CASE STUDY

A Comparative Study between Performance-based Promotion and Seniority-based

Promotion Systems
A. Background of the Study

Productive and competent employees are one of the keys to organizations’ success. That’s
why modern companies today invest in developing programs to enhance their employees’ work
ethics inside the workplace and conduct training for new and existing employees. According to
Boyatzis (1982), there are factors that affect employees’ productivity and competency. Such
factors include personal qualities, motives, experience and behavioral characteristics. Hence,
most companies have developed a process and policies for their promotion systems that should
serve as a guide and motivation for employees to have strong work ethics, and job advancement
opportunities for employees.
Promotion systems play a vital role in the performance of organizations and for the
employees. There have been multiple studies that have analyzed that there are various factors
that can control employees to reach productivity and competency inside the workplace depending
on what promotion systems are being implemented by the companies. In the Philippines’ private
corporate sectors, promotions for employees are mostly based on performance basis and length
of service rendered by an employee. On the other hand, Philippines’ public sectors are currently
following a government mandated promotion guideline which is based on seniority system.
Organizations practice different systems of promotion that serves as the process including
guidelines and criteria for employees’ job advancement. As such, promotion systems affect
almost all aspects of employees’ lives. The study of promotions systems has been a focus of
human resource management and internal labor markets (Baker and Holmstrom, 1995; Fuller
and Huber, 1985 & Barron and Loewenstein, 1985). Given the importance of promotion systems
in organizations, other studies focused on the role of various working environment, organizational
and job factors on the effectiveness of promotion systems for employees’ work behaviors (Allen,
1997 & Ferrisetal, 1992).
Different organizations today have policies and procedures in promoting their employees,
as what organizations seem is fit and appropriate. Most organizations based their employees to
reach job advancement using a seniority-based system promotion or merit-based system
promotion. Many other organizations rely on some form of merit or rank-order system, where
those receiving the highest performance evaluations in a given cohort are promoted while those
missing the cut remain at their current level (Lazear and Rosen, 1981). Seniority as a basis,
implies relative length of service in the same organization. On the other hand, merit as a basis,
merit implies the knowledge, skills and performance record of an employee.
Eximius BPO Services, Inc., as chosen locale of the study, practices both a combination
of seniority-based and merit-based promotion system. The seniority-based promotion system is
 utilized in choosing the best candidates when it comes to promoting employees to a managerial
and/or project lead positions; however, aside from experience, such candidates are also
evaluated based on their merits and mastery of different project conventions. Each candidate is
then deliberated by the management until a management vetted candidate is chosen. The
company also utilizes the merit-based promotion system as their primary practice when it comes
to employees from entry-level to supervisory level. Their unique practice of the merit-based
promotion system helps employees in fast-tracking the achievement of promotion in the company.
The candidates are monthly assessed based on a company-made performance appraisal system
and bi-annually evaluated through Key Result Areas (KRA) chosen by the management. Every
month the employees have a sit-down sessions with their supervisors in order to conduct
assessments and feedback regarding a statistical presentation of their retention and promotion
percentages. After achieving a 3 consecutive month satisfactory achievement in each criterion,
project leads pass on recommendations and is then deliberated by the Human Resources
Department (HRD) based on their attendance records (including, tardiness and absences). After
all candidates have been assessed, evaluated, and recommended by both managers and HRD,
then a promotion is awarded to each employee. The problem in Eximius BPO is that the
implementation of both seniority and merit programs do not always ensure the best possible
solution to attain competency and productivity and also motivate its employees for job
advancement opportunities.
Given the proportions of how promotion can affect workers’ compensation, benefits and
rankings. We shall explore more attention on the impact of seniority system and merit promotion
systems which may affect and influence employees’ work behaviors, and how each system
motivates or serves as a catalyst of demotivating employees which is not limited to work
productivity and work competency. Various information was found in organizational psychology
on public service employees, including law enforcement officials, about employees’ perceptions
of fairness in seniority-based promotion systems compared to their perceptions of fairness in merit
based. Hence, the study shall illustrate on why employees’ work behaviors were influenced based
on the process of seniority basis or merit basis which may be a determinant of employees’ job
productivity and competency. Accordingly, this study shall evaluate and compare merit based
promotion and seniority based promotion that impact employees’ work behavior (i.e. productivity
& competency) and help us understand why promotion systems: (i) should be the mechanism for
producing greater effort from workers; or (ii) are the mechanism that can cause undesirable
working behavior from workers inside the workplace.

B. Statement of the problem

 How does the Merit-based and Seniority-based promotions systems significant on
employees’ work behavior and motivation in attaining productive and competent work inside Call-
VID BPO?

