I have a few friends whom I nicknamed “career powerhouses”. They are always the first in the office, the last out, enormously energetic, constantly volunteering for assignments and of course, continuously eyeing for that promotion at every conceivable opportunity.
I respect them enormously. I take my hats off to their ambition, hunger and drive.
I was having dinner with one of them in Shanghai the other week and the evening started off civilized enough. However several pints of lager later it gradually degenerated into a heart-to-heart. The evening then developed into my friend unleashing a Trumpian rant on his boss, who passed him over for a promotion that he had been working tirelessly for the past 3 years. It ended with him crying and vomiting out the dinner whilst I tried to stay as balanced as possible to hail him a cab home.
Some of my best thinking comes after a few pints and as usual, I started pondering about promotion and career advancement on my way home.
Understand why you want that promotion
A lot of people do not know why they want the promotion. I personally do not tend to do something unless I comprehend the rationale behind the action.
Do you want it because of:
- More money
- Greater responsibility and authority
- More prestige
- More challenging work
- Something else…
Many assume that the only way to advance in one’s career is via promotion. However, that is not correct. To understand career advancement, you must understand what career means to you.
Some people derive satisfaction from the list above. Others have their own personal motivations. Personally, for example, my ideal career would be:
- Challenging and fun work: I must feel mentally stimulated.
- High autonomy and flexibility: I want to do the work at a time and location that suits me.
- Competitive compensation: I need to be fairly rewarded for my performance.
None of the criteria above designated promotion as a goal because it simply isn’t a motivating factor for me.
Figure out yours.
Promotions come with increasing responsibility and hence time commitment
3 things are usually certain when it comes to promotion at work:
- Your responsibility will increase
- Your pay will also increase (most likely)
- The increase in your pay will not be proportional to the increase in responsibility.
Looking at this logically:
- A promotion-induced pay rise increases cost for your employer.
- The expectation, therefore, is that the incremental value you produce will exceed the pay rise.
- This can be done via 2 ways: 1). increasing total hours worked or 2.) increasing productivity (or both).
Increasing productivity required you to upskill, usually by investing in training and tools. This is notoriously difficult for 3 reasons:
- It takes time and capital (usually at your own expense), which not many people can afford or willing to sacrifice.
- People have different levels of intelligence. The actual process of upskilling may not produce the desired outcome.
- Productivity does not rise linearly. It requires experience and often follow a sigmoid curve (slow initially then rapid increase before plateauing out).
For these reasons, most people tend to focus on increasing working hours.
The problem with this approach is that it offers zero leverage on your time. You remain in the trap of exchanging time for money, which is the most inefficient monetization method.
The consequence of increasing your working hour is that by definition, you’ll have less time for other activities.
- It takes you away from your family and places you in the office cubicle instead.
- It reduces the time available for developing a side hustle that may one day be income-generating.
- It decreases your overall happiness.
Increased responsibility is usually not a good thing for an employee with zero ownership in the business because by definition you’ll be under-compensated.
Salary is 100% taxable
One of the key thesis in Robert Kiyosaki’s Rich Dad Poor Dad book is the following:
- Employees earn a salary, pay tax and then spend.
- Business owners/investors earn revenue, spend and then pay tax on the balance, the profit (if any).
I think he went a bit too far in the book and ventured into creative accounting (e.g. deducting your country club membership fee as business development expense). Nobody should do that because it’s simply illegal and will haunt you eventually.
However, he does have a point.
Say if you want to increase your income by $100:
- As an employee, you will tax on that $100 (say at 30%) and be left with $70 net.
- If you have a side business at home and you receive $100 revenue, then you can deduct a portion of the housing expenditure from that as expenses (e.g. say if you had spent 30 hours to make that and your rent is $1,000 per month, then you can legitimately deduct the rent of these 30 hours, or $40, off that). This means instead of paying 30% tax on $100, you’ll only have to pay tax on $60 ($18). Your net income will, therefore, be $82.
The key takeaway is that salary increase provides zero scopes for tax deduction, whereas business income at least offers the chance of tax deduction and increased net income.
I think focusing your effort solely on obtaining that dream promotion is not the best risk management technique.
Let me explain.
Individual risk concentration
In most people’s careers, the make-or-break of a promotion often lies in the hands of one person: your manager. The essence of securing a promotion is that your manager needs to be pleased with your performance.
Here comes another left field idea – it is a lot easier to please 100 people than 1 person.
- Pleasing 1 person requires a highly individualized approach. You need to understand his/her styles, approach, language and the intricacy of non-verbal communication clues.
- Then there will be instances where you do not agree with the decision made by your manager but have to implement them anyway.
- Furthermore, an individual can be less predictable than a mass of people, leaving you blindsided.
On the other hand, pleasing a group of people requires you to get certain “macro” characteristics right, which are often standard and predictable.
For example, when I worked as a management consultant, both as an employee and a freelancer on the side, I needed to provide a personalized service to my end clients (my line manager or my client).
- The relationship between manager and subordinate is often a direct and control one. I had to do what I’ve been told, even if it meant trying to fix the position of a comma at 10 pm.
- Working with my clients was a partnership relationship where I simply provided a specified service and carried it out under my terms.
Employer-based risk concentration
This risk happens when someone’s income is overly reliant (75% or more) on their employer. This is never wise because there’s no diversification (imagine holding 75%+ of your stock portfolio in a single company).
Unfortunately this is the case for majority of the working population: most of us only have our pay cheque to rely on at the end of every month.
The consequence of this when it comes to promotion is 2-fold:
- When you rely on your paycheque as the sole income, you are at a weaker bargaining position. You need that pay cheque way more than your employer needs your skills and time. This means you need to live on your boss’ agenda (and your boss’ boss). You cannot be free.
- As a result, you’ll often end up devoting a significant amount of time and energy to your work, depriving you of the precious “you time”. This decreases your wellbeing. Equally, it reduces the time available for the side hustle that’s critical in income diversification.
As a result, being an employee is one of the least secure ways of making a living. You only have to read this real-life job loss story to understand why.
Where does this leave us? Shall I avoid promotions all together?
No. Promotion is a great way of learning new skills and increasing income at the start of your career. However, let it happen naturally. Don’t be the overzealous type who’s always huffing and puffing for the next move. Save that energy and devote it to an income-generating side hustle. It will do wonders.
Do you agree with my view on promotion? I’d love to hear from you. As usual, please comment away.