Written by Ash
•
•
Why don’t we make the best sports players the managers? Why don’t the smartest thinkers become the teachers? Why don’t the highest performing salesperson become the sales manager? To avoid falling trap to The Peter Principle.
As an employee, you may have faced the following situation; after time and effort of working towards a promotion, upon starting your new role you find yourself not fully prepared for it. Either your expectation of what the role entailed was way different, or you felt under-prepared to execute the duties and responsibilities of the role, or you even felt a lacking sense of competency for the position.
As a manager, on the other hand, the following situation may sound familiar; a position has opened and it’s time for you to promote one of your direct reports. You identify the star player; someone who you have seen outperforms his targets year on year, has strong interpersonal skills and is generally seen as the Most Valuable Player. Without second-guessing, you proceed to promote this person only to find them struggling in their new role and seem to be out of their depth.
Click here to download free Ultimate Guide to Succession Planning
If any of the above resonates with you, you may have fallen victim to The Peter Principle. The Peter Principle is a concept in management made famous by Laurence J Peter and Raymond Hull in their book with the same title in 1969. The Peter Principle observes that people in a hierarchy tend to rise to their “level of incompetence” as an employee is promoted based on their success in previous jobs until they reach a level at which they are no longer competent, as skills in one job do not necessarily translate to another.
Although the concept was published in 1969, we still see many examples of The Peter Principal in companies today and even more so in highly hierarchical organisations.
An easy example to illustrate The Peter Principle, which is a promotional error many companies still make today, is by looking at sales teams promotions.
If Company A needed a new sales manager; they would typically look at their sales team’s individual performance and conclude that the person with the best sales track record should be promoted to sales manager. Now this person despite an amazing sales track record may find difficulty executing his new role because the skills and competencies needed to be a good sales manager differ greatly from the skills and competencies needed to be a good salesperson.
The bigger the change in the design of the role, the bigger gap of incompetence may exist.
For example, if you’re promoted from engineer to senior engineer, your work may be more challenging but you’re using the same skills. When you are promoted from senior engineer to manager, however, you may lack the “soft skills” needed for such a role. These can include your ability to motivate team members, delegate tasks and responsibilities, communicate effectively, resolve conflict, and liaise with other teams and senior management.
Obviously, it’s undesirable for someone who lacks the competence to hold a position of responsibility in your team or business. He will start becoming aware that he’s under-performing after thriving in previous roles, and he will likely feel demotivated, frustrated and anxious. Over a long period of time, as more and more senior roles are filled by people who are ill-equipped for them, company-wide mediocrity sets in leading to reduced productivity, reduced morale and reduced innovation. Those factors alone have a huge impact on top and bottom lines.
Due to this, companies are placing increased importance on the development of employees, in fact, a report from Brandon Hall states that 58% of companies say that their top priority is closing leadership gaps but, only 19% of them say they are “very effective” in developing leaders1. With that, the below points will help ensure your company won’t promote employees into incompetence and therefore avoid The Peter Principal. To gain an in-depth understanding of succession planning, visit our Ultimate Guide to Succession Planning here.
Groom The Way Ajax Does
Many companies still reserve the target of their succession planning programmes to a few high-level critical positions and develop their direct reports to possibly fill those roles when vacant.
The problem with this is only upon reaching those levels are employees now starting to be groomed, and should the need arise to take the new role now they are highly underprepared.
Reserving succession planning for a select few roles is short-term thinking with many hidden costs. Understand more about these hidden costs here.
Consider instead, a build-up of potential successors across levels of the company starting from the very bottom of your structure.
The time spent grooming an employee from entrance to the top ensures your company’s readiness for successors.
Reserving succession planning for a select few roles is short-term thinking.
An example of building capability and competence over time from outside the corporate world is Amsterdam based football club Ajax, historically one of the most successful clubs in the world. One of the reasons the club has been so successful is its long-term perspective. Talent is scouted early. Children as young as 7 join the Ajax Youth Academy. As the children age, the best ones get promoted to higher divisions and the most successful end up living their dream: playing in the Premier League. This is an excellent example of the long-term, strategic perspective taken by Ajax. Talent is groomed for at least 10 years before they join the Premier League team. Whenever a player of that team leaves, Ajax has multiple candidates lined up who can replace him, regardless of the position in the field.
Think Mobility Like Apple
Your employees are the backbone of your company, especially the ones who do a good, solid job, day in and day out.
Many HR teams then automatically feel that not promoting these high performers will result in them either being demotivated and dropping in performance or worse, leaving the company.
But some of these employees may not have the potential to move up yet because of a gap in competence for the new role.
Once again, a promotion here may be a short term reward that leads to long term problems.
This is where companies now need to expand their idea of growth to include more than just upward mobility.
