The Peter Principle - How to Avoid It in Your Company

Don’t let your company be a victim of the Peter Principle. Use these tips to nurture top talent and avoid promoting people into positions they can’t handle.

In the 1960s, Laurence Peter began to notice incompetence. He observed that while some people function competently, others rise above their level of competence and habitually bungle their jobs, frustrate their coworkers, and erode efficiency. He concluded that for every job that exists in the world, there is someone, somewhere, who cannot do it. Given sufficient time and enough promotions, however, that person would get the job. Peter searched for the underlying principle that would explain why so many important positions were occupied by persons incompetent to fulfill the duties of their offices.

He developed “The Peter Principle,” a belief that posits that when organizations promote based on achievement, success, and merit, employees will eventually be promoted beyond their level of ability and rise to their level of incompetence. If people don’t advance solely based on their track records, what else remains? Potential.

The principle holds that in a hierarchy, people will receive promotions so long as they work competently. Eventually they will be promoted to a position at which they are no longer competent—their level of incompetence. Too often, there they remain, unable to earn further promotions, but also clogging the pipeline for those who can still move up. Often virtuosos fill the roles of those who wait impatiently.

Frequently a person’s cognitive skills have proven adequate at one level but will prove insufficient when the problems become more complex, the surprises more frequent, and the priorities less stable. Sometimes individuals with exceptional tactical abilities excel at getting the work finished and the product out the door. Similarly, some people can handle a budget but don’t understand how to function in a role that has profit / loss responsibilities. They simply lack the quantitative reasoning to play in the tougher league.

The employee’s incompetence, however, is not necessarily a result of the higher-ranking position being more difficult. It may be that the new position requires different work skills which the employee does not possess. For example, an engineer with great technical skill might get promoted to project manager, only to discover he lacks the interpersonal skills required to lead a team.

Peter offered advice for those who lead virtuosos—those he called “super-competent.” As he noted, competent managers will promote a super-competent for the betterment of the organization. Incompetent managers, however, will feel intimidated and threatened by those who excel too much.⁶

As you examine your hiring and promotion systems, consider the following for avoiding the Peter Principle:

Develop an “up or out” policy that requires termination of an employee who fails to advance, either through promotion or skill development. Those who remain in positions for which they have shown incompetence compromise general morale and cause resentment from those beneath them in the organization who perceive they are being kept from advancement by an incompetent.
Create solo contributor tracks. Too many organizations with the “up or out” framework fail to recognize that not every virtuoso will make a good leader. Find a way to let them do their best work without having the additional duties related to leading others.
Promote slowly and methodically only those who have demonstrated the skills and cognitive abilities to perform at the next level.
Identify virtuosos at every level in the organization, and don’t lose sight of them as they progress through the pipeline. Star performers, by their nature, disrupt the perceived natural order of most organization. Sometimes incompetent managers resent them and withhold mentoring. If you find these stars working for an incompetent manager who resists developing or promoting them, as the senior leader, step in.
Don’t promote for effort. While laudable, effort alone doesn’t drive the business. Results do. Promote when you see results that exceed your expectations.
Avoid developing an egalitarian organization. Senior leaders don’t have to start in the mail room. Virtuosos can frequently jump into advanced roles, even when they are new to the company. (Exception: In family-owned businesses, I encourage the owners to have their children literally start on the lowest rung of the ladder, often as summer workers while they are still in high school. When you stand to inherit the family company, knowing every level of the business makes sense.)
Train people for new positions. Before they take on the title or promotion, have them shadow the current person. Hire them a coach who specializes in preparing people for promotion, have them enroll in formal training, or find some other way for them to learn the requisite skills.
Use consultants or contractors for short-term, specialized projects. Training internal people for these kinds of situations wastes time and sets the person up for failure.
Evaluate evaluators. Bosses promote or recommend their direct reports for promotion. Look at the boss’ track record. How many promotions have worked out? Some bosses who lack gold standards themselves simply can’t recognize gold when they see it. Stellar performers sometimes project. They think others figure things out as quickly as they do, even when no evidence exists to support the notion.

The Peter Principle – How to Avoid It in Your Company