The Peter Principle definition
The Peter Principle is a management concept which observes that, in a hierarchical organization, employees tend to be promoted from position to position based on their success in their previous role, until they reach a position at which they are no longer competent.
At that point, they typically stop being promoted and remain in their “position of incompetence”.
The concept was presented in the book “The Peter Principle”, written by Dr. Laurence Johnston Peter, a 20th Century Canadian educator, and Raymond Hull, a Canadian author and playwright. In their words, “in a hierarchy, every employee tends to rise to his level of incompetence.”
Employees who are competent and perform well in a position tend to earn promotions to positions that require skills that were not required at the level immediately below. When a promoted employee eventually lacks the skills required for their new role, they typically stop being promoted, but then generally remain in the role in which they perform incompetently.
While one might expect that these non-performing employees might then be terminated, it has proven to be incorrect in most such cases. Incompetence was often insufficient for termination. Gross incompetence appeared to be the required threshold.
These promoted employees, who have typically been with the company for a while – and sometimes promoted more than once, generally remain stuck in their positions or are transferred to different roles inside the company, rather than terminated.
This analysis led Dr. Peter to state that, in companies, “Work is accomplished by employees who have not yet reached their level of incompetence”.
Worse, Dr. Peter added, taking this concept to its logical extreme, “in time, every post tends to be occupied by an employee who is incompetent to carry out its duties”. In other words, given enough time and enough promotions, every position in a company could be occupied by someone who can’t really perform successfully in that role.
The cost
A successful sales executive could be promoted to a sales management role. Although keenly familiar with what the sales executives that he now manages need to do to be successful in terms of performance, he might not have the management or leadership skills to lead to the team to success.
In this case, the company loses twice: a talented sales executive is removed, and an untalented manager is installed.
Even more challenging perhaps, employees in these situations seldom have the insightfulness required to assess their own situation. As such, routine attempts to assist, are typically unsuccessful.
In one of our recent assignments, a smart, well credentialed CMO who had been promoted to this C-level role prematurely exemplified the rise to the “level of incompetence” stated by this principle.
Indeed, had he been properly further developed as a VP or SVP of Marketing by a strong CMO rather than promoted too early, for whatever reasons, he would have had the opportunity to further develop and become the powerful CMO he could and should aspire to be. Instead, this deprived him of the opportunity and deprived the company from having a competent CMO.
One more recent study suggested that managers might not be promoted to their level of incompetence per se, but rather to a level of anxiety which overwhelmed their desire to succeed, thus affecting their performance.
A 2018 paper on Promotions and The Peter Principle by professors Alan Benson of the University of Minnesota, Danielle Li of MIT, and Kelly Shue of Yale, studying over 53,000 sales executives from over 214 companies confirmed that companies indeed tend to promote employees based on their performance in their previous positions rather than on aptitudes required by their new ones.
Prevent or manage
The best way to minimize the impact of the Peter Principle on corporations is simply to prevent it.
Know the skills required for successful performance in a new role. When evaluating potential employee candidates for promotion into that new role, assess their capabilities against those identified skills.
Not all successful sales professional need becoming sales managers. Sure, they know how to perform the sales function. But they might be better suited for other roles with the company, including outside sales instead of inside sales, managing sales support function, onboarding training, etc.
But what if the promotion took place and the new manager is already struggling?
The solutions here become a bit harsher, albeit unavoidable, lest the problem becomes pervasive and affects the company performance.
Some companies have adopted systems where employees are not periodically promoted are reassigned to lower-level positions, so that anyone promoted to their level of incompetence is reassigned to a level of competence.
Others deployed an “up or out” system, where employees who are not promoted periodically are terminated.
Regardless the approach, companies must ensure that the promoted employees are aware of their performance deficiency, as they might not be, and be personally engaged in the solution.
The solutions could include a skill assessment, scheduled remedial training, support from colleagues and the human resources department, and repeat assessment until the desired performance is achieved.
Managers can also enlist their teams to assist.
Indeed, employees have a constructive role to play in improving their manager’s performance.
A culture fostering candor between employees and managers will allow employees to speak up when they recognize that their managers’ expectations are not clear or that their managers need help. Such engagements can be beneficial for the manager, the employee, and the corporation.
Other outsourced, remedial actions should also need be taken. The company can provide new managers with learning track for their current jobs as well as for desired ones and assist their employees in those efforts with outsourced skills training or one-on-one executive coaching.
And, while all these actions will be beneficial for the employees and the company, it is critical for both to internalize that this must be an iterative, continuous effort which will require a sustained commitment from all to be successful for all.