Pay allocation isn't rational from the ICs point of view. For handwavy business reasons that sound stupid and no one cares about, you have things like separate budgets for "extra money spent due to promotion" vs "extra money spent due to retention raises" so if you want to retain someone and can't get sufficient money from the retention pot, you are forced to dip into the promotion pot.

From an ICs perspective, I think the takeaway is that getting promoted is almost never the wrong move and should be done as soon and as aggressively as possible, otherwise you're probably leaving money on the table.

Even in the rare event that you manage to get promoted beyond your level of competence and are now struggling to avoid being fired for performance, you just move to another company with your shiny new title and enjoy a higher total comp there than you would have gotten without promotion anyway. It's pretty hard to go wrong.

Usually you have a pool of money to split between your reports, playing with say a 2-6% raise for them. If you have an underpaid report you try to favor them, that kind of thing.

If you get someone promoted, they get bumped into a new salary band, and thus get a larger raise — and this is outside the above pool.

In a nutshell, there's one budget for annual salary increases, and another budget for pay increases that result from promotions and competitive counter-offers. These budgets may be controlled by different people.

Companies that have a lot of money, tend to manage that money by dividing it up into different "pots" that are controlled by individual managers. This is just a straightforward way of managing a business, but what's not obvious at first glance is that moving money from one pot to another is hard. If a higher power has decided that the merit increase budget is 2%/y, that could be hard for an individual manager to budge. On the other hand, if you promote someone, you get the full 2% of your new budget in the next annual cycle, so your salary budget has increased by more than 2% for that year.

Another thing is that if you bump a junior up to senior, and that person leaves, nobody will bat an eye at replacing them with another senior.

What I did as an IC was that I articulated my interests to my boss in fairly plain terms. I asked: What's the process for moving up a level? What do I need to do? What goals can we put on my performance review? A lot of people are timid about this, especially as the answer might be No. One of my friends was told by his boss: "You are topped out at your level." Ouch. What I can't tell anybody is what risk they're taking by adopting any particular approach.

I don't think I engaged in any skullduggery or politics. I am in fact enthusiastic about the business, and committed to improving my own knowledge and work. Something I've told my bosses, which is completely sincere, is that I have a lot of mental flexibility, and am happy to be guided by what they think is the best for their department and the business.

It might be that my experience as a manager gave me some cred, since it was clear that I understood the process from both sides of the table.