The Peter Principle is a concept that says that, in a hierarchical system, every employee tends to be promoted until he reaches his level of incompetence, and was created by Canadian educator Laurence J. Peter, author of the book entitled The Peter Principle: Why Things Always Go Wrong, published in 1969, co-authored with Raymond Hull.
According to this principle, in Organizations in general, promotions are based on the level of competence that the employee demonstrates in the current position, and not on the competence required for the new function. In this way, the employee takes on new functions (in higher hierarchical positions), and is always promoted based on current performance (as a prize), until he reaches a level where he no longer has good results, becoming incompetent, and becoming stagnant in that position.
An interesting study entitled Promotions and the Peter Principle“, conducted by Alan Benson (University of Minnesota), Danielle Li (MIT), and Kelly Shue (Yale University), published in 2018, analyzed the performance of salespeople from 214 companies and found consistent evidence of the Peter Principle, realizing that the performance of salespeople in their current position was the preponderant factor at the time of promotion, to the detriment of management skills.
Another study called Things Can Only get Worse? An Empirical Examination of the Peter Principle, by Tim Barmby, Barbara Eberth and Ada Ma, from the University of Aberdeen (Scotland), published in 2006, analyzed a large financial sector company for two years and concluded that promotions during that period suggest observing the Peter Principle.
In a similar way, we see this happening in the public service, where people take up positions in government companies, ministries and public offices, not because of their competence, but simply because of a political indication. Likewise, this causes incalculable damage.
What to do?
We can find the Peter Principle occurring out there, in some companies, and perhaps you have already witnessed some situation (such as the excellent salesperson who becomes an incompetent manager, or the great specialist who becomes the bad manager), and in certain sectors, more than others.
However, in order to avoid being a victim of the Peter Principle, and of the harmful consequences of having managers acting without the necessary management skills, the Organization must ensure that the employee to be promoted has the necessary skills to take over the new position. Promotion should not be seen as a gift given to those who perform their duties well, but rather, it should be seen as an opportunity for the Organization’s employees who have the basic skills required for a particular vacancy. Therefore, a good selection process, with clear competencies and requirements, can prevent the Organization from falling victim to the dangerous effect of the Peter Principle.