Why don’t we make the best players the managers? Make the smartest thinkers the teachers? Make the highest performing salesperson 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 unprepared 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, 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 MVP. Without second-guessing, you proceed to promote this person only to find them struggling in their new role and seems to be out of their depth.
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 Principle in companies today and even more so in highly hierarchical organizations. An easy example to illustrate The Peter Principle, which is a promotional error many companies still make today, is by looking at the sales team’s promotions. If Company A needed a new sales manager; they would typically look at their sales team’s 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, 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. 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, as more and more senior roles are filled by ill-equipped people for them, company-wide mediocrity sets in leading to reduced productivity, reduced morale, and reduced innovation. Those factors alone have a huge impact on bottom lines. Due to this, companies are placing increased importance on the development of employees. 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. Learn more about how data can be a hindrance to succession planning
- Have A Long Term Perspective
Many companies still reserve the target of their succession planning programs 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. Learn more about the hidden cost of poor succession planning
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 the entrance to the top ensures your companies readiness for successors. 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.
2. Consider Lateral Moves
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 competency 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. Many examples have shown that lateral moves make employees more knowledgeable which contributes to higher career growth.
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.
3. Identify Performance VS Potential
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.
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. 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, behaviors, 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 separate high and low potential candidates; whether it be soft skills, leadership capability, communication prowess, or any other attributes. Learn about a new high-potential axis
“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, many schools of thought and research critique The Peter Principal. Some companies believe that to maintain a high caliber 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 organizations 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 Principal especially in the long run can be detrimental. Therefore, companies should use the above as a guideline to avoid promoting employees to the point of incompetence.