Career Planning

What is career planning?

Career planning (German: Karriereplanung or Laufbahnplanung) refers to the systematic definition of the paths along which employees can develop in a company and the requirements that apply to each level. It links development, pay and succession. Its result is a career model with described levels and assigned salary bands, that is, fixed salary ranges for each level. The model works like a route map: it shows which stops there are and what is required for the next stop.

Career planning is part of personnel development and is the joint responsibility of management, the head of HR and line managers; in larger companies, the HR business partner of the relevant area supports it. From the company's perspective, it is less a social benefit than an instrument of retention and risk management: anyone who sees no prospects in the company will sooner or later look for them elsewhere. In funding rounds and company sales, it becomes relevant because investors and buyers examine dependence on key people and the depth of the management level.

Specialist track and management track

A common design flaw is a model in which promotion is possible only through management. The best specialist is then promoted to team lead although their strength lies in the subject matter. The company loses a very good specialist and gains a manager who did not seek that task. Two parallel tracks are therefore common:

• Specialist track: growing professional depth and reach, responsibility for professional standards and fundamental technical decisions, without responsibility for staff.
• Management track: responsibility for employees, budget and results of a team or division.

Some companies add a project track for leading large projects of limited duration. The routes are equivalent only if comparable levels are paid comparably. If the specialist track is systematically paid less, it is an alternative in form only.

Building blocks of a career model

• Levels with verifiable criteria: For each level, it is described what impact, responsibility and competence are expected, evidenced by observable behaviour rather than adjectives.
• Salary bands: a range with lower and upper limits for each level, regularly compared with market data.
• Development conversation: a fixed rhythm, separate from the conversation about pay.
• Promotion procedure: a transparent process with coordination between the managers, so that equal performance is classified equally in all teams.

Salary bands also make personnel costs more predictable. Level promotions and adjustments within the bands can be stored as a rule in the headcount plan, instead of estimating every pay rise individually.

Succession planning for key roles

For investors and buyers, the part of career planning that secures key roles is the most important. Succession planning answers two questions for each critical position: who can take over the task in the event of a short-term absence, and who could succeed in 12 to 24 months if development is prepared in a targeted way. For each person named, it is recorded what is still missing and how this gap will be closed.

Key roles are not only management and heads of division. They also include people with exclusive knowledge of architecture, major customer relationships or regulatory approvals. Their retention is often additionally secured through participation programmes with vesting or through retention bonuses.

Legal framework

Where a works council (Betriebsrat), that is, an elected representation of the workforce, exists, parts of a career model are subject to co-determination: they may be introduced only with its consent. Salary bands concern the principles of remuneration under Section 87(1) no. 10 of the German Works Constitution Act (Betriebsverfassungsgesetz, BetrVG). General principles of appraisal require its consent under Section 94(2) BetrVG, and in vocational training it has participation rights under Sections 96 to 98 BetrVG. Irrespective of this, the German General Equal Treatment Act (Allgemeines Gleichbehandlungsgesetz, AGG) prohibits discrimination, for example on grounds of sex or age, including in career advancement. Criteria and promotion decisions are therefore documented and justified. In practice, career models are worded so that they describe possibilities without creating an entitlement to promotion.

For salary bands, pay transparency law is added. Under the German Pay Transparency Act (Entgelttransparenzgesetz), employees in establishments with generally more than 200 employees can demand information on how employees of the other sex with the same or equivalent work are paid. A condition is that at least six persons of the other sex perform comparable work. The EU Pay Transparency Directive, which was to be transposed into German law by June 2026, additionally requires employers to make the criteria for pay and pay progression accessible. Which obligations apply from which company size follows from the German implementation. A career model with gender-neutral, described criteria creates the basis for this.

Practical example

A software company with 70 employees, 35 of them in development, is preparing a Series A round, that is, the first larger funding round with institutional investors. Until now, salaries were negotiated individually; two experienced female developers resigned within a year because higher pay seemed attainable only with a team lead role. The company introduces a specialist track and a management track with four levels each. Level 3 of the specialist track and level 3 of the management track share the same salary band of EUR 80,000 to EUR 95,000.

At the same time, the management names for the key roles in technology, sales and finance one person each who can take over in the event of absence, and records their development gaps. In the round's due diligence, that is, the investors' review of the company, the company answers the question about key people with this document. Salary conversations have since revolved around criteria instead of negotiating skill. In the financial model, six level promotions per year with an average of EUR 8,000 more annual salary are stored, together EUR 48,000 plus employer contributions. Salary development is thus comprehensible to investors and no longer dependent on the chance of individual negotiations.

Distinction from related terms

• Personnel development: covers all measures for qualification. Career planning gives these measures direction and a goal.
• Organisational development: shapes structures and processes; career planning describes the paths of people within that structure.
• Business succession: concerns the transfer of ownership and management to new owners. Succession planning for key roles, by contrast, secures individual functions in ongoing operations.
• Talent assessment: delivers the structured assessment of whether a person meets the requirements of the next level.

Common mistakes

• Development only through management. The company loses good specialists or gains managers against their will.
• Vague criteria. Formulations such as “shows initiative” cannot be verified and are experienced as arbitrary.
• Levels without positions. A path that exists on paper but is never taken damages credibility more than a missing one.
• Outliers in the salary bands. Individual special negotiations undermine the model and quickly become known in the workforce.
• Conversation only after resignation. A counter-offer after a resignation has been submitted often does not retain people permanently, because the reasons for leaving persist.
• Succession only in the founders' heads. Without written succession planning, the question about key people cannot be evidenced in the review.

Frequently asked questions

Is a career model worthwhile even for a small company?

In a simple form, yes. Two tracks with three levels each and a page of description are enough to begin with. The effort is small, and the effect on salary conversations is immediate.

How often do development conversations take place?

Usually every six months or annually. A six-monthly rhythm keeps agreements up to date without becoming a mere formality.

Must the works council approve a career model?

In part. Salary bands and general principles of appraisal are subject to co-determination, the mere description of development opportunities generally is not. Which parts are covered in an individual case depends on the specific design.

What do investors look at in career planning?

Above all the protection of key roles and the depth of the second management level. A company whose growth depends on a few people is harder to finance and to sell.

The Roemer Capital view

Dependence on individual people is among the standard questions in every due diligence. We prepare the answer with our clients before an investor or buyer asks: a list of the key roles with succession, notice periods and existing retention through shareholdings. If the company can name, for its most important roles, who takes over in the event of absence, the question is answered with one document.

If this answer is missing, the topic shifts into the contract negotiation. In a company sale, which usually extends over 6 to 12 months, this shows up in retention bonuses, an earn-out for the management or a discount on the purchase price. Reliable succession planning is therefore also a question of proceeds.