Have you ever come across a manager that is absolutely fantastic at doing the core work of the business/team, but is found out to be absolutely useless at managing the people themselves? There is a simple reason for this - they are promoted based on capability in their current role and seniority. The problem is, without the proper support or development they hit a ceiling that is difficult to break through.

The Peter Principle is a concept in management theory that observes how people in hierarchical organizations tend to rise to their "level of incompetence." Developed by Dr. Laurence J. Peter and Raymond Hull in their 1969 book "The Peter Principle," this theory explains a common phenomenon in workplace promotions and organizational structures.

Key Aspects of the Peter Principle

Promotion Based on Current Performance: Employees are typically promoted based on their success and competence in their current role, rather than their potential to excel in the new position.

Skill Mismatch: As employees move up the hierarchy, they often reach a position that requires skills different from those that made them successful in their previous roles. This can lead to incompetence in the new position.

The Plateau of Incompetence: Once an employee reaches a position where they are no longer competent, they are unlikely to be promoted further. This level is referred to as their "final placement" or "Peter's plateau".

Organizational Impact: Over time, this principle suggests that every position in an organization may eventually be filled by an employee who is incompetent to carry out their duties.

Examples in Action

1. A skilled software developer promoted to a team leader role, struggling with management responsibilities.
2. A successful sales representative promoted to sales manager, facing difficulties in team management and maintaining sales performance.
3. An engineer promoted to project manager, unable to meet deadlines and manage projects effectively.

Research and Validation

In 2018, economists Alan Benson, Danielle Li, and Kelly Shue analyzed data from 214 American businesses, finding evidence supporting the Peter Principle. Their research showed that companies often promoted high-performing employees to management positions based on their previous performance rather than managerial potential, leading to poor management and significant costs to businesses.

Strategies to Mitigate the Peter Principle

1. Skills Assessment: Carefully evaluate candidates' skills and aptitudes for new roles, not just their performance in current positions.
2. Training and Development: Provide comprehensive training and skill development opportunities for employees before and after promotions.
3. Job Rotation and Cross-Training: Expose employees to various aspects of the organization to broaden their skill sets.
4. Alternative Reward Systems: Consider offering higher pay or other incentives without necessarily promoting employees to positions they may not be suited for.
5. Feedback Loops: Implement continuous feedback mechanisms to identify and address competence issues early.

By understanding and addressing the Peter Principle, organizations can work towards more effective promotion practices and better overall performance.

As a small business owner you may or may not have much control l over this initially. Your business is growing and you get one of your more experienced people to be "supervisor" and run the team. It doesn't work and will cost your business tens of thousands of dollars, and breed a negative work culture.