The Peter Principle
The Perils of Promotion
“People may spend their whole lives climbing the ladder of success only to find, once they reach the top, that the ladder is leaning against the wrong wall.”
Thomas Merton
For me, The Peter Principle was one of those ideas in business that stuck from the moment I heard about it: It made sense to me, it was logical, and while initially satirical, I was immediately able to identify those around me to whom this applied.
It is based on the book of the same name by Laurence J. Peter. How does The Peter Principle work? Simple. We promote people based on their accomplishments in their current role, e.g., the most successful salesperson is promoted to Sales Manager. The position they are promoted to requires a different skillset that they may or may not have. This continues until a person is ultimately promoted to a role that is beyond their abilities. And they fail.
Based on the principle, EVERYONE is promoted until they eventually reach a role beyond their ability. Or, as Lawrence J. Peter puts it, “In a hierarchy, every employee tends to rise to his level of incompetence.”
The principle was put to the test: Alan Benson of the University of Minnesota, Danielle Li of MIT, and Kelly Shue of Yale analyzed the performance of 53,035 sales employees at 214 American companies from 2005 to 2011. During that time, 1,531 of those sales reps were promoted to become sales managers.
The data show that the best salespeople were more likely to a) be promoted and b) perform poorly as managers — the conclusion: The Peter Principle is real.
“Consistent with the Peter Principle, we find that promotion decisions place more weight on current performance than would be justified if firms only tried to promote the best potential managers,” the researchers concluded. “The most productive worker is not always the best candidate for manager, and yet firms are significantly more likely to promote top frontline sales workers into managerial positions. As a result, the performance of a new manager’s subordinates declines relatively more after the managerial position is filled by someone who was a strong salesperson prior to promotion.”
In its simplest form, does that mean you keep everyone in the role they excel in? No promotions ever? In a world filled with ambition, this would not work.
Peter Hyman offers practical advice on how to handle this better:
Promote “but do so carefully.”
“Ensure they're prepared for the next move. It's much like onboarding a new hire. The onus is on you to ensure they have the competencies to be successful in the new role.”
Do not just assume they will be good in the new role. “Pull in the proverbial rope a bit at first. And watch for early warning signs that they may be over their head.”
And do not give up. “Often, you can get things back on track. With coaching, training, more frequent check-ins, an online course, a mentor. There are all sorts of ways.”
“But also don't ignore the early warning signs.”
Set people up for success. “Sometimes, you can even create ways or projects to "try a role on for size" - a test drive of sorts - to get clues on how they might perform in the new role.”
And last but certainly not least, think in advance about what you will do when things do not work out: “Can you demote the person? … Can you find a way to let them save face internally? … Can you transfer them to another role where the competencies will translate & they'll continue to learn and grow?”
Hyman concludes: “Bottom line: The Peter Principle is a reality, even when you commit to putting a Rockstar in every seat.”
Other authors also focus on how to overcome and beat the principle. F. John Reh writes, very much in line with Hyman: “Victims of the Peter principle generally stay at their level of incompetence until they retire. They don't usually get fired. But they're usually miserable. So is everyone around them. Obviously, this is not good for business.
Smart executives look for ways to beat the Peter principle. There are three ways to do it: Promote better, train better, and, as a last resort, demote. Demotion may sound harsh, but it is often the only way to deal with the problem. And it can be a win-win situation because people who have risen to incompetence are not usually happy to be there.”
Talk to us to find out how a fractional or interim sales leader may be able to help.
__________________
Peter Hyman – Recruit Rockstars
Benson, Li, Shue – Promotions and the Peter Principle
Andrea Ovans – Overcoming the Peter Principle
F. John Reh – The Peter Principle and How to Beat It
Photo by Anne Gosewehr