take a brief pause to talk about how you can support independent voices like ours in this space. Luna: If these conversations have moved your work forward in some small way, consider supporting us directly. It helps us keep this network ad-free and focused on the details that matter. Lucas: You can find us at buy me a coffee dot com slash fexingo. Any amount helps us continue digging into these workforce issues. Luna: Thanks for keeping the signal clear. Back to the issue of management readiness. Lucas: Right. So we’ve talked about selection and the dual track. But there’s one more piece: the transition itself. Even a good manager struggles if the transition is abrupt. Luna: What do you mean? They start Monday, and suddenly they’re responsible for five people? Lucas: Often. But the best transitions are gradual. We see this in military structures sometimes. A lieutenant might shadow a captain for months before taking command. In corporate life, we skip the shadowing. We assume competence transfers. It doesn’t. Luna: So the advice is to slow down the promotion? Give them time to learn the rhythm of leading. Lucas: Yes. Pair them with an experienced manager for the first quarter. Have them co-lead a project. Let them fail safely in low-stakes environments. Build their confidence before they’re accountable for quarterly results. Luna: That changes the dynamic completely. It’s less about testing them and more about preparing them. Lucas: Preparation is everything. When you invest in that preparation, you see a different kind of engagement. Managers who are trained well tend to stay longer and perform better. It creates a positive feedback loop. Luna: And it protects the company from the costly mistakes we discussed earlier. Less churn, better leadership. Lucas: Exactly. It’s not glamorous. It doesn’t sound like a disruptive innovation. But it’s the bedrock of a healthy organization. Luna: Do you think smaller companies can pull this off? They don’t have the resources of Alphabet. Lucas: They can. In fact, they need to be even more careful. Small teams feel the pain of bad management acutely. One bad manager can tank morale for fifty percent of the staff. The solution is simpler. Just ask the question. 'Do you want to manage?' If the answer is no, respect it. Promote them for their craft, not their potential. Luna: Simple, yet so many companies ignore that basic human preference. Lucas: Because they’re obsessed with titles. They think every senior person needs a 'Manager' in their email signature. It’s vanity. Real leadership is about outcomes, not optics. Luna: Outcomes over optics. I like that. It shifts the focus back to what actually drives the business. Lucas: It does. And it frees up the talented individuals to do what they love. Which, ultimately, is what keeps a company competitive. Luna: So the next time you’re looking at your org chart, ask yourself who really belongs in those boxes. Lucas: And who would be happier elsewhere. It’s a hard question, but a necessary one.