The Peril of the Peter Principle and What to Do About It

“You can fly, you can fly, you can fly!”

Lyrics from Peter Pan

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 it was initially almost 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 skill set 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 put it, “In a hierarchy, every employee tends to rise to his level of incompetence.”

The principle was put to the test and proven right many times: e.g., 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, in a world where technology, the markets, and hyper-growth change job roles all the time, 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, and a mentor. There are all sorts of ways. A mentor or coach can always come in from the outside and represent the “been-there-done-that.”

• 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.”

What is worse than realizing you put the wrong person in a key seat? Realizing that you yourself have reached a level of incompetence. This is referred to as Conscious incompetence: In this stage, you realize that you do not know how to do something or did it wrong. You begin to feel discomfort because you acknowledged your mistakes or shortcomings to yourself.

There are a few steps on what to do next: acceptance, sharing and receiving feedback from others, change and up-skilling, and monitoring are key.

How often does this realization happen? And how often does a senior leader intently up-skill or intently remove themselves from a position? I was unable to find any statistics, but I venture to say, not very often. More often than not, the step chosen is to blame others.

Talk to us to find out how a fractional or interim sales leader might be able to help. Because instead of only promoting from within, grow yourself and your talent by adding an experienced Fractional Executive as a coach or mentor. It significantly increases the chances of success and helps to avoid the Peter Principle.

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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

Indeed – What to Do When You Are Feeling Incompetent at Work

Photo by Anne Gosewehr