The Peter principle is a concept in management developed by Laurence J. Peter which observes that people in a hierarchy tend to rise to "a level of respective incompetence": employees are 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.

The concept was explained in the 1969 book The Peter Principle (William Morrow and Company) by Laurence Peter and Raymond Hull. but it became popular as it was seen to make a serious point about the shortcomings of how people are promoted within hierarchical organizations. The Peter principle has since been the subject of much commentary and research.

Summary

The Peter principle states that a person who is competent at their job will earn a promotion to a position that requires different skills. If the promoted person lacks the skills required for the new role, they will be incompetent at the new level, and will not be promoted again.

The Peter Principle

Laurence J. Peter's research led to the formulation of the Peter Principle well before publishing his findings.

Eventually, to elucidate his observations about hierarchies, Peter worked with Raymond Hull to develop a book, The Peter Principle, which was published by William Morrow and Company in 1969. As such, the principle is named for Peter because, although Hull actually wrote almost all of the book's text, it is a summary of Peter's research.

Summary

In the first two chapters, Peter and Hull give various examples of the Peter principle in action. In each case, the higher position required skills that were not required at the level immediately below. For example, a competent school teacher may make a competent assistant principal, but then go on to be an incompetent principal. The teacher was competent at educating children, and as assistant principal, he was good at dealing with parents and other teachers, but as principal, he was poor at maintaining good relations with the school board and the superintendent.

Chapter 6 explains why "good followers do not become good leaders." Spanish philosopher José Ortega y Gasset (1883–1955) virtually enunciated the Peter principle in 1910: "All public employees should be demoted to their immediately lower level, as they have been promoted until turning incompetent."

A number of scholars have engaged in research interpreting the Peter principle and its effects. In 2000, Edward Lazear explored two possible explanations for the phenomenon. First is the idea that employees work harder to gain a promotion, and then slack off once it is achieved. The other is that it is a statistical process: workers who are promoted have passed a particular benchmark of productivity based on factors that cannot necessarily be replicated in their new role, leading to a Peter principle situation. Lazear concluded that the former explanation only occurs under particular compensation structures, whereas the latter always holds up.

Alessandro Pluchino, Andrea Rapisarda, and Cesare Garofalo (2010) used an agent-based modelling approach to simulate the promotion of employees in a system where the Peter principle is assumed to be true. They found that the best way to improve efficiency in an enterprise is to promote people randomly, or to shortlist the best and the worst performer in a given group, from which the person to be promoted is then selected randomly. For this work, they won the 2010 edition of the parody Ig Nobel Prize in management science. Later work has shown that firms that follow the Peter Principle may be disadvantaged, as they may be overtaken by competitors, or may produce smaller revenues and profits; as well why success most often is a result of luck rather than talent—work which earned Pluchino and Rapisarda a second Ig Nobel Prize in 2022.

In 2018, professors Alan Benson, Danielle Li, and Kelly Shue analyzed sales workers' performance and promotion practices at 214 American businesses to test the veracity of the Peter principle. They found that these companies tended to promote employees to a management position based on their performance in their previous position, rather than based on managerial potential. Consistent with the Peter principle, the researchers found that high-performing sales employees were likelier to be promoted, and that they were likelier to perform poorly as managers, leading to considerable costs to the businesses.

Some authors refer to the phenomenon they have observed as the Paula principle: that the Peter principle applies mostly to male employees, while female employees are significantly less likely to be promoted than their male colleagues. Therefore women tend to be kept in positions that are below their abilities. They state that this discrimination against women affects all hierarchical levels and not just top positions. The name is a play on words with those of the apostles Peter and Paul.

Response by organizations

Companies and organizations shaped their policies to contend with the Peter principle. Lazear stated that some companies expect that productivity will "regress to the mean" following promotion in their hiring and promotion practices. Brian Christian and Tom Griffiths have suggested the additive increase/multiplicative decrease algorithm as a solution to the Peter principle less severe than firing employees who fail to advance. They propose a dynamic hierarchy in which employees are regularly either promoted or reassigned to a lower level so that any worker who is promoted to their point of failure is soon moved to an area where they are productive.

The Peter Principle is a British television sitcom broadcast by the BBC between 1995 and 2000, featuring Jim Broadbent as an incompetent bank manager named Peter, in an apparent demonstration of the principle.

The Incompetence Opera is a 16-minute mini-opera that premiered at the satirical Ig Nobel Prize ceremony in 2017, described as "a musical encounter with the Peter principle and the Dunning–Kruger effect".

Freakonomics Radio is an American Public Radio program and podcast. In 2022, an episode was produced entitled "Why Are There So Many Bad Bosses?" This episode explains the Peter Principle and its practicality. The episode aired in syndication on National Public Radio in the United States of America.

See also

  • Dilbert principle

References

Bibliography

  • ... how to avoid it
  • Word.A.Day -- Peter Principle
  • How to overcome it