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The Peter Principle

The Peter Principle is a concept that was formulated by Dr. Laurence J. Peter and Raymond Hull in the 1969 book The Peter Principle: Why Things Always Go Wrong.  It is a principle of organizational management that basically states that employees within a hierarchical organization tend to be promoted and promoted, until they reach the point where they no longer have the skills necessary for the role that they are assigned, and are no longer competent.

What is The Peter Principle

The Peter Principle hypothesizes that promotion decisions are frequently based on an employee’s performance in their current roles, and not on what they would bring to a future management role.  Thus, promoted to incompetence. When people complain about having incompetent managers, the Peter Principle is a big reason why.

A person may wonder how this plays out.  Think about a technical industry, like automotive. An employee starts out in manufacturing, where they have excellent technical skills, so they get promoted into positions that highlight those technical skills.  Then, because they are so adept at their job, they get promoted into a manager position where they manage others who perform technical jobs.  Of course, they likely know nothing about management nor have they been trained to develop managerial skills, but, since they are overseeing a job or jobs that they previously performed, they may be OK at it.  Finally, because they were OK at managing a job that they previously performed, they get promoted to oversee a group of managers- which falls completely outside of any skill set that the person initially had.  Thus, promoting them into incompetence.

This illustrates the point that as employees are promoted, the tasks and responsibilities of their new role become increasingly complex, encompassing more, and requiring different skills from whence they started out. The irony is that most employees may not possess the necessary skills and abilities to perform the new role effectively, which ultimately leads to their failure. Moving a person from being in a position where they were highly successful into one where they are highly unsuccessful is neither good for the person nor the organization. 

Warning Signs Of The Peter Principle

The Peter Principle offers a cautionary tale for organizations. First and foremost, it warns us that organizations need to be cautious when promoting employees.  It gives us the push to think about, when making promotion decisions, if should one consider whether the employees have the necessary skills and abilities for the new role, especially a management position?  If they don’t have the training or managerial skills, it provides reasoning for continuous training and development programs for management roles. For example, potential managers should be required to participate in a test like What’s Your Leadership Style?

This scaffolding of training ensures that employees have what it takes to be promoted to the next level, before they are actually promoted to the next level.  Taking this a step further, it suggests that organizations need to have clear career progression pathways that will help employees understand what additional training they need in order to develop and advance their careers, if that’s what they choose to do.

On the flip side, The Peter Principle raises the issue of what does one do to handle employees who have reached their level of incompetence?  If an organization has allowed this to happen, it can be difficult for both the employee and the employer. Does the organization step in and try to remediate and provide training to bolster the competence of the promoted employee?  Does the organization allow the employee the choice to return to a previous position? Does the employee exit due to exasperation?

The Peter Principle alludes to one of the biggest reasons for lack of motivation and job dissatisfaction.  Employees who are unable to perform effectively in their new job role, because they’ve been Peter Principled, often feel helpless and incompetent. Negative feelings like these can result in turnover and a decrease in morale within the organization. In cases where employees reach their level of incompetence and get demoted, demotivation ensues, as the experience is damaging for their ego.

The Problem with Hierarchical Corporate Cultures

Hierarchical organizational cultures are fertile breeding ground for The Peter Principle. You can see what type of organizational culture your company has with the test What’s Your Organizational Culture? This is because promotions are often based on seniority rather than an individual's ability to perform well in a given role. In such hierarchical organizations, employees are promoted upwards to new positions based on their length of service and previous performance, rather than their ability to succeed in a new role.

In hierarchical organizations, there can be a strong emphasis on rank and status (i.e., achieving a higher position).  In those cultures, employees feel pressure to conform to those sets of norms and values. The norm is to move upwards, and value is based on level of position. While employees in such organizations check all the boxes that they need to in order to advance, it is at the expense of innovation, personal growth, and creativity.  Having your workforce participate in an employee engagement survey can be a quick way to assess if employees are reluctant to take risks, suggest new ideas, or highlight skill sets that are outside of their hierarchical trajectory.

Unfortunately, hierarchical organizational cultures can also lead into feelings of entitlement amongst employees.  Employees may expect that they are owed a promotion simply because of their length of their service, rather than the quality of their service. When this is fulfilled, it results in employees being promoted to positions for which they are not well-suited.  Additionally, other employees who are better suited and also higher performers may become resentful.  This, overall, can lead to a decrease in job performance, overall organizational performance, and dissatisfaction with the corporate culture.

Overall, is easy to see how hierarchical organizational cultures create the type of environment in which the Peter Principle is more likely to occur. The greater and organization’s rigidity and inflexibility, the greater the chance that employees will be promoted to incompetence.

How To Avoid The Peter Principle

How does an organization avoid the pitfalls of The Peter Principle?  One way is through succession planning, which involves identifying and developing future leaders within an organization based on specific traits that fit the roles. This can guarantee that individuals are already in place to fill key leadership roles as they become vacant.  Succession planning sidesteps linear promotion by training specific people based on the prediction of their future success rather than their success in a current job role.  Succession planning can also help to foster a culture of continuous learning and development within an organization, with some employees self-identifying as having a desire to take on leadership roles and training up for them.

Another way to avoid The Peter Principle is for organizations to implement a flat organizational structure, as opposed to a hierarchical one. A flat organizational structure is an organization with few to no levels of management between management and staff level employees. The flat organization emphasizes increased involvement of all employees in the decision-making process.

This reduces the risk of employees reaching their level of incompetence, because they are not promoted based solely on seniority. Instead, in a flat organizational structure, promotions are based on merit, interest, and the ability to perform well in a given role.

Organizations may also benefit from having a flexible work environment.  An environment that allows employees to work in different departments or on different projects helps employees to gain a wider range of skills and experiences. Another benefit of this flexibility is that it can help to prevent boredom and burnout.

Finally, organizations can promote learning and personal growth by encouraging employees to pursue professional development opportunities outside of work. This can include attending conferences, workshops, classes, or participating in online learning or certification programs. By providing employees with opportunities for growth and development, organizations help to broaden their employees’ skill set, which may encourage employees to seek advancement or to move laterally into a different position.

Organizations can try to adopt a more holistic approach to employee development as well.  Looking at an individual's wants and needs for training based on strengths, weaknesses, and career aspirations, increases the likelihood that employees are placed in roles that will make them shine.  In short, learning and growth makes employees better at their job, both in the present and in the future.  And, when employees do well in their job roles, it leads to greater job satisfaction, motivation, and overall performance for both the employee and the organization.

How Widespread Is The Peter Principle?

The Peter Principle can cast a wider impact on an organization than just one individual employee. A small problem becomes a big problem if a large number of employees reach their level of incompetence in one organization. Imagine a company that starts out with everyone in the right role at the right place and the right time, and ten years down the road promotes all of those formerly great employees into incompetence? Imagine the decrease in overall organizational performance and effectiveness? Imagine the impact of the organization's ability to achieve its goals and objectives, as well as its competitiveness and profitability?

Overall, The Peter Principle is a useful framework for understanding what not to do.  The dynamics of organizational hierarchies is a big part of this.  It’s so important to look at employee roles and promotion practices and correlate it with how an organization has performed in the past, how it’s performing now, and how it can optimally perform in the future.  The Peter Principle can act as a guide and as a cautionary tale, it can help organizations to make more informed decisions about employee promotion, and about how to develop the right people for the right roles for everyone’s success.

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