Sub Problems

1. What are the advantages and disadvantages of Seniority-based and Merit-based

promotion systems?
2. What were the observations of the employees of CALL-VID BPO Services, Inc. with
regards to both merit-based and seniority-based promotion practice and its impact on
attaining productive and competent job performance in the organization?

C. Statement
The merit-based promotion system gears toward a motivated working environment that
can help make an organization become more productive and competent. On the other hand,
seniority-based promotion system contributes to increased maturity level of employees at the time
of promotions, and thereafter, enhance employees’ productivity and competency.

E. Theoretical Framework
There are different aspects developed concerning motivation studies from early
management studies up to date on conducted research with needs to find effective ways of
motivating employees at workplaces to attain productive and competent performance. The
traditional theories of motivation paved a way for development of many theories about human
side of motivation. Motivation essentially entails influencing employee behavior based on
employees’ perception on the organizations’ program about employee appraisals and evaluations
for job advancement.
Hence, the Motivational Theories including the Process Theory, Goal Theory and
Expectancy Theory shall be used in this study. These Motivational Theories shall provide
explanations on how and why employees are motivated to produce a productive and competent
work performances inside the workplace based on their perceptions towards organizations’
promotion process which provides stated guidelines and policies for job advancement. Motivation
theory explains the factors that affect goal-directed behavior and therefore influences the
approaches used in Human Resource Management to enhance engagement (the situation where
employees are committed to their work and the organization and are motivated to achieve high
levels of performance) (Armstrong, 2011). People will learn more effectively if they are motivated
to learn. If an employee sees a process to gain reward, then he/she will likely to render a
competent and productive work. Hence, the process to gain reward is the motivator for an
employee to provide such performance.
According to Reynolds et al (2002), the disposition and commitment of the learner, their
motivation to learn, is one of the most critical factors affecting training effectiveness. As such, a
specific goal may lead employees to have a strong disposition to learn, enhanced by solid
experience and a positive attitude resulting in exceptional performance inside the workplace.
Developed by Latham and Locke (1979), Goal theory states that motivation is higher when
individuals aim to achieve specific goals, when these goals are accepted and, although difficult,
are achievable, and when there is feedback on performance. Learning goals may be set for
individuals (but to be effective as motivators they must be agreed) or individuals may set their
own goals (self-directed learning). Motivation and performance are higher when individuals have
a set of specific goals, when goals are demanding but accepted, and when there is feedback on
performance. Goals must be clearly defined. Participation in goal setting is important as a means
of getting agreement to the setting of demanding goals. Feedback is vital in maintaining
motivation, particularly towards the achievement of even higher goals. Goal theory highlights four
mechanisms that connect goals to performance outcomes: 1) they direct attention to priorities; 2)
they stimulate effort; 3) they challenge people to bring their knowledge and skills to bear to
increase their chances of success; and 4) the more challenging the goal, the more people will
draw on their full repertoire of skills. Therefore, the theory supports the emphasis in performance
management on setting and agreeing objectives against which performance can be measured
and managed.
Alongside Goal Theory, Expectancy Theory has become the most influential motivation
theory, particularly as it affects performance and reward management. Expectancy theory states
that motivation will be high when people know what they have to do in order to get a reward,
expect that they will be able to get the reward and expect that the reward will be worthwhile. The
concept of expectancy was originally contained in the valency-instrumentality-expectancy (VIE)
theory that was formulated by Vroom (1964). Valency stands for value. Instrumentality is the belief
that if we do one thing it will lead to another; and expectancy is the probability that action or effort
will lead to an outcome. The strength of expectations may be based on past experiences
(reinforcement), but individuals are frequently presented with new situations – a change in job,
payment system, or working conditions imposed by management – where past experiences are
an inadequate guide to the implications of the change. In these circumstances, motivation may
be reduced. Motivation is only likely when a clearly perceived and usable relationship exists
between performance and outcome, and the outcome is seen as a means of satisfying needs.
This explains why extrinsic financial motivation – for example, an incentive or bonus scheme –
works only if the link (line of sight) between effort and reward is clear and the value of the reward
is worth the effort. It also explains why intrinsic motivation arising from the work itself can be more
powerful than extrinsic motivation. Intrinsic motivation outcomes are more under the control of
individuals, who can place greater reliance on their past experiences to indicate the extent to
which positive and advantageous results are likely to be obtained by their behavior (Armstrong,
2014). If individuals feel that the outcome of learning is likely to benefit them, they will be more
inclined to pursue it. When they find that their expectations have been fulfilled, their belief that
learning is worthwhile will be reinforced. Expectancy theory states that goal-directed-behavior is
driven by the expectation of achieving something that the individual regards as desirable. If
individuals feel that the outcome of learning is likely to benefit them, they will be more inclined to
pursue it. When they find that their expectations from the process they have complied with have
been fulfilled, their belief that learning is worthwhile will be reinforced. According to Armstrong
(2014), both motivational theories: Goal and Expectancy Theories should correlate to the Process
Theory.
In Process Theory, it emphasizes on the psychological or mental processes and forces
that affect motivation, as well as on basic needs. It refers to employees’ perceptions of their
working environment and the ways in which they interpret and understand it. Employees perceive
what they think is fair and unfair based on the criteria they follow towards their job which may be
a catalyst of outstanding performance or serves as a demotivator to them. When employees
perceive that the system to bring rewards are likely to be unfair and biased, then such system will
serve as a catalyst to employees to commandeer work without enthusiasm which may result to
neglect of duty and poor performance inside the workplace.
The given Motivational Theories proposed that employees are motivated based on their
perception of the systems they are following. If employees perceive fairness towards the system,
then, they will perform and value their duties with competency and productivity at the workplace
based on the process/needs and criteria of the organizations’ reward systems. Employees who
are motivated by objectives/stated criteria prefer to master a job, or work on task that are
moderately difficult, or prefer work where success is based on the length of service. These
motivation theories are particularly relevant to promotion systems such as Merit Based and
Seniority Based.
E. Conceptual Framework
As the study examines the impact of merit base and seniority base to employees’
performance, the total number of employees of CALL-VID BPO has been taken population,
employees’ performance (such as competency and productivity) as dependent variable and both
merit based and seniority based promotions including each system’s policy, procedure, working
conditions, performance management, and pay as independent variables.

