Why the Peter Principle Will Doom Your Business (& How to Fight It)

peter-principle

Let’s say you’ve been managing an extraordinarily competent employee for over a year now. As a marketing associate, she always follows the correct procedures, takes ownership over , and works incredibly well with clients.

So, what do you do? You promote her to marketing manager. It seems like the natural next step for her career progression, and she deserves it for all that hard work.

But, in her new role, she rarely interacts with clients, she must create rules rather than follow them, and she’s often unable to take creative risks. You quickly realize she’s unqualified for this role, which surprises you -- She was so great in the other one, what went wrong?Click here to download leadership lessons from HubSpot founder, Dharmesh Shah.

This scenario is an example of The Peter Principle, a term first coined by Lawrence J. Peter. Peter studied organizational hierarchies and condensed his research into a 1969 satirical novel, written with Raymond Hull, called The Peter Principle: Why Things Always Go Wrong. Essentially, Peter states, “in a hierarchy, every employee tends to rise to his level of incompetence … [and] work is accomplished by those employees who have not yet reached their level of incompetence.”

What does this mean? Simply put, it means promotions don’t always equate to progress. Just because someone is a great teacher, doesn’t mean he’ll be equally competent as the school principal. And just because someone is a fantastic tennis player, doesn’t mean she’ll make a great coach.

Unfortunately, in the corporate world, this is a harder pill to swallow -- if we’re unsuited for a role directly above us, where should we direct our ambitions instead?

The Peter Principle doesn’t just impact individual employees. It can also hurt the organization as a whole. Think about it: not only have you placed an employee in a role for which she’s unqualified, but you’ve also taken her away from a role in which she was performing exceedingly well.

This isn’t just a satirical observation, either -- at least, not anymore. Researchers Alan Benson from the Carlson School of Management, Danielle Li of MIT Sloan, and Kelly Shue from the Yale School of Management studied the career paths of more than 53,000 salespeople at 214 United States companies between 2005 and 2011. Their findings, published for the U.S. National Bureau of Economic Research, support The Peter Principle.

Ultimately, their research found a negative correlation between the best salespeople and the worst managers -- the better someone was at sales, the worse they were as managers. And yet, the best salespeople were 14% more likely to earn that promotion.

The teams with the best salespeople as their managers saw an average 7.5% decline in sales. Meanwhile, average and below-average sales performers were undeniably the best managers.

So, now what? Is your organization doomed to promote all your best players into badly-suited positions, until you’ve eventually pushed all your employees to their own levels of incompetencies? Should you just stop promoting all together?

Not quite. Here, we’ll explore four different tactics you can use to ensure The Peter Principle won’t destroy your business.

The Peter Principle & How to Fight It

1. Create opportunities for employees to grow within their current roles.

As humans, we are always striving for more -- more prestige, more money, more responsibility. As Peter writes, “As individuals we tend to climb to our levels of incompetence. We behave as though up is better and more is better, and yet all around us we see the tragic victims of this mindless escalation.”

Knowing this, we can combat the Peter Principle by creating different opportunities for our employees, besides a typical promotion. If your marketing associate is doing really well, ask her where she’d like to expand. Perhaps she simply wants more writing tasks. You can mold a position on your team to fit her strengths, without necessarily following a typical promotional path.

You can also offer your employees annual raises, without needing to shift them to a new position. Or you might offer other incentives, like additional vacation time if your employee meets X goals.

It’s equally imperative to recognize and applaud individual contributors. Perhaps you want to create an award for the employee with the most team spirit. Maybe, in an email, you simply need to congratulate your employee for her impressive strategy with a client. Whatever the case, a promotion shouldn’t be the only way employees can earn prestige and additional responsibility.

2. Assess internal hires against the new role's qualifications, not their performance in their current role.

In the U.S. National Bureau of Economic Research, there was a reason the worst salespeople became the best managers -- often, the worst salespeople would rather work as a team player than competitively strive for their own personal best. While these traits aren’t necessarily helpful in a sales role, they’re undeniably critical in a manager’s position.

When you’re interviewing for a new leadership position, you’ll want to identify the traits necessary to exceed in that role, and then find the employee who possesses them. You might be surprised when your top candidate isn’t the employee with the most impressive numbers, but that’s the point.

You shouldn’t promote an individual based on how well they’re performing in their current role. You should only promote them if you believe they showcase critical skills necessary to perform well in the next one.

3. When an employee begins a new role, encourage open feedback.

The Peter Principle isn’t to say someone can’t grow and become competent in a role for which they’re largely unprepared. If you’ve promoted your best marketing associate but she’s fumbling as a manager, it doesn’t mean you need to denote her.

In her prior role, perhaps she was given constant praise for her quick-decisions, independence, and ability to offer harsh criticism. These traits made her exceptional previously, but now she struggles to figure out why her team seems disheartened.

As her director, you might want to encourage her to openly ask her team, “What kind of manager do you want? How can I help you do your job?” Perhaps she finds out her quick decision-making skills are perceived as close-minded to her team. Or, maybe her independence makes her seem inaccessible.

By opening herself up to honest feedback, she can focus on improving traits within herself that will most help her team. It isn’t that she’s an incompetent manager, it’s that she needs to recalibrate her strengths and weaknesses in light of this new role.

4. As an employee, reflect often on where you really want to be.

Perhaps, for as long as you can remember, you’ve had your eye on becoming a team manager.

You love your current role -- you enjoy working collaboratively with smart people, you feel lucky you get to brainstorm marketing strategies on a daily basis, and you deeply enjoy the independence you receive.

But you can’t stay where you are forever, and you know it’ll look impressive to receive a managerial promotion. Right?

It’s important you consider the skills required of being a manager, and ask yourself if you’re truly excited about the qualifications of the role. If necessary, meet with other managers’ and ask about their day-to-day experiences, or take a leadership course.

If you find a manager’s role seems to take away parts of the job you love most, consider an alternative direction. Maybe, to you, progress is simply getting to speak more often with clients. Perhaps you’d be most excited to receive full ownership over the Instagram Influencer campaign.

Ultimately, the problem with The Peter Principle is we assume a promotion is a smart next step in our personal career path, without fully examining all the other directions we could take.

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