What is the Peter Principle?
The Peter Principle states that in an organizational hierarchy, employees tend to receive a promotion until reaching a state of incompetence.
The origin of the Peter Principle stems from Dr. Laurence J. Peter, who wrote about the management theory in his book, The Peter Principle: Why Things Always Go Wrong.
- Under the Peter Principle, the management of individuals in a hierarchical organization tends to promote until an employee reaches their level of incompetence.
- By standard practice, the norm for employee promotions is predicated on performance in their current role rather than the employee’s strengths and weaknesses and how those fit into the new position.
- The issue is that an employee who can perform effectively in one role should not be assumed to be capable of directly transferring those results to a different, often more challenging position.
- The organization should aim to reward a productive worker via incentives, but a promotion is not the only option available to motivate an employee.
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What are the Origins of the Peter Principle?
The Peter Principle originated from Dr. Laurence J. Peter and his classic book published in 1969, The Peter Principle, which has garnered a reputation as a popular business management literature.
The Peter Principle, also known as the “Peter Principle of Incompetence,” establishes that an individual competent at their job should be promoted to a new position that requires a different set of skills and a higher level of competence if deemed capable of learning the new skills needed.
The Peter Principle is a concept in management theory that implies that employees are promoted to their level of incompetence at the workplace.
Once an employee reaches the breakpoint at which their current skills and depth of knowledge are no longer adequate to contribute value, the inevitable outcome is the employee’s performance will start to falter, and the continued poor performance will contribute toward organizational inefficiency at scale.
If the promoted employee cannot adapt to the new environment and lacks the aptitude necessary to perform well in the new role, the likelihood of a promotion is unfavorable.
Each employee at an organization, even the top employees who outperform relative to others, receives promotions and climbs the hierarchy until reaching a barrier beyond their level of competence.
From the management perspective, the recognition and desire to reward competence are understandable. However, individual performance is a function of the surroundings and the burden placed on them to execute in a situation that not everyone can handle.
While technically written as satire, those words have an underlying truth, as evident in many corporate workplaces that promote employees with seemingly no afterthought.
How Does the Peter Principle Work?
The Peter Principle is a hierarchical workplace pattern where individuals receive promotions until their competence is insufficient to meet performance expectations.
The mechanism inherent to corporations continues, with high-performing employees climbing up the ladder until they reach their threshold, at which point performance falters.
The standard procedure within an organization is to reward the positive performance of employees with promotions, which is a reasonable practice.
However, the continuous cycle of offering promotions is not a sustainable strategy to incentivize employees, irrespective of the underlying intent, which is most often well-meaning.
In fact, the reverse of the intended outcome can occur far more often than one might expect.
The aforementioned inflection point where an employee—with a track record of accomplishments and positive performance at the workplace—is left frustrated and feeling inadequate is termed the “final placement.”
Employees deemed competent in their current position with the skills necessary to contribute tangible value on behalf of a corporation are normally rewarded with promotions.
In other words, the employee’s achievements led to being promoted to the furthest position at the corporation before their skills reached their maximum capacity (or “the ceiling”).
Therefore, the Peter Principle informs corporate executives of the risks of the normalized reward system oriented around performance-contingent promotions that occur at regular intervals for top performers.
Why Does the Peter Principle Matter?
By understanding the Peter Principle, organizations can implement strategies to mitigate the risk of pushing employees beyond their limits and ensure that promotions will improve the company’s operating efficiency (and job satisfaction).
Therefore, an employee receiving a promotion and becoming assigned a new role with more responsibilities—i.e. climbing the ladder—is an effective method to incentivize the employee, up to a certain point.
The promoted employee will inevitably be placed in a new position at a typical organization, where their performance falls short of expectations, causing a downward spiral where the employee is eventually overwhelmed with incompetence.
The Peter Principle is the notion that in a hierarchical organization, employees tend to be promoted based on their performance in their current role — but each promotion is a step closer to the breakpoint at which the employee is no longer productive.
The cause-and-effect pattern—where the positive performance of an employee is rewarded with a subsequent promotion—repeats itself until the employee is no longer capable of performing at a level deserving of a promotion.
The employee could perhaps not even be performing at a level comparable to their peers in the new role. That said, the increase in workload could worsen the employee’s morale even further, which boils down to poor management.
