The importance of career ladders: A Q&A with Melanie Naranjo

An increasing number of employees are looking to their employers for growth opportunities. And employers need to be ready to respond.

Melanie Naranjo, VP of People at Ethena, a startup company modernizing compliance training, says career ladders are the way to go in order to provide employees with a sense of direction and purpose, as well as a clear understanding of what they need to do to advance in their careers.

What do clear career ladders have to do with employee recruitment and retention?

When it comes to the reasons people cite for deciding to leave their jobs, lack of growth opportunities sits at the top of the list. According to a 2022 Paychex survey, 63% of employees say they would be more likely to stay at their organization if they were provided better career advancement opportunities.

It’s no secret that career ladders provide employees with a sense of direction and purpose, as well as a clear understanding of what they need to do to advance in their careers. Career ladders also make a company more attractive to prospective employees who are searching for more growth opportunities. In fact, a PwC study showed that more than a third (37%) of job candidates “see upskilling opportunities as the most important factor in deciding on a new job, after salary and benefits.”

Creating clear career ladders is not only good for current and prospective employees, it’s also good for the company. When employees understand the opportunities available to them for advancement, they are more likely to feel motivated to perform in their current roles and to be engaged with their work. That means increased employee satisfaction and productivity, which is a boon for the organization as a whole.

How did you define career ladders at Ethena? 

The first thing we did in our process to better define career advancement opportunities was survey our employees. We wanted to better understand where they stood and what they wanted out of career development. Through that, we quickly learned that many of our employees interpreted growth in just one way: vertical. In other words, the only way for an employee to feel as though they had achieved professional development was to receive a promotion. Without a promotion, there was a sense that their career had gone stagnant.

The reality, however, is that there are a lot of ways to grow. In fact, the very nature of working in a scaling startup means that even within the same role, an employee will inevitably take on more challenging tasks in Q4 than they did in Q1.

So we defined what growth looks like:

• Expanding the scope of a role, i.e. going from managing a team of 1 to managing a team of 3
• Leaning into leadership opportunities, i.e. volunteering to lead a meeting, speaking up if you see something’s not working, partnering with leadership/HR to host an event, etc.
• Adapting to changing needs and picking up new skills along the way

We also made sure we were clearly communicating our definition of growth throughout every stage of the employee cycle, including during the recruitment process, onboarding, and periodically at company-wide all hands.

And finally, once all that was in place, we defined the different job levels we’d already been leaning on for the past year so that employees could better understand what exactly it meant to perform at each level. We went one step further and provided an example of how each different level would address the same problem. An easy example of this is: Someone at the Analyst level might go to their manager for instructions on how to navigate a problem whereas someone at the Director level would have anticipated the problem before it could happen and set up structures to mitigate it from happening — all without having to involve their manager in the first place. For the record, you don’t need to create twenty different job levels. In fact, the fewer, the better. At Ethena, we have just 6.

Putting all these steps in place empowered our employees to more easily identify growth opportunities in their everyday work and ultimately feel more confident in the many different ways that their everyday work can in fact contribute to their overall growth. It also helped us increase employee satisfaction from 72% to 90% over the span of two quarters.

How do you measure an employee’s development along that ladder?

Personally, I’m a firm believer that promotions should be the result of growth and not the first step towards it. Clarity around what it takes to get promoted offers employees key milestones to aim for and a clear sense of continued growth opportunity within their existing role.

Once you have clearly defined job levels, it’s important to publicly define exactly what they mean, as well as how to determine the gaps between them. My recommendation is to take each job level and create definitions for them, breaking them down by: scope of role, hard skills, soft skills, and leadership skills. As discussed above, at Ethena, we went one step further and included a sample problem and a description of how each level would tackle the same problem differently so that employees could really understand what each level looks like in action rather than having to rely on what can feel like really broad, theoretical criteria.

Once you have that down, share that job level chart company-wide so everyone is working off the same set of understandings as they headed into performance reviews.

What role do managers play in this? 

The reality is, you can set up all the right resources and communicate as clearly as possible, but if you don’t empower your managers to take it across the finish line and actually execute on company guidelines, you’re going to have a pretty hard time achieving success.

Managers play a critical role in upholding company standards, and when it comes to career growth, that’s no less true. If you’ve got the bandwidth, host manager trainings. If you don’t, explore lower lift options like creating a ‘managers’ Slack channel, hosting AMAs or office hours where managers can ask about challenges they’re facing, and offer periodic tips and best practices like:

• How to deliver difficult feedback while keeping it motivational
• How to delegate effectively
• How to empower your teams to reach their full potential
• How to manage your team through difficult times
• How to build community in a remote world

What’s your advice to other companies that want to create clearer career ladders? 

For organizations that want to create more clarity around career development, consider these steps:

1. Define professional development: Make sure your teams understand all the many growth opportunities available to them across the company and how to go about chasing after them.
2. Define growth metrics: Clarity around what it takes to get promoted offers employees key milestones to aim for and a clear sense of continued growth opportunity within their role.
3. Invest in your managers: Managers are responsible for coaching and mentoring; they’re responsible for helping their teams reach their full potential. If they fall short, everyone suffers. Equip your managers with the tools they need to do their jobs well.

Related: How employers can address quiet quitting: Fix the performance review

Ultimately, the fundamental question you want employees to have an answer to is this: “If you were to leave the company today, what new skill-sets and experience could you add to your resume that you didn’t have when you first started?” If they can point to new skill-sets and experiences, they’ve grown. If they can’t, they’re likely to explore what else is out there.