It is surprising how few are familiar with the Peter Principle.  This is most disturbing in the areas of business and organizational psychology as it speaks directly to the source of innumerable challenges for organizational success.  It should be a risk factor in talent management, succession planning, and organizational compensation systems.  Most of all, organizations should look at ways to circumvent this process; most notably, organizations should consider how Verstalists can thwart the Peter Principle.

The Peter Principle

“In a Hierarchy Every Employee Tends to Rise to His [Her] Level of Incompetence” (Peter & Hull, 1969, p. 25).

In action, the Peter Principle states a simple inevitability.  If you are good at your job, you get promoted.  If you are good at the new job, you get promoted again.  This continues until you take on a job for which you are not well suited; i.e. incompetent.  Having reached your level of incompetence, you no longer get promoted, but stay within the job you are least capable of performing well.   Taken to its ultimate conclusion, organizations eventually become dominated by leaders with the least capability to do their job.

Although published originally in 1969 as a tongue-in-cheek exposition on incompetence within human organizations, and supported by fictitious research, the Peter Principle continues to be debated amongst practitioners and academics.  It has been lambasted as unscientific (something it never purported to be) and crass overgeneralization, as well as an insightful source of legitimate inquiry.  The staying power of the Peter Principle maybe that its simplicity and succinctness, aligns with human experience and explains why so many organizations manage to do such stupid things.

The Value of the Peter Principle Perspective

Despite the limited academic basis for the Peter Principle, it manages to highlight a particular problem – why do we use promotion as a means of reward for competent performance (Fairburn & Malcomson, 2001)?  Doing so fails to consider two very fundamental truths: competence is domain specific, and management is a very specific skill. These fundamental truths conflict with the way most organizations reward and promote people.  Failure to acknowledge these promotes inefficiency, turmoil, and perpetuates the validity of the Peter Principle.

First, few organizations design their job families to reward and promote people for simply getting better and more efficient at the job they do.  Moving from job-specialist level 1, to job-specialist level 2, often requires doing different things, instead of doing the same things better.  We reward people, not for being good at their job, but for taking on new roles they have never done before, not proven they are capable of, and promoting constant change rather than long-term competence.   As soon as people demonstrate competence, we move them.

Second, organizations fail to realize management and leadership skills as a unique job all to themselves.  Being a good engineer says nothing about your ability to be a good engineering manager; however, good leadership skills can be a boon regardless of the function or industry. While understanding the jobs people need to perform is beneficial, leaders do not have to be competent in all the job functions they lead.  Promoting people who are competent in their job but shown no competence for leadership to positions of leadership, once again, promotes inefficiency and disruption.  Not only do you lose a competent performer in their prior role, but you may very well promote incompetent leadership.

Versatilists to the Rescue

Versatilists rarely run afoul of the Peter Principle.  First, versatilists are rarely promoted very high within most organizations, because they do not stay within any specific domain very long (something HR departments seem to think predicts success).  Second, because versatilists are deeply knowledgeable about many domains, they are keenly aware of what they are, and more importantly are not, capable of doing.  As such, versatilists without the desire or capability to lead will not pursue those opportunities.  Versatilists could be the savior for organizations looking to thwart the Peter Principle, but it will require HR to change their perspective on talent acquisition and development.

In terms of talent acquisition, HR and recruiting need to look beyond the experience requirements they believe are required for a job, and begin looking at the actual skills.  Far too often, organizations are looking for years of single domain experience (like engineering and software development) for roles that don’t necessarily require that experience (like leading engineering and software development teams).   The skills themselves are more important than the domain in which they were developed.   This is important for strategic innovation in particular, where having new perspectives brought to the job can be highly valuable.  A versatilists with leadership capability can quickly adapt to new industries and environments, while also bringing a host of new skills.

HR/Recruiting should also consider the quantity and quality of performance, rather than simply the length of performance, when looking at promotions or new hires.  Comparing two candidates for a position, a candidate who has shown success in multiple assignments and multiple environments over numerous years, should be preferred to one that has shown success in a single domain over the same time.  The candidate with multiple, differentiated success is much more likely to be successful in the new job as well; the one in a single domain is ripe to be reaching their level of incompetence.  Success in adapting to new environments is a skill companies should value, but don’t.

In terms of talent development, HR needs to create ways of rewarding specialists who do their job increasingly well over years of dedication without using promotions, while appreciating the versatilists who thrive in taking on new roles.  Promotions should not be the only means of rewarding top performers; bonuses and incentives should be used to drive continued competence building.  Promotions should only be used to expand and diversify the experiences of those already proving their ability to adapt and succeed in new roles.   HR needs to look beyond narrow definitions to find the people most likely to succeed, not those that have just been doing it longer.

As companies continue to struggle with market volatility, disruptive innovation, and dramatic shifts in business models, versatilism should be the new standard of performance.  What good is someone who has ten years’ experience in business models and practices that no longer hold true? Perhaps a new principle, the Versatilist Veracity should succeed the Peter Principle:

“Without Versatilists, a Hierarchy Tends to Become Incompetent”

 

References

Fairburn, J. a, & Malcomson, J. M. (2001). Performance, promotion, and the Peter Principle. Review of Economic Studies, 68(1), 45–66. http://doi.org/10.1111/1467-937X.00159

Peter, L. J., & Hull, R. (1969). The Peter Principle. Cutchogue, N.Y.: Willima Morrow & Co., Inc.