The Peter Principle

I came across The Peter Principle several years ago and found it fascinating, as I had observed this phenomenon in my coaching and training within organizations for years and wondered why it was so prevalent. Lawrence J. Peter, a Canadian educator and a self-proclaimed “hierarchiologist,” published his findings in “The Peter Principle.”

The main premise of the book was simple, yet profound.

“In a hierarchy, every employee tends to rise to his level of incompetence.”

Peter goes on to explain that inside an organization, over time, individuals are promoted to positions for which they are incompetent to perform their required duties. They lack the skill, ability, and working knowledge to be successful in that position. Work, he says, is accomplished by the employees who have not yet reached their level of incompetence.

Here’s what happens.

People at work demonstrate proficiency in their current position. As a result of their success, they advance within the organization into a more demanding role. If they demonstrate proficiency there, they are again advanced to another position until they find themselves trapped in a role beyond their abilities.

Now, they are stuck. The organization has self-sabotaged what was a good employee. They have also sabotaged their organizational success in the process.

I’ve spent a lot of time coaching and training in the financial services industry and saw The Peter Principle play out in practical application. An organization hires a sales professional who becomes a Star. He (or she) is leading the organization in sales, breaking records, and being recognized for their efforts at company events.

Wanting to replicate this individual’s success, leadership promotes this individual to a Sales Manager, giving no thought to whether or not he (or she) is capable of leading others. As a result, sales drop. Why? Because the company’s best sales professional is now behind a desk, no longer selling.

He (or she) is ineffectively managing a team of mediocre sales professionals who lack the skill, talent, or ability to replicate what the #1 salesperson could do on his (or her) own.

The end result?

Rather than rectify the error, the #1 sales professional is fired because he (or she) isn’t a good manager and can’t replicate his (or her) success in the other lackluster salespeople on staff. So, the company loses its #1 sales professional and once again starts to look for their next Superstar salesperson through a new hire.

It gets worse.

The #1 sales professional lands a job at another financial services firm, and the process repeats itself all over again. After rising to the top in sales, the sales professional is asked to become a Manager. Believing he (or she) has learned from the past faux pax, they accept the management position, but still lack the skillset to effectively lead and train a team.

Once again, sales drop, the sales manager is fired, and incompetence rules.

And it’s not just something that happens in finance. I consulted with the owner of a commercial construction company a few years ago and saw The Peter Principle play itself out once again. As employees demonstrated competency in an entry-level position, they were promoted, often to a position where they lacked the skills, talent, or ability to effectively lead in that role.

As a result, the company struggled.

People were operating in positions that were outside their unique areas of giftedness, leading to a stressful, toxic workplace environment. When people are not primarily working in their strength zone, they are more likely to stress out, burn out, and ultimately quit. Sadly, stress (like success) is contagious and can wreak havoc inside an organization.

There was no plan in place to grow the individual team members or evaluate their competency before assigning them a role for which they are ill-equipped.

I’ve seen this happen in auto dealerships, restaurants, factories, manufacturing facilities, martial arts studios, just about every type of organization I can think of. The best people become mediocre managers, managing mediocre people and creating mediocre results.

It’s a recipe for disaster.

Yet, it happens far too often. Why?

It’s what happens when people outpace their expertise and experience.

So how do organizations avoid The Peter Principle sabotaging their success?

To prevent the Peter Principle, organizations should focus on three often overlooked or ignored advancement best practices.

First, organizations should promote based on skill, talent, ability, experience, and potential. If the goal is to put the best people in the right positions, these individuals must be assessed and evaluated in advance to determine if they are capable of succeeding in this new, enhanced role.

If the plan is promotion from within the organization, promote based on a comprehensive assessment of skills and potential for higher-level roles, rather than solely on past performance in the current role. Leadership should also consider the employee's ability to learn and adapt to new challenges and responsibilities.

Why?

For individuals to succeed in any position long-term, their role needs to align with their strengths and giftedness. Just because they can do a task or a job doesn’t mean it is the best use of their talent and ability. Putting a person in a role that doesn’t allow them to focus on their strengths is mentally and emotionally draining, eventually leading to burnout.

