F.I.R.E. (Financial Independence Retire Early) - Why promotions matter
Getting promoted to higher levels significantly increases earnings which can get you to F.I.R.E. faster.
The F.I.R.E. (Financial Independence Retire Early) movement has been becoming increasingly popular among software engineers.
Some of the key reasons for this are:
- High compensations - The tech industry offers some of the best compensations vis-a-vis other industries. Software engineers these days are uniquely poised to achieve financial independence earlier than ever before. Higher earnings enable higher savings which lends favorably to the early retirement construct.
- Financial motivations - Given the possibility of high earnings, a career in software engineering is looked upon more as a means to achieve financial independence vs. following one’s passion. When one is only in it for the money, there remains little motivation to further one’s career after achieving their financial goals. Early retirement offers one the opportunity to pursue other interests.
- Constantly changing technology - Software engineers have to constantly update their skills and knowledge since technology is ever-changing. As one progresses in their career, this can become challenging. It can prove difficult to devote the time required to develop skills and meet personal commitments at the same time. Companies are always on the lookout for new talent with expertise in the latest technologies. It gets harder to compete as one ages in the system and the threat of redundancy always looms large. Getting to retirement early becomes more attractive in this context.
Getting promoted to higher levels as an engineer is important to unlocking earnings and savings potential to achieve financial independence as soon as possible.
To put this in perspective, outlined below is the typical compensation (cash + equity) software engineers stand to make as they move up the career ladder.
It’s clear the higher one goes, the more one stands to earn and, therefore, speeding up the promotion process is a key element to getting to F.I.R.E. faster.
To help software engineers, we decided to ask some industry experts to weigh in with their thoughts in a session on Clubhouse (the fastest growing social media app). This article is based on that session. Hosted by Ryan Valles and Soham Mehta, the co-founders of Interview Kickstart, the session featured a panel discussion comprising Interview Kickstart alumni & instructors working FAANG, tier 1 companies, and startups. The panel also fielded questions from the audience comprising software engineers from various companies and aspiring FAANG engineers.
In this article, we’ll cover:
- Managing the promotion process - advocating for a promotion
- Frequency of and scope for promotions
- How to actively manage the promotion process for faster growth
- Promotion processes at FAANG companies vs. Startups
- 360 degree feedback for promotions
- How promotion processes work
- Promotions for different roles and levels - IC vs. EM
- Switching companies for promotions
- Compensation - Internal promotions vs. switching companies
- Selling yourself for a promotion
Managing the promotion process - Advocating for a promotion
Getting promoted can happen in two ways -
- Passively - A system-driven approach in which one waits to be recognised and rewarded by the company.
- Actively - A self-driven approach in which one advocates for oneself to favorably influence the promotion process.
In an ideal situation, high-performing employees are naturally recognised by the company for their contributions and rewarded in a fair and transparent manner at the appropriate time.
A passive approach may work at smaller, fast-growing companies where everyone’s work is easy to track and one can make a recognizable impact in their roles.
However, this is not usually the case, especially at larger companies where visibility is a challenge and promotions get more competitive as one moves up the career ladder.
Actively managing the promotion process is inherent to owning one’s career and defining one’s own career path. This involves understanding the requirements of a higher role, performing to fulfill those requirements, and ensuring performance is duly recognised and rewarded.
Visibility is key to being considered for a promotion. It is imperative that one advocates for themselves and has the right person of influence advocating for them within the company to be considered for a promotion.
Promotion processes differ across companies requiring different levels of advocacy.
At Google, employees can put themselves up for promotions. Their managers can either support the notion or not. If they do support it, the employee and manager go into the promotion cycle together.
At Facebook, however, the promotion process is not as cut and dried. Under the lagging vs. leading model that Facebook follows, one is required to demonstrate the ability to perform at a higher level for at least 6 months before being considered for a promotion.
At Netflix, the absence of clearly defined levels means one cannot ascertain requirements to be fulfilled to qualify for a higher role. One has to instead self-advocate for a promotion using external market data / market referencing. One can also use an offer from a competing company as leverage to justify why a higher role is deserved.
Frequency and Scope for promotions
Typically, the rate of promotion at most companies is once every two years. However, promotion cycles vary across companies.
Promotions can occur more frequently where candidates demonstrate strong leadership and mentorship skills, and consistently deliver on projects successfully.
Many companies have review discussions on a quarterly vs. annual basis. This is to provide growth opportunities to deserving candidates at the right time as opposed to having them wait till the end of the year to move up the ladder.
