The reason a promotion can be a demotion

The best engineer on the team is made lead of the team. Nine months later they are doing less of what they were good at, more of what nobody assessed them on, and their old output has been replaced by meetings about other people’s output. The reward and the punishment arrived in the same envelope.

What everyone sees

Promotion is read as recognition, which it is, and as progression, which is doing more work than it can support. Recognition looks backwards at a role now being vacated. Progression looks forwards to a role whose requirements were never in the assessment, and the two need not point at the same person.

What is actually happening

Lazear formalised the observation that promotion decisions based on observed performance will systematically elevate people whose measured output contained a transitory component, so average performance declines after promotion even with no change in ability. Benson, Li and Merkle tested this with sales-force data covering promotions to management and found that stronger sales records predicted promotion while also predicting weaker performance as a manager, with the firms bearing a measurable cost for using the wrong signal. The mechanism is not that good performers become bad ones; it is that the selection criterion measures a skill the new role does not principally require, and no separate evidence about the new skill was collected.

Why it stays hidden

The mismatch hides because refusing a promotion is expensive in ways that accepting it is not. Declining reads as lack of ambition, removes the pay increase, and often removes the next opportunity too. So the person best placed to know the fit is the person with the strongest reason not to say so, and the organisation records an acceptance as agreement.