The Peter Principle: The consequences of over-promotion and how to avoid it

Organisational mismanagement and inefficiency are all around us.  Think about when you had to wait in line for hours and fill out multiple forms to receive a simple service or when you read about the large corporate scandals in the newspaper. Why does this happen?

Dr Laurence J Peter in his book "The Peter Principle", first published in 1968, suggests that any organisation that has a hierarchical structure will fall victim to the Peter Principle by inevitably recruiting incompetent managers who contribute to project failures and are no longer promoted. This is a result of employees being promoted to a position where they reach their "level of incompetence" and are unable to contribute efficiently.

The book uses satire and humour to be brutally honest about organisational dysfunction. It offers advice to readers on how to detect incompetence and achieve job satisfaction by avoiding "final placement"— the job position where they will reach their level of incompetence.

The Peter Principle becomes apparent when employees are promoted up the organisational hierarchy until they are promoted to a position where they are unsuitable, and spend the rest of their career there. For example, a very effective salesperson may be able to leverage his/her communication and interpersonal skills to boost sales significantly. However, this same individual when promoted to sales manager for his/her good performance will struggle as a manager as he/she may lack the organisational or management skills necessary to lead salespeople.

As an ineffective sales manager, the individual has reached his/her level of incompetence. Although it can be argued that this situation may be partially mitigated if the organisation offers training to the new manager, the author explains that certain roles require high levels of intellectual capacity or stress tolerance which cannot be as easily trained.

Moreover, earlier managers who have been promoted further up the ladder may not think training is necessary as they themselves had been a part of the system but were yet to reach their own level of incompetence.

What happens when someone reaches their level of incompetence? They start to act differently, occasionally working overtime or extra hard to compensate for their lack of skill in that particular role. As a result, these individuals rarely lose their jobs because their superiors perceive them to be competent as they work hard.

This subjectivity of competence perception allows the workers to continue to work in that role until the end of their career. Why is that bad for the organisation as a whole? The employees or the executives at their level of incompetence may become demotivated and lazy when they notice their inability to get promoted despite all the hard work they try to put in to compensate. "The cream rises until it sours'', is what the author says in this regard.

Therefore, managers who have reached their level of incompetence may devise complex strategies that their subordinates find difficult to comply with. The manager may double down on the need for formalities, demand unrealistic perfection, meddle with and criticise the work of their subordinates, shut down new ideas from their subordinates and develop peculiar habits like insisting on keeping a clean desk (paperwork may remind them of the inadequacy) or do the exact opposite by stacking files and papers on their desks (to give the illusion of heavy workload). However, managers who have yet to reach their level of incompetence will continue to perform well and rise up the ranks.

For those who have just entered a new job or are yet to reach their level of incompetence, the book offers guidance on how to continue to be promoted before the dreadful "final placement". The superiors of a worker may judge him/her as competent and eligible for promotion in a way that reflects their own competence.

Competent managers value workers based on their productivity and potential whereas incompetent managers perceive workers to be competent when they are good at following orders and maintaining the status quo. However, we know that good followers do not always make good leaders as it requires a different skillset. That is why the book emphasises on the need for workers to not only work hard but also gain the support of their superiors to be perceived as competent.

Regarding promotion, the author suggests that if an employee's path to promotion is blocked by superiors – who are unlikely to be promoted further because they had reached their level of incompetence – he/she should either shift to another hierarchy with better career mobility, i.e, transferring to a different branch or moving to another organisation.

Finally, the author suggests that if employees are happy with their job positions and want to avoid the terrible fate of "final placement", they should try their best not to get promoted inconspicuously. For example, the book talks about a skilled gardener who was happy with his job and "accidentally" misplaced all his cash receipts which made him look ineligible for further promotion.

As for those who have already reached their level of incompetence, the author recommends that they focus on their quality of life rather than on overpromoting themselves into oblivion. Rather grimly, the Peter Principle also indicates that every position in a company will eventually be filled with people who have reached their level of incompetence.

Despite being written more than 50 years ago, "The Peter Principle" continues to be relevant to this day. In fact, research done by economists Alan Benson, Danielle Li, and Kelly Shue on 214 US companies in 2018 found that effective salespeople were more likely to be promoted based on their sales performance despite being more likely to be less successful as managers.

In conclusion, for those of us planning to scale the promotional ladder, "The Peter Principle" is a humorous yet potent reminder of the pitfalls of over-promotion. It is a must-read classic for management enthusiasts or anyone who works in a hierarchical organisation.