Upward movements within a company are only possible when there exists adequate scope for promotions. This depends largely on the size and growth trajectory of a company.
Facebook scaled and grew very quickly, going from 3,000 to 50,000 employees in just 7 years. There was no question about room for growth. Promotions were given quickly and frequently because there was huge scope for advancement. One didn’t have to wait for a reporting manager to exit a role for a position to open up or for a promotion to be given.
When companies expand very quickly, performance reviews may not always be equitable. However, one is more likely to be in the right place, at the right time and earn a promotion at a company with a high growth trajectory.
At Google, promotions are not as easy to come by as one advances to higher levels. For e.g. to advance from an L6 or L7 level one would have to wait for a Director to exit his/her role and create an open position.
However, being a large-sized company, one doesn’t have to depend on upward movements within the same team but can transfer to another team for career growth.
At Netflix, the scope for promotions is much smaller. With only 8,000 employees, the typical 40% year-on-year increase in compensation doesn’t feature as part of the promotion process here as it does at most other companies. Netflix values tenure vs. levels. The company is more likely to pay current employees more than new hires if they decide to retain them.
Under the company’s ‘Keeper Test’, employees are considered to have gained more expertise the longer they remain with the company. This makes them valuable assets that the company chooses to retain. In fact, many people are likely to be overpaid at a certain level in comparison to other companies because of their long tenures with the company.
How to actively manage the promotion process for faster growth
A superior’s influence can be quite strong in a promotion process. Often, it is one’s immediate manager who provides opportunities for advancement.
One way to earn promotions quickly is by staying aligned with managers who get promoted quickly themselves. Managers / superiors are more likely to reward reportees with advancement opportunities if they hold a trusted relationship with them.
Reportees can grow along with their managers by making themselves an integral part of their manager’s success.
Often, this is viewed in a negative light as being opportunistic vs. meritocratic. However, that is not really true since it is all about aligning interests as opposed to gaining favor.
Creating a symbiotic relationship for advancement with a manager / superior is a win-win situation that benefits both parties. Aligning with a manager’s objectives effectively aligns with company objectives.
Managing upwards or ‘managing the manager’, is an effective way to develop an impactful relationship with superiors.
Managers delegate responsibilities to their reportees to achieve their objectives. Their problems are effectively their team’s problems. Reportees can either wait for instructions and the opportunity to make a mark, or proactively take on tasks that provide recognizable support to their managers.
Immediate reporting managers don’t always provide potential for growth. If managers don’t get promoted fast enough, there may be limited opportunities for their teams to grow under them. In such cases, it is important to identify other managers within the organization that can provide the right opportunities for advancement.
One can identify opportunities to make an impact by understanding the OKRs of managers. Many companies / managers use open or shared calendars. One can look through managers’ calendars to find out what can be taken off their plate. This will enable a manager to focus on high-priority tasks and strategic initiatives. Managers are more likely to favorably influence promotions of subordinates who are an asset to them.
Projects are never perfectly planned out and there are always opportunities to fill in gaps as they arise.
As one engineer recounts, during his tenure at Uber, his manager always seemed stretched for time handling multiple projects giving rise to organizational and strategic problems within his team. Having identified this gap and ways to close it, he decided to initiate a discussion with a Director who was at a level higher than his manager. By outlining the issues his team was facing and how he could help his manager, he was given the opportunity to manage a subset of his team. This enabled him to demonstrate leadership skills and his suitability for a higher role.
Promotion processes at FAANG companies vs. startups
Startups usually follow an informal promotion process in the early stages. However, as a company matures, so do its processes. Eventually, a fair and transparent promotion process is needed to support a growing staff. Promotion processes tend to become formal over time with more defined roles and clearer paths for promotions.
Doordash, for example, is a much younger company when compared to FAANG companies or other leading tech companies. However, a lot of the talent at Doordash are former employees of leading tech companies like Google, Uber etc. who instituted, at Doordash, processes and practices similar to those followed at their previous companies. This led to Doordash having a well-established and transparent promotion process.
Promotions at startups are relatively easier and faster than at FAANG companies. Startups, generally, have limited manpower and flatter organizational structures making it easier to climb the ladder to senior positions. The promotion process at FAANG companies and other large tech companies is generally very structured. Getting to senior positions at FAANG companies is a longer process than at startups. This is because every role at a FAANG company usually has different stages that one has to clear before being promoted to a higher role.
Promotions tend to be system-driven at fast-growing startups whereas promotions at FAANG companies have to be more actively managed.
