Peter Principle

The Peter Principle is one of those statements tossed around when it supports a point of view and ignored when it does not. The Peter Principle states that “In a hierarchy every employee tends to rise to his level of incompetence…” and was first introduced in 1968 by Laurence Peter, a Canadian Educator.  This statement tends to be touted whenever we see a position occupied by an employee who is seemingly incompetent to carry out their duties, especially middle managers. Until now, this concept has not really been empirically tested.

Statements such as “70% of all mergers fail” or the 80/20 rule, known as the Pareto Principle, are other examples of sayings that can be used so much that they become truths that actually guide decisions. No doubt, there is a grain of truth to all three of these statements, but one must be careful in giving them the same weight as facts. These “rules” or “guidelines” should be watch-outs, not principles or policies.

We use sweeping statements to summarize intuition or to summarize data. We must be cautious in moving forward with these summary statements, know and test our assumptions. The Peter Principle was a summary of intuition that we promote based on current performance but the skills needed in next level of the organization are different than those needed in previous. Nothing is more true than the transition from individual contributor to people manager. This transition is usually, for example, the first time that true authority is available as a tool for motivation, and it is usually used incorrectly. Or it is the first time that full decision-making accountability for success, or failure, lies with the promoted individual.

In a recent academic paper,we now have data to test Peter’s Peter Principle. Using thousands of sales reps and managers in 214 companies, the researchers found that success as a sales representative was a positively correlated with promotion. And they learned that sales performance (more easily measured than most positions) was a negatively correlated with managerial success, (as measured in the study).

Given the Peter Principle can also be used to summarize a large data set, we better believe it can happen, and we should be more compelled to look at our own organizations. It would not be hard to do the same sort of study in your own organization. However, once you have that kind of data, how do you act on it? We often hear the anecdotes about incompetent managers. Organizations must look at why the Peter Principle is intuitively correct or why their data suggests it to be correct in their own house.

How do you select the best managers? What kind of preparation, training and coaching do you give managers to maximize their potential? Do you have a system for tactfully and respectfully, bringing employees back a step if they are not ready, able or willing to do the work required in other levels or parts of the organization? Do you have a means for employees to advance without going through the manager role if they are not manager material? What keeps employees engaged, growing and challenging besides promotions?

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