The peter principle: all you have to know

What do we do when a worker performs very well in their position?

Supervisors notice when a person stands out among their peers and immediately begin to consider them for a future promotion. This, of course, seems the most logical thing to do and may coincide with our dreams within a company: occupying positions of greater responsibility, accessing a better salary... it is even seen as a way of recognizing good performance.

However, even if it is paradoxical, a promotion is not always the best solution for a good worker. By moving them to a position that requires a different set of skills to perform the job, we may be creating incompetence rather than more efficiency.

What is the Peter Principle?

This was stated in the book "The Peter Principle" in 1969, by the American pedagogue Laurence J. Peter, a scholar of business hierarchy.

This principle points to a paradox within companies: if an organization starts promoting its best workers for their good performance, it will continue to promote them until they stop being good at what they do. Seen from another point of view, organizations manage the careers of their employees in such a way that they all reach the same level of incompetence.

This is because the group of skills and competencies that a person possesses to be really good at what they do have nothing to do with those necessary to occupy a higher-level position. Therefore, taking them out from what is good generates incompetence in the long term.

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The above can be reduced to two conclusions:

  • Over time, every position tends to be filled by an employee who is incompetent at performing their duties and obligations.
  • The work is performed by those employees who have not yet reached their level of incompetence.

According to this principle, as the promoted worker regains the skills to develop in the new position and begins to be successful again, they are promoted once more. And so on, until they are unable to adapt to the new circumstances and becomes incompetent.

Of course, at that point the company directives just allows them to be, rather than to accept that they expect too much from that person and demote them.

At the same time, the previous position will be filled by a new employee who is not going to perform as well as the promoted person. Hence, the current promotion scheme of companies tends to maximize general incompetence, paradoxical as this may seem.

This principle can be found in practically all sectors: an excellent programmer can be a lousy project manager, as well as an outstanding professor can be a disaster as a dean. And even if someone dominates the upper echelon of performance, as they continue climbing they will reach the point where they become completely incompetent.

Under this Peter Principle, the ideal is not to promote the best worker, but the one with the best skills to fill the new position. However, this is difficult to achieve, since in a lower category position there are not many opportunities to excel in aspects such as organization or leadership. In addition, a promotion system based on skills rather than merits can cause discontent.

Evidence of the Peter Principle

In his 1969 book, Peter used cases of incompetence in some companies to arrive at his conclusions, but these were not thoroughly verified. However, as a humorous reflection, the pedagogue ends his book stating that he had shown so much on the subject that a university should already give him a chair on hierarchical organization. 🙂

Recently, a study conducted by the Yale, Carlson and MIT schools of management of over 214 companies was published in the journal of the National Bureau of Economic Research, supporting this theory.

The case studies were restricted to the sales sector, where it is easy to quantify the productivity of salespeople and managers. However, the magnitude of the data used allows Peter's principle to be corroborated beyond doubt: the study analyzed the statistics of more than 53,000 workers and more than 1,500 promotions.

Analyzing the productivity of salespeople and sales managers, the work concludes that a salesperson increases their chances of being promoted to manager by 15% each time they climb a position in the sales ranking. However, each time they are promoted to manager, they produce a 7.5% decrease in the performance of their subordinates.

This fact is independent of whether the salesperson promoted to manager works with their original team or is transferred to another work environment, which indicates that it depends on their intrinsic skills as a leader and not on the impact of their promotion on the work of their colleagues.

In conclusion, this study corroborates what Laurence J. Peter expressed in his principle: promoting the best salespeople generates incompetent managers.

How to solve the Peter Principle?

Due to the logic of this principle, many companies have been taking it into account in their promotion scheme for decades, even without being endorsed so far by a scientific demonstration.

Then, other forms of encouragement have been implemented for the best workers that have nothing to do with a promotion to management positions, but as direct results of their high efficiency.

There are now instruments such as the payment of bonuses based on results, increases in salary scales or participation in the company's shares. These allow the worker to feel stimulated, without having to leave their comfort zone in terms of the skills that make them excellent.

Another conclusion derived from the previous study reinforces this idea: companies that gave better commissions were also able to promote more capable people to managerial positions. If salary is not the incentive for promotion, less dissatisfaction is generated when a worker who has leadership skills is promoted ahead of another who is better at what he does.

To solve the Peter Principle paradox, other companies do not tie promotions to job results, but instead use two different scales to differentiate technical positions from management positions. This way, managers and specialists have equivalent salaries and prestige, thus avoiding establishing hierarchies that undermine morale within the company's staff.

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