In either case, it is always advisable to learn about a company’s promotion process when joining a new company. Some companies readily share their proposed promotion process for new hires explaining how one can achieve career growth within the company. This information can also be gleaned from engineers who have gone through the company’s promotion process themselves.
360 degree feedback for promotions
An employees immediate supervisor may be negatively or positively biased resulting in a subjective evaluation. Oftentimes, managers are not competent enough to appreciate their subordinates’ expertise. Companies prefer to base promotions on objective assessments.
360 feedback, performance cycles, or summary cycles are a means for companies to ensure people give feedback to each other. This results in a system through which everyone assesses each other.
360 degree feedback is a process through which an employee’s performance is assessed by superiors, subordinates, peers, and the employee him/herself.
At Google, a manager’s influence in the promotion process is limited and feedback from various levels, especially higher levels, is valued.
Companies famously claim that talent is assessed individually and not in comparison to others. However, in reality, comparisons do influence reviews for promotions.
Employees advocate for themselves through self-reviews. These reviews showcase their achievements and contributions. It’s common to compare performances to ascertain who is more deserving of a higher rating or promotion.
A tactical way to actively influence the promotion process based on 360 degree feedback is by ensuring a solid self-appraisal. Maintaining a verbal or written work diary will ensure this. It’s easy to forget contributions made over a period of time. A work diary is a way to document strengths, contributions, and accomplishments. This can be tied to one’s team / company’s objectives, and the impact delivered. Showcasing these details in one’s self-review is a great way to advocate for oneself.
How promotion processes work
Companies follow different ways to assess if employees qualify for a promotion.
At Linkedin, performance reviews are held twice a year, although reviews can be held every quarter to ascertain if there are promotions to be given. Promotions are the result of a multi-fold process which is very detailed and based on OKRs. Typically, all the managers meet to discuss the talent. At LinkedIn, ratings are not restricted to the levels one is at. Everyone stands an equal chance to get the rating they deserve. Since the company puts a lot of effort in hiring the right people, it isn’t uncommon to have a high-performing team or many members performing at the top. Managers discuss an employee’s work individually for the quarter or the year, in detail. They look for recurring behaviors and indicators that an employee constantly exceeds expectations, takes on more tasks, and constantly develops leadership skills in relation to other teams. One of the most important influences in determining promotions at LinkedIn is feedback from higher levels e.g. staff and principal engineers.
At Facebook, promotions to a managerial role are based on a voting / rating system. Peers and/or subordinates vote / rate one’s performance on a scale of 1 - 5. All-round feedback is very important and one has to achieve a very high score to secure a promotion.
At Box, managers had substantial influence on the promotion process when the company was smaller and younger. However, managers’ influence diminished as the company grew. Box eventually established a review-system based on rubrics instituted by an ex-Googler. Every role and level in the company is now defined by a set of rubrics i.e. the rubrics for a solutions engineer is different from the rubrics for a software engineer. Promotion cycles are aligned to half-yearly and yearly reviews and the promotion process is very structured. One has to demonstrate performance based on defined rubrics to secure promotions. Promotions are deliberated on by a committee which includes members from at least two levels higher than the employee in review. Feedback from peers and those outside the committee is also strongly considered during deliberations.
Promotions for different roles and levels - IC vs. EM
It is not necessary for an IC to become an EM to move up the career ladder. An IC can continue to move upwards on a technical path and influence the technical direction of a larger project. Nearly all tech companies have IC ladders independent of management.
As one moves up levels, whether on the IC ladder or switching to a managerial ladder, leadership skills become more important. These skills may not matter as much at lower levels but at the L6 level and above, a lot of emphasis is placed on leadership. People management skills are a requirement for higher roles. One has to demonstrate strong leadership and influencing skills to advance to higher levels.
Senior IC levels don’t require one to take onus of careers / career development of subordinates but one has to have the ability to influence their reportees technically and organizationally. The role of an EM and other senior managerial roles, on the other hand, requires one to demonstrate career development abilities.
A common misconception is that it is easy to switch between IC and managerial roles. Lateral movements between IC and management roles become increasingly difficult at senior levels. One can move laterally at the level of a Principal Engineer or DIrector. However, becoming a VP or SVP from a distinguished engineer is not easy. Eventually, one will have to decide which ladder to climb and work toward earning promotions accordingly.
Switching companies for promotions
For many of our students, Interview Kickstart has been a stepping stone to a company of choice. Upskilling and preparing for technical interviews has helped them move out of their current companies and pursue distinctly better job opportunities.
