top of page

We consider an environment assuming the firm can commit to different promotion policies. In the presence of external hiring, committing on promotions can sharpen the incentive provisions to low-level workers and reduce productivity for the high-level job. There is a trade-off between incentive provisions and job assignment. We analyze the optimal promotion policy in light of this trade-off and highlight the role of commitment in promotion policy. Our main result shows that even if the firm has the ability to implement commitment, it may not be optimal for the firm to commit. The full commitment promotion policy is optimal if and only if the incentive role of the promotion dominates the assignment role. In addition, we give a strategic reason for no commitment. Keeping external hiring open has a higher expected output for the high-level job.

bottom of page