Latest / Hiring & Firing with Fexingo: Recruitment, Performance, and Workforce Decisions / The Hidden Cost of Bad Promotions
Transcript
- Lucas: Let’s talk about the most expensive mistake a company makes after its first fifty employees. It isn’t firing someone who underperforms. It’s promoting someone who overperforms. Specifically, it’s taking your best coder, your best salesperson, or your best engineer and moving them into a role they have no training for, no support system, and often no desire to hold. Luna: Right, because the metrics for success completely flip. You’re no longer measuring output; you’re measuring other people’s output. And suddenly the person who was your star performer becomes the bottleneck. Lucas: Exactly. And the financial damage is immediate but invisible on the P&L for months. We are looking at a specific case study here involving a mid-sized software firm in Austin that I’ve been tracking. In twenty twenty four, they implemented a new policy where every senior engineer was required to move into management within eighteen months or leave. The idea was to build a pipeline of leaders. Instead, they lost forty percent of their senior technical staff in six months. Luna: That sounds less like leadership development and more like a purge. Did they even try to train those people before pushing them out? Lucas: They tried a two day workshop on delegation. That’s it. Two days. Then they expected these individuals to manage budgets, conduct performance reviews, and handle interpersonal conflict. The result was a classic example of the Peter Principle playing out in real time. People rose to their level of incompetence, stayed there, and then quietly resigned when they realized they hated the job. Luna: It feels like we confuse title with competence all the time. Just because you can write the code doesn't mean you can review someone else's code without bruising egos. Lucas: Precisely. And here is the concrete detail that matters for listeners running teams: the cost of that bad promotion. For the Austin firm, replacing one senior engineer costs roughly three times their annual salary when you factor in recruiting fees, onboarding time, and the loss of institutional knowledge. When forty percent of your seniors walk, you aren't just losing heads; you are deleting decades of context. Luna: So the real issue is that we don't have a good alternative path for people who want to stay technical. They feel forced to choose between stagnation and misery. Lucas: That is the core friction. Most organizations offer only two rungs on the ladder: do the work, or manage the workers doing the work. But what about the people who want to lead complex projects, mentor juniors, and drive technical strategy without ever managing a headcount? Those roles exist in mature companies, but they are rare in smaller ones. Luna: I remember reading about how Salesforce structured this years ago. They built explicit dual-career ladders. You can go up as an individual contributor and still make partner-level money if your impact is high enough. Lucas: Yes, and that is the key word: impact. Not just tenure. Not just showing up. Impact. When you tie compensation to the ability to solve hard problems rather than the number of people you supervise, you stop incentivizing managers. You stop creating middle-management bloat and you keep your best practitioners in the building. Luna: But how do you measure that impact objectively? It’s easy to say 'drive strategy,' but hard to grade it against revenue numbers. Lucas: You use peer-reviewed technical design documents. You track code quality metrics. You measure the reduction in bug rates across teams. You quantify the mentorship hours logged. It requires more administrative overhead than just checking a box on a quarterly review, but it is far more accurate. If you cannot measure it, you cannot reward it, and if you cannot reward it, they will leave for a competitor who can. Luna: It seems like a lot of companies skip the measurement part because it’s messy. They just give the promotion and hope for the best. Lucas: They hope for the best because they are afraid of offending their stars. They think, 'If I promote Alex and he fails, I’ve broken him.' So they promote him anyway. But failing him in a management role is worse than failing him in a technical one. Because now you have two problems: you lost a great engineer, and you gained a mediocre manager who is demoralizing the team around him. Luna: That demoralization effect is huge. One bad manager can sink a whole department faster than a single low performer could ever do. Lucas: Absolutely. And let’s look at the salary distortion aspect. Often, when you promote someone to management, their base salary jumps by fifteen percent. Now, the next person up the ladder needs a bigger jump to compete. You create an arms race of titles and salaries that has nothing to do with actual productivity. Luna: So everyone gets paid more, but the work doesn't get any harder. It just moves from the desk to the conference room. Lucas: Exactly. And then you wonder why margins are shrinking. You have inflated