Quick Guide to the Peter Principle

In this article, I use my 30 years of management experience to share with you the method behind the Peter Principle and how it can negatively affect companies of all sizes. I will also highlight some techniques to avoid poor recruitment choices and falling productivity. 

 

 

What is the Peter Principle? 

 

The Peter Principle is a management theory focusing on organisations who promote people until they become incompetent. This is a common mistake I have witnessed in a wide range of working environments, including both the public and private sector. 

 

 

This theory was first put forward by Canadian educator Laurence J Peter, who along with co-author and playwright Raymond Hull, published the book “The Peter Principle” in 1969. 

 

 

For example, when a business wants to fill a manager’s role, they assess candidates based solely on their performance in their current or previous role, rather than their ability to deal with the pressure at a more senior level. Not surprisingly, the new manager lacks the necessary skills and underperforms in their new position. 

 

 

The reason for this, according to the Peter Principle theory, is that employees pushed up the pecking order can begin to lose confidence and feel unable to cope with their new responsibilities. The competence gap reduces productivity and prevents them seeking further promotions. In most cases, the company does not do anything about the poor performance, leaving the employee stuck in the same position. 

 

 

What are the consequences for the organisation? 

 

Filling positions with poor performing people puts the future of an organisation at serious risk. Promoted employees feel unhappy and frustrated, which can hurt productivity and profitability. If they happen to be team managers, a negative culture can soon spread among the ranks. 

 

 

Rather than dealing with the poor performance, the executive who pushed the promotion through might protect the employee from scrutiny. This loyalty to the individual, can create wider long-term issues for the company. 

 

 

The Principle highlights a loophole in corporate structures where loyal but unskilled employees are promoted to roles needing leadership and managerial experience. 

 

 

Case study: the sales manager 

 

An office technology business has a vacancy for a sales manager. The current manager is leaving in a couple of weeks, so the pressure is on to make a quick appointment otherwise the department might not make its monthly sales targets. 

 

 

The director, who has little day-to-day involvement with the sales team, thinks that an internal promotion would be a faster and safer option. No need to worry about getting the new manager up to speed, and they can easily be replaced by a junior sales person. 

 

 

Looking at the sales spreadsheets, the director identifies the best performing member of the sales team and offers them the job. Would this turn out to be a good hire? 

 

 

Being a high-performing sales representative requires a completely different skill-set to a sales manager. Top sales people are competitive and target driven, but they don’t necessarily have the ability to manage and motivate a team. 

 

 

In my experience, companies often regret promoting their best performers to managerial positions. The immediate impact is that the sales team has just lost its star player, which results in a drop in next month’s sales figures. 

 

 

Should companies avoid internal promotions? 

 

To be clear, I have nothing against promoting people internally. An existing member of staff will understand your culture and values, the promotion will send a positive message to other employees and the hiring process causes minimal disruption to your operation. 

 

 

However, organisations have a responsibility to support the employee by arranging skill development training. Ideally, this should start before they are appointed so that they fully understand their new role and responsibilities. The company can set out its expectations for the new position, while mentoring the employee on how to perform. 

 

 

How can you prevent the Peter Principle? 

 

There are several techniques businesses can use to negate the effects of promoting poorly trained employees. Here I highlight the most effective strategies: 

 

 

Higher pay 

 

Employees usually want promotion to get a rise in wages, which can lead to focusing on the most lucrative position rather than one that best suits their skills. Going back to our sales manager example, the director could give the top sales person more money to ensure they keep hitting the sales targets. Organisations should find ways to reward performance, rather than simply promoting people who lack the necessary skills. 

 

 

Demotion 

 

The obvious solution would be to simply send the struggling employee back where they came from, by demoting them. According to Peter, organisations need to handle this process carefully without it being seen as a public punishment for failure. The leadership need to admit that they made the wrong decision by promoting the individual too soon. 

 

 

Sideways shift 

 

Bosses might feel uncomfortable firing or demoting under-performing, but loyal and well liked, employees. Another option is to give them a position, which is technically at a lower grade, but with a fancy job title and less responsibility. This way, the business can remain on good terms with the employee, who is probably relieved to be doing an easier role. This isn’t the cheapest decision, but can be suitable for both parties. 

 

 

Management skills training 

 

One of the most effective ways to improve people performance is to support them by arranging management skills training. This will give the employees the tools they need to carry out their new roles confidently and effectively. 

 

 

While training sessions require a meaningful investment from the organisation, the result will be more capable people in the organisation. Answer this question: would training cost more than recruiting a replacement? 

 

 

Want to learn more about management skills training? 

 

As the Peter Principle demonstrates, there are numerous skills you need to learn to become a good manager. I established East Saxon Training to offer bespoke management skills training courses covering the important topics organisations need to succeed. We don’t offer standard solutions, all our training is tailored to your specific needs. 

 

 

david.hewitt@eastsaxontraining.com