After procuring and training employees, maintaining and utilizing them effectively in the organization is the concern of management and personnel administration. In doing this, both the employee and management should be satisfied. The management cannot satisfy and utilize the skill of an employee effectively by keeping him in the same job that he was originally hired for. The employee has an urge to improve and move up in the organization. The services and loyalty of an employee are to be rewarded reasonably. The higher positions in the organization have to be filled from within by moving employees from one job to another. Promotions and transfers meet this.

Promotion can be defined as the upward reassignment of an individual in an organizations hierarchy, accompanied by increased responsibilities, enhanced status and usually increased income. Also, some experts define promotion as the advancement of an employee to a better job in terms of greater responsibilities, more prestige or status, greater skill and an increased rate of pay or salary. In corporate terms, better hours or better location or working conditions may also characterize the better job that an employee seeks, but if the job does not involve greater skill or responsibilities and higher pay, it should not be considered a promotion.

The term upgrading refers to a practice closely related to promotion. In fact, it amounts to a small- scale advance in status. Upgrading is the movement of an employee to a more responsible job within the same occupational unit and with a corresponding increase in pay. For example, in the claims department of an insurance company a junior approver moves up to the position of approver. Both upgrading and promotion are ways of recognizing and developing the abilities of employees within the organization, instead of filling positions from outside. However, for certain highly skilled or professional jobs, it is often necessary to recruit from outside.