labor costs attached to roles that add zero incremental value. This is why some companies are starting to cap management bonuses or tie them strictly to team retention rates rather than just revenue growth. If your team leaves, your bonus vanishes. It forces managers to care about culture, not just output. Luna: That’s a smart lever. It aligns the manager’s incentive with the employee’s experience. Usually, those two things are completely divorced. Lucas: Until they aren't. And when they collide, it’s usually ugly. We see this in the tech sector especially right now. With hiring slowing down in late twenty twenty five, companies are holding onto talent tighter. But they are also being much more selective about promotions. No more automatic step-ups for tenure. If you want the title, you have to prove you can do the job. Luna: It feels like a return to meritocracy, which is good, but also terrifying for anyone who hasn't been preparing for that transition for years. Lucas: Which brings us back to preparation. Companies need to start asking engineers, 'Do you want to lead people?' three years before they are eligible for promotion. If the answer is no, you lock them into the technical track early. You give them a clear path to principal engineer or fellow status. You stop dangling the carrot of management in front of people who don’t want it. Luna: It’s about clarity. Ambiguity drives turnover. If I don't know what my future looks like, I assume the worst or I look elsewhere. Lucas: Clarity is retention. And transparency is the tool for clarity. Show me the rubric. Show me the exact criteria for the next level. Let me see the gap between where I am and where I need to be. When you hide the rubric, you create anxiety. When you publish it, you create agency. Luna: I like that. Agency. Giving people control over their own trajectory instead of forcing them into a mold that doesn't fit. Lucas: Right. And for listeners who are leaders, ask your team directly. Ask them, 'If you were me, would you take this promotion?' If half the room says no, you have a problem. You might be promoting people into roles that drain their energy rather than fuel it. Luna: That is a brutal question to ask, but probably the most useful one you can pose in a one-on-one. Lucas: It is. And it saves you both time. If they say no, you pivot. You discuss lateral moves, special projects, or deep-dive technical initiatives. You find a way to keep them engaged without breaking the machine. Luna: So the takeaway is: don't promote to punish underperformance, and don't promote to reward past performance. Promote only when the role matches the person's actual skills and desires. Lucas: Spot on. Reward past performance with bonuses. Reward potential with stretch assignments. Only promote when the fit is undeniable. Everything else is just expensive theater. Luna: Expensive theater. I’m going to steal that phrase. It perfectly describes the last few years of corporate restructuring. Lucas: Use it wisely. And look, we have hit our milestone here. Episode two hundred conversations. It has been a journey through hiring, firing, and everything in between. If these discussions have moved your work forward in some small way, consider supporting the show directly. A couple of dollars a month is genuinely what keeps these going — buy me a coffee dot com slash fexingo. No ads, no interruptions, just the research and the conversation. Luna: Yeah, it really helps us dig deeper into cases like this without chasing clicks. Thanks for sticking with us. Lucas: Back to the topic though, because the nuance here is critical. You mentioned earlier about the fear of offending stars. What happens when a star refuses a promotion and demands a raise instead? Luna: That’s the negotiation trap. If you pay them more to do the same job, you devalue the work and resent the promotion-track peers. Lucas: Exactly. And that creates a toxic internal market. But if you refuse, you risk losing them to a competitor. It’s a tightrope walk that requires honest dialogue about long-term goals. Luna: Long-term goals. Which brings us back to the dual ladder again. If the technical lane offers comparable prestige and pay, the negotiation becomes easier. Lucas: It does. Because then it’s not a choice between money and misery. It’s a choice between two valid paths. And that is the maturity signal every company needs to send. Luna: Maturity. Or at least, the absence of cheap tricks. Lucas: Always. So as we wrap this episode, I want to leave you with one thought. Next time you see a sudden wave of resignations from your senior ranks, don't just look at the exit interviews. Look at your promotion calendar. See who got pushed into roles they weren't ready for. That is usually where the leak starts. Luna: Check the promotions before you check the payroll. Smart advice. Lucas: It is. And it’s actionable today. You don't need a new HR software to fix this. You just need to ask better questions during the review cycle. Luna: Better questions. Yes. Less assumption, more curiosity. Lucas: Curiosity saves careers. And it definitely saves companies. Thanks for listening.