Today’s topic: The Peter Principle, which was first introduced in an article written by Dr. Laurence J. Peter in the January 1967 issue of Esquire magazine (a few years later Dr. Peter also published a humorous book on the topic).
The Peter Principle states that in a business or government organization, employees tend to be promoted past their highest level of competence (also stated as employees are promoted to their level of incompetence). As a person continues her path of promotion, she’s eventually promoted right out of her field of expertise and into a position where she’s utterly and helplessly incompetent. Dr. Peter observed that one reason so many employees are incompetent is that that the skills required to get a job often have nothing to do with what is required do the job itself. The skills required to run a great political campaign have little to do with the skills required to govern. There is nothing about being a great surgeon that prepares a doctor to run a hospital. Learning to be a great litigator in no way prepares a lawyer to run a law firm. Being a skilled tax accountant does not prepare one to be department head or managing partner.
Case in Point: A recent National Bureau of Economic Research working paper titled “Promotions and the Peter Principle” examined the the career paths of 53,000 salespeople at 214 US companies between 2005 and 2011. The study found that the best salespeople – those who closed more than 2x as many deals as their peers – were more often promoted to management positions than less skilled salespeople. But, it appears that better salespeople make worse sales managers as sales declined an average of 7.5% on teams led by former top salespeople. The study also found the inverse to be true, sales improved under managers who were mediocre salespeople.
Being promoted past one’s level of competence sucks for the person promoted as at the point where his level of incompetence is reached, an employee’s ability to achieve further promotions ends, and he’s stuck in a position where he no longer has confidence in his abilities and produces less work for the company than he did in the position in which he excelled. Eventually, says the Peter Principle, the higher levels of a bureaucracy become populated entirely by incompetent people. The promoted person will tend not to be fired unless they are super-incompetent, partly because the person who promoted the incompetent person is reluctant to admit failure and/or may incompetent himself/herself.
Another aspect of the Peter Principle is that a company can grow past it’s leaders, rendering them incompetent. The skills to run a company with 50 employees is vastly different that those required to lead a company of 5,000 and executives can struggle to adapt as a company changes and grows.
How to battle the Peter Principle? A few strategies:
- Wait to promote an employee until they demonstrate most or all of the ability to succeed in the next job up the ladder. Organizationally, this means that opportunities of the next position are given to those who have not achieved the next level.
- From Quartz: “The authors of the National Bureau of Economic Research study propose a solution that’s so crazy it just might work: Identify the traits shared by good managers, and promote employees who possess them. (!!!) For example, salespeople with a track record of teaming up with colleagues on sales were rarely top performers. Yet when those employees were promoted to managers, their collaboration skills paid off, boosting sales by 30%. If you don’t come up with an incentive and promotion structure that both rewards good work and results in good managers, it’ll cost you: The study claims ignoring the Peter principle means you’re losing out on a 30% improvement in performance. Yet many companies do just that—evidence that those in charge may be beneficiaries of the Peter principle themselves.”
The major flaw in the Peter Principal is the ability of people to learn. The point is, a manager who promotes a person and ignores the need to train the person in the new position is setting the person up to fail. The skills needed have changed, but can be learned. Find a person skilled in their current job and train them for the next level job and I bet they will exceed there as well.