Well-known for the studies he conducted on hierarchies of modern organizations, the American pedagogue Laurence J. Peter is also famous for enunciating the principle that bears his name.
In the 1986 book “The Peter Principle”, the scholar apparently jokingly stated what is in fact a great truth: the best workers turn out to be bad bosses. The book stayed on the bestseller lists in the United States for 33 weeks and sold over one million copies.
What is the Peter Principle?
The Peter Principle is embedded in a paradox: if organizations start promoting the best workers for the jobs they do, they will inevitably continue promoting them until they are no longer good at what they do.
In other words, organizations manage careers so that everyone reaches the same level of incompetence.
The worker’s skills and talents that make him good at what he does have nothing to do with his success at a higher level. Therefore, promoting and removing an employee from the position in which he is good generates long-term incompetence. According to Peter, in the end every job has a tendency to be filled by an incompetent worker for that role.
In companies, the most capable workers are rewarded with promotions and this is a logic that seems to make sense. If that worker again stands out as a manager, they will be promoted to a higher position. But the point is that a good employee is not always a good boss, because he lacks the necessary elements to display leadership.
This occurs in all professions, and the ideal would be to promote not the best worker, but the one who has the necessary set of skills to perform better in the job. This is not easy to determine, and a promotion based on skills and not on labor merits tends to cause dissatisfaction among workers.
Evidences of Peter Principle
Peter deduced his principle by analyzing incompetence cases, but it had never been proven until the Yale Management Schools, Carlson and MIT, studied the data from 214 companies. The results, published in the journal of the National Bureau of Economic Research, are surprising.
The productivity of salespeople and sales managers was analyzed to determine if those companies overlooked the best managers when promoting the best salespeople. Sales is an ideal environment to test the Peter Principle, as it is easy to quantify those salespeople and managers who perform best.
According to the study, sales performance is conditioned by promotions. A salesperson increases his chances of being promoted by 15% each time he goes up a position in the sales ranking.
But his sales performance is inversely related to his performance as a manager, correlating with a 7.5% decrease in the performance of his subordinates. It does not matter if salespeople are promoted within their work team or transferred to another department.
In conclusion, companies promote the best sales workers, but they become the worst managers.
How to solve the Peter Principle?
Although it is the first time that the Peter Principle has been scientifically proven, in business administration it is taken into account by many managers.
One way to avoid the Peter Principle is to increase the worker’s wage based on his results. The previous study showed that companies with the best commissions also promoted the best bosses, because when the salary is not an incentive to escalate to a manager, they could choose the most capable without the best salespeople considering it a grievance.
Other companies do not link promotion in responsibility to results, but instead use a double scale in which the best technicians have their hierarchy levels and the managers another, with equal prestige and salary. This is the model that Microsoft follows, for instance.