I’m a huge proponent of assessments, as they can help an organization better understand the potential of an applicant or employee. This can avoid placing a gifted individual in a position they are not skilled or equipped to serve so they can continue to contribute to organizational success while personally thriving in the business.

Successful organizations align skills (not people) to positions, allowing individuals to thrive. It’s the Paetro Principle in action, positioning people where they can spend 80% of their day doing the 20% of things they are best at doing. This is a recipe for organizational success.

Secondly, rather than promoting individuals who are thriving in their specific roles, consider financial incentives to reward them for their efforts. This could take the form of a pay increase, a bonus, or other perks to continue to incentivize the employee while leaving them in a place where they are making a significant contribution.

Remember what happened to the financial services organization that promoted their #1 salesperson to management? Don’t make that same mistake in your own business.

Promotion is not the only way to reward results.

Thirdly, every organization needs to invest in ongoing training to ensure that employees are equipped for new responsibilities. No one can outperform the quality of thinking they bring to an organization, so focusing on the personal growth and professional development of every member of the team helps ensure that the quality of thinking improves, and with that the quality of results.

One organization I worked with a few years back started cross-training employees in the roles and responsibilities of each department. Not only did it give all the employees a greater appreciation for each department’s role, but it allowed them to see if there were other opportunities within the organization they may find they enjoy or are gifted in doing.

This resulted in some reassignment of personnel within the organization, further aligning strengths with responsibilities, while improving outcomes in the process.

There are two additional things I would encourage organizations to consider to avoid The Peter Principle in their advancement practices, open communication and transparency.

Employers need to foster a culture of open communication and feedback, where employees feel comfortable sharing their thoughts and concerns about a possible promotion, taking on new roles or responsibilities, or how they are doing in the role currently assigned.

Employee performance needs to be regularly monitored and assessed. This can help identify if benchmarks are being met or missed, and if so, why. One of the ways employers help their employees learn, grow, and improve is to provide regular constructive feedback, as well as actively listen to the employee’s thoughts and concerns.

When a culture of open, honest communication exists, everyone has the opportunity to be heard, valued, and appreciated.

Lastly, when an organization is considering promoting an individual to a new position, it is essential to have an open dialogue about what is expected and whether or not the employee being considered is truly suited for this role. This requires a critical assessment of the individual, with both parties candidly discussing the pros and cons.

An employee should not be forced into taking a new role or position, especially if they don’t feel they are qualified or simply don’t want to accept the role. If either party has a hesitation, that’s often a subconscious signal that the timing may not be right or one of the parties doesn’t feel the individual being considered is the best fit for the job.

When it comes to promotions, it should be okay to say NO.

I’ve done this personally several times during my career. There have been times when I have declined promotions, job opportunities, or consulting roles because they were not the best use of my time, talents, and abilities. For the good of the organization, as well as my own welfare and well-being, I thanked them for their consideration but passed on these opportunities.

If I couldn’t thrive in the role, neither would the organization.

As I wrap up today’s insight, you may be asking how you, as an individual, avoid The Peter Principle sabotaging your own success and well-being. I’ll share four quick thoughts.

First, to borrow a phrase from Aristotle, “Know Thyself.” I’m a huge fan of assessments, as they give us an unbiased look at our strengths and weaknesses.

Secondly, to borrow a phrase from the legendary basketball coach, John Wooden, “When opportunity knocks, it’s too late to prepare.” Daily personal growth puts us on a trajectory of perpetual learning, allowing us to become a better version of who we are and what we are capable of doing every day.

Successful people do daily what unsuccessful people do sometimes or not at all.

Third, to borrow a phrase from Jordan Peterson, “Get comfortable with being uncomfortable.” We’ve got to embrace the challenges and unfamiliar situations life brings our way. We need to see them as opportunities for growth and resilience, and not avoid them. This is how we learn to do new things, improve our skills, gain competency, and rise to our full potential.

Lastly, it’s okay to say NO. We do our best when we operate in our strength zone. That’s the 20% of things we’re best at doing. When we focus our efforts and activities on the areas where we excel and find fulfillment, we maximize our potential and achieve better results.

That’s a much better place to be than being promoted to a place of incompetency.

Now you know The Peter Principle, and how to avoid it.