Switching companies can lead to promotions in two ways:
- Getting a higher role at the new company
These transitions are well-understood by large tech / FAANG companies and many have rubrics to determine if one qualifies for a higher role based on the company they are switching from. For example, the criteria Facebook uses to assess if a Googler qualifies for a higher role is different from the criteria used to assess someone from another company. A Googler will have to satisfy certain requirements to qualify for a higher role at Facebook. For many other companies there are no parameters based on company pairing and getting a higher title is a matter of negotiation.
- Using an offer from a new company as leverage to negotiate a promotion within the same company
Companies may offer promotions as a way to retain valued employees. Although, this doesn’t always work if one is negotiating solely for higher compensation. One can leverage an offer from another company if they demonstrate they are suited for a higher position in their current company and that they can add value by staying with the company.
Sometimes people switch companies and then return to their old company for a higher role at a later period. This happens when one leaves their old organization on good terms.
In many cases, people switch to another company not for a promotion but to take up different roles that can lead them to advance in their chosen career path. When the current company doesn’t offer opportunities to learn particular skills, one may not be able to advance further for lack of expertise or knowledge. In this case, they switch to another company at the same level to work in a desired area and subsequently work for promotions to advance along that path.
For example, Antony used to work at Wall Street as a tech lead before moving into a managerial role. As a people manager of a team, he had limited scope to work on technical tasks. He felt his growth in skills and expertise was stalled. He decided to switch to another company to broaden his experience and aimed to move to a big tech / FAANG company.
When he switched companies, he moved into a more technology-oriented role. Although this wasn’t at a higher level, the new role enabled him to deepen his knowledge and skills. At his previous company, his work impacted only his team comprising 5 - 10 members. When he moved to Facebook, the impact of his work was across a huge section of the organization. This automatically had a favorable effect on his compensation and promotion prospects. He realised at FAANG companies, promotions aren’t the only way to see a raise in compensation or RSUs.
Compensations - Internal promotions vs. switching companies
Upward movements within the same company may come with a pay rise and a higher title. However, getting promoted when changing teams is not the norm. Managers generally have an understanding that talent will not be lured from other teams with promotions or pay raises.
Many feel that the pay rise one sees with an internal promotion is not as high as the pay rise one sees when switching to a higher role in another company. It appears switching companies is a better way to get a higher pay.
While pay rises may be standardised for each level, they are also an outcome of one’s negotiating skills. Compensations can vary a lot between companies.
One has to consider salary bands before and after a promotion. Moving from the top of one’s current salary band to the middle of the next salary band will not result in as much of a pay rise as moving from the top of the current band to the top of the next salary band.
Switching companies can appear to be more lucrative if the new company offers a pay rise that is higher than one would have got through an internal promotion. Companies usually do this to attract good talent or to lure talent away from their competitors. On the flipside, if the compensation offered is at the top of the salary band for the role one is moving into, then there will be little or no possibility of further increments for a while after. This may adversely affect promotions prospects at the new company and one may remain at the same level longer than expected.
Selling yourself for a promotion
It is not always possible to adequately showcase all contributions and achievements during a performance review. Listing out all of one’s achievements and efforts for the quarter or year can be overwhelming for the review committee. Instead, one should try to communicate efforts undertaken consistently over a period of time. One’s accomplishments should precede them in such a way that a promotion is a forgone conclusion. One should always be careful to avoid overselling themselves for a promotion.
Engineers should develop distinguishing characteristics to help them stand out and make them more deserving of a promotion.
Communication skills are a requirement as one goes higher up the career ladder. Every engineer should work on communication skills since this can act as a distinguishing factor to secure promotions at higher levels. Communication skills are also important to advocate for oneself and clearly convey one’s contributions and impact during reviews.
Besides communication skills, time management and leadership skills are two additional areas in which engineers can distinguish themselves.
Knowing how to estimate time requirements and manage tasks in a time-efficient manner can make an engineer more accessible and reliable. An engineer who is too busy to communicate with others can lose out on important interpersonal interactions and opportunities to broaden or deepen skills.
Leadership and influencing skills are very important to advance to senior levels whether as an IC or an EM. Leadership skills can be learned and one should work on specific aspects of leadership like how to be a visionary, strategic thinking etc. These skills help differentiate a good performer from a strong performer and tip the scales in one’s favor for a promotion.
Promotions are a key step to accelerating career growth. Advancing to higher levels can accelerate wealth creation through incremental pay rises, which, when coupled with smart financial planning and investing leads to F.I.R.E. faster. Understanding promotion processes at various companies and how to actively manage one’s promotions is an integral part of one’s journey to financial freedom and an early retirement.