Employees can also grow and develop laterally, which also contributes to their long-term development.
In fact, many examples have shown that lateral moves make employees more knowledgeable which contributes to a higher career growth.
Download Our Ultimate Guide To Succession Planning Today
Employees can also grow and develop laterally, which also contributes to their long-term development.
Consider one of the most famous succession planning stories of the corporate world, Apple. Steve Jobs was working hard to prepare Tim Cook for the position of CEO. Cook took on a variety of different operational roles including manufacturing, distribution, sales, and supply chain management before working directly with Jobs to gain experience in the CEO role. It wasn’t a single vertical career track that led to Tim Cook leading today’s tech giant, but rather, the many many lateral moves that increased his readiness for the role.
Performer Like Shearer, Potential Like Mourinho, Both like Cruyff
One of the basic elements of succession planning is how to identify successors effectively.
This means companies need a systematic way to look at their entire organization and apply parameters in measuring talent.
A method that has been widely used is applying the matrix of performance against potential and looking at where employees fall.
However, understanding what this matrix truly means is crucial as misinterpretation leads to overlooking the right successors.
A method that has been widely used is applying the matrix of performance against potential and looking at where employees fall.
We can illustrate the idea of performance and potential by looking at 3 names that have made a mark on the world of football.
Alan Shearer; The High Performer: In the Premier League and for Newcastle United, there are few players more legendary than Alan Shearer. The striker still holds the record for all-time Premier League goals scored and is usually rated as the best striker in league history. As correctly predicted by fans, in 2009 when Newcastle United’s manager was taken ill due to heart conditions, Alan Shearer took the club reins. Unfortunately for Newcastle United, not only did Shearer fail to save them from relegation, but they also had one of the worst runs in Newcastle and Premier League history. An example of how high performers can be mistaken for high potentials to bigger roles.
José Mourinho; The High Potential: As a player, José Mourinho made just fewer than 100 appearances for 4 different Portuguese clubs, in that time he scored a mere 13 goals. Nothing really materialised from his short career on the pitch, but it provided the foundation for one of the most successful managerial careers we’ve ever seen. Through his strong passion for the game and outstanding tactical knowledge, he has gone on to win over 20 honours including the world’s best club coach 4 times. An example of how high potentials may not perform in their current role, but excel when given the opportunity.
Johan Cruyff; The High Performer High Potential: A testament to Ajax football development discussed earlier, Cruyff trained with the club as a youth and debuted professionally with Ajax. His career is regarded as one of the best great footballers turned great manager stories of our time. As a player, he contributed strongly to the success of his club and the national team even winning the most prestigious award in football, the Ballon D’Or, 3 times. As a manager, aside from success in winning football cups, he also pioneered coaching styles and techniques said to be ahead of his time resulting in clubs like Ajax and Barcelona successfully redesigning youth academies. Cruyff is an example of how high performers with high potential can excel despite role expansion.
High performers stand out from average employees in any organization.
They consistently exceed expectations and are management’s go-to people for difficult projects because they have a track record of getting the job done. They’re great at their job but may not have the potential, or desire, to succeed in a higher-level role or to tackle more advanced work.
On the other hand, a high-potential employee is harder to identify and is one who has been identified as having the potential, ability, and aspiration to climb to higher-level roles or tackle new and advanced work.
High potentials can be difficult to identify, for two reasons.
First, high performance is easy to observe that it then drowns out the less obvious attributes, behaviours and traits that characterize high potentials–like change management or learning capabilities.
Second, few organizations define the attributes and competencies needed for each different role–which means that managers don’t know precisely what to look for to assess potential.
To overcome this, companies first need to define the parameters they look for in potential that upon assessing can clearly separate high and low potential candidates; whether it be soft skills, leadership capability, communication prowess or any other attributes. Explore how tools can help you assess these attributes here.
“When performance is the only criteria employees are evaluated on,” warns Brian Kight, Director of Performance at Focus 3, “high performers will be the only ones moving up–and your high potentials will be moving out”
Criticism of The Peter Principle
While the theory sees many examples to make it evident and the book which sold millions of copies worldwide stayed as a bestseller for 33 weeks, there are many schools of thought and research that critique The Peter Principal.
Some companies believe that to maintain a high calibre workforce which leads to high performing organizations an “up-and-out” strategy made famous by law firms is more suited.
Another is that performance will eventually “regress to a mean” in large organisations despite The Peter Principle being present.
Whilst there may be some schools of thought that oppose the idea of The Peter Principle, it can’t be denied that it does occur. The potential business impact of The Peter Principle especially in the long run can be detrimental.
Therefore, companies should use the above as a guideline to avoid promoting employees into the point of incompetence.
Reference
Page Contents