The proposed conceptual model is shown in below Figure .

Conceptual Framework on the effects of merit based and seniority based to Employees
Performance (Productivity and Competency)

The underlying assumption in the study is that the performance of employees is influenced by the
entire process of promotion whether in accordance with merit procedure or seniority base
procedure.

The above conceptual framework proves that Merit-based and Seniority-based as

promotion system are important to understand how and why employees’ behavior towards the
process they abide with may give motivation to employees in attaining a competent and
productive work to improve overall performance so as to achieve any organization objectives or
serves a demotivation to employees as they perceive the promotion process unfair resulting to
disadvantages of both promotion systems. In order to implement promotion practice successfully
there are various independent variables that are supposed to be involved for the purpose of
achieving organization objectives, such variables are Seniority and Merit policies and procedures,
development, training and length of service.

Comparative Studies

Wright (2001) stated that public-sector organizations are under constant pressure to
improve their productivity and reduce their costs because public-sector employees are
stereotyped as lazy, self-serving and misguided. In the Philippines, according to Mar Roxas (May,
2014), the promotions and movements in the Philippine National Police should not be based on
the tenure of service, but on the basis of meritocracy. Accomplishments during the promotion
process are vital to give experience and fast track of careers. However, according to President
Duterte, whether presidential appointees or career civil servants, many officials and employees
in government should be observed based on the length of their service. He emphasized that
seniority ignores politics and such should be the primary basis for making promotions. If all similar
levels of competence are vying for the same promotion, then the seniority based system shall be
followed (Rodrigo, 2018).

The impact of both merit and seniority promotion systems depends upon employee’s
response. Wood (1999) and Guest (2002) have stressed that a competent, committed and highly
involved work force is the one required for best implementation of business strategy. Huselid
(1995) have found that the effectiveness of employees to perform productive and competent work
performance will depend on what employees perceive on the criteria and guidelines they are
following to attain reward and job advancement opportunities (Rupia et al., 2012).

According to Rupia et. al., (2012) titled “Perception of Civil Servants towards Promotion
on Merit” they emphasized that merit based promotion is adopted by many organizations as a
way of motivating their employees to perform better. Employees perceived that it was a fair
method of rewarding those whose performance is considered exemplary and in the process
encourages employees to strive and perform better. Contrary to Barton (2002), he suggests that
the factor which discriminates companies from the others is recognition of their reward system.
According to Ali & Ahmed (2009), the relationship between rewards and recognition respectively,
motivation and satisfaction. Their study revealed that if rewards or recognition offered to
employees were to be altered, then there would be a corresponding change in work motivation of
employees.

This literature review was conducted to evaluate the relevance and/or significance of both
seniority and merit promotion systems. From this review, it is determined that both promotion
programs do have some advantages and disadvantages to employees in both public and private
sectors, and how employees were motivated or demotivated by the process of both seniority and
merit promotion systems.