What is the Peter Principle?

The Peter Principle is a human resource theory. The overall concept of his theory is that people within an organization are promoted until they reach a level at which they are incompetent.

As a result of incompetence in their latest position, the person is not promoted further. The theoretical result of the Peter Principle in organizations is that, eventually, every position is held by someone who was not competent to hold it.

Why is it called the Peter Principle?

It was put forth by Dr. Laurence J. Peter in the mid 20th century. Dr. Peter wrote a book about the principle that was published in the late 1960s.

Examples of the Peter Principle

Real-life situations are some of the best way for many people to truly understand the Peter Principle. Here are three examples of how the principle might play out in various types of organizations.

1. The Peter Principle in a fast-food restaurant

Individuals are hired to work entry-level positions, such as front-counter, drive-thru or grill. Someone who excels at one of these positions because they are good at customer service or simply have a strong work ethic might eventually be singled out and promoted to shift supervisor—even if they have no leadership experience or relevant skills.

Some of those individuals will remain at shift supervisor positions, probably struggling to succeed, because they don’t have the skills or knowledge to do the job properly.

Meanwhile, those shift supervisors who are able to perform well may eventually move up to store management positions. Eventually, says the Peter Principle, all shift supervisor positions will be held by those who aren’t competent and this same story will play out at higher levels.

2. The Peter Principle in a sales organization

Several studies have looked at promotions in dozens or even hundreds of sales organizations and found evidence of the Peter Principle in action. Specifically, the studies conclude that sales leadership tends to consider performance and not supervisory experience or other relevant skills.

One example would be giving a management position to the highest performing salesperson. However, someone who can meet and exceed sales goals on a regular basis and appears to have a magical ability to close deals does not necessarily have the skills or even the personality to be a good manager.

3. The Peter Principle in a nonprofit agency

Employees in a nonprofit often begin as volunteers, but what makes a good volunteer doesn’t necessarily make a good employee. As employees rise in the ranks through a nonprofit, they may also experience more of the Peter Principle.

For example, someone who is great at providing customer service at fundraising events might not be the best choice for planning and running said events. And the person who excels at planning and running an event may not do well running a permanent team of people or ongoing nonprofit accounting processes.

What is the opposite of the Peter Principle?

The opposite of the Peter Principle is the Dilbert Principle, which is named after the comic. This is the theory that companies promote incompetent people into leadership roles to get them out of the product workflows, where they may be holding up revenue-generating tasks.

How can the Peter Principle impact businesses?

The Peter Principle can have a number of negative impacts on businesses and other organizations. They include:

• Less effective leadership. Not everyone who gets promoted ends up in a supervisory role, but organizations that are falling prey to the Peter Principle might be pulling high-performers from the ranks for management or even—eventually—executive positions. According to Dr. Peter’s principles, that can lead to less effective leadership, with managers, directors and others who are unable to make the best decisions for their departments and teams.
• Trickle-down effect. Poor leadership has a trickle-down effect that can cause decreased productivity and reduced revenue as processes, departments and individual employees fail to function to their maximum potential. Trickle-down effect from the Peter Principle can also lead to people being pulled inappropriately from lower ranks as those above them move up. Eventually, a number of layers in an organization can be filled by people who aren’t able to do their jobs appropriately.
• Greater potential for error. Filling positions with people who aren’t skilled or experienced enough to do them can increase overall error rates. That can lead to defective products, poor customer experience and major monetary losses.
• Poor employee morale. One of the Peter Principle’s biggest victims is employee morale. Employees may see people being promoted who can’t really do the job they’re rewarded with, and that can cause negativity in the workforce. In some cases, it’s because another employee (or employees) may feel they’re more qualified and wonder why they didn’t get the position. Even more commonly, someone who steps into a leadership role and can’t perform well in it can negatively impact the job and work environment of everyone else.

4 tips to avoid the Peter Principle in your business

Reduce the chance of negative reactions to your employee promotion announcements by avoiding the Peter Principle and choosing high-qualified people for all your positions. Here are some tips for doing so.

1. Understand the position requirements

Start by truly understanding the requirements of the position you need to fill. If it’s a leadership position, the person you hire should probably have experience encouraging and managing teams. At a minimum, they would need organizational, interpersonal and teamwork skills.

If you’re hiring a senior tech position, on the other hand, you might not need someone who can oversee people. You might be looking for someone who can manage complex technical processes while continuing to make improvements to systems.

Understanding the key skills and experience that would best serve your position starts with creating a solid job description. From that document, come up with a list of requirements for the position. Work to find someone that meets those requirements instead of trying to fit someone into a new position simply because they’ve done well in their existing one.

2. Don’t automatically hire from within

Hiring from within is important. It reduces training and onboarding times and can improve employee morale by ensuring people feel like they have a path to growth within your organization. But you can’t always fill every position from your ranks.

Take time to consider whether someone already on your roster meets the needs of the position—and wants it—before you force an in-house hire that might not work or be the right choice for your business at that time.

3. Assume you need to provide training at every level

Offer proper training at every level of your organization, even if you have to outsource it to industry experts. Don’t assume that because someone excelled in one position that they can move seamlessly into another without guidance or acquiring new skills.

It’s common for organizations to provide onboarding orientation and training for people who come from outside the organization. But many businesses skip this step when they pull from the ranks. They simply have the employee leave one evening with a certain title and show up the next day with a different title, skipping all the work necessary to ensure someone can successfully step into a new position.

4. Encourage employees to be honest about how they’re doing

Finally, create a team culture that supports honest employee communication. Employees who are offered new positions should be able to express their concerns about knowledge, skills and training without fearing the position will be yanked from them simply for expressing those needs or fears.

How do you handle someone who really wants a promotion but isn’t ready?

Be honest but compassionate. Ensure that the employee understands what skills and experience they need to be able to get to the next level and that they understand and feel that you also want them to succeed. Work with the employee to create a long-term plan that helps them grow skills, gain experience and potentially position themselves for a promotion in the future.

Once employees are in a new position, ensure they can seek assistance from leadership and mentors to help them succeed at that level. Support for your team members should exist long after everyone expresses congratulations on the new promotion.