Peter Principle: Promotions Actually Suck, Here's Why

People in a hierarchy rise to a level of incompetence. They are promoted based on success in previous jobs until they reach a level at which they are no longer competent. This is because skills in one job do not necessarily translate to another. If the person is found competent in the new role, they are promoted again, all the way until they suck. Where they are incompetent, the individual does not qualify for another promotion, and so they remain stuck at this final placement. The Peter principle is also reinforced by the fact that people work hard to get a promotion, and then slack off once they achieve it.

The author surmised that an employee’s ability to fulfill the requirements of the new position aren’t due to general incompetence, but because the position requires different skills. You can be a competent assembly man but maybe you don’t have the capacity to manage others along the line. Once the promotion is issued, you are stuck there. This is because you neither qualify for the next post nor is there sufficient reason to fire you. So your productivity isn’t there, you aren’t aligned with your role, all while the employer pays you more. Think of the fresh manager who isn’t suited to their role. They cannot give effective direction to their subordinates. This results in high rates of error. The problems trickle down on other employees. The manager is, of course, aware of these issues, and their self-esteem drops. Overall, not a great mix.

In 2018, economists Alan Benson, Danielle Li, and Kelly Shue did a study on this. They analyzed sales workers’ performance and promotion practices among 214 businesses. They found that companies promoted employees to management positions based on their sales performance. Whether they had managerial potential didn’t come to their heads. Consistent with the Peter principle, the high-performing sales personnel weren’t great managers. This meant the business suffered considerable financial losses, the leadership was poor, and who knows how many other opportunity-cost-based losses each business incurred. Great software developers aren’t always effective leaders. Employees who consistently meet sales targets are not necessarily ready to be regional sales managers.

Real-world examples of the Peter principle:

• Corporate World: a highly successful salesperson is promoted to a managerial position. Their individual performance was excellent. Though they struggle with leadership duties: team coordination, resolving conflict, and strategic planning. The team’s performance declines. The manager is ill-equipped to handle the new responsibilities.

• Tech Sector: a brilliant engineer is moved into a managerial role within a tech company. The transition results in less innovation and slower projects. Turns out the person is a tech geek who lacks interpersonal skills needed to support and motivate a team. Who could have thought?

• Educational Institutions: a teacher with excellent classroom performance is moved to an administrative role. The teacher has pedagogical skills, not those that translate into effective school administration. This results in inefficient management and lower overall school performance.

• Public Administration: a public servant is promoted to leadership in government. The rationale is their technical expertise in a previous position. If their skills in policy crafting do not extend to managing large teams or complex bureaucracy, public services suffer.

How you might use the Peter principle as a mental model: (1) wait before promoting — prior to promoting someone, evaluate whether the skills that made them successful in their current role are relevant in the new position; (2) develop parallel paths — provide options for advancement that allow technical professionals to progress without necessarily becoming managers, such as a dual career ladder, one for leadership, and one for expert roles, so people stay within their domain of expertise; (3) give them the tools — equip employees with skills needed for higher-level roles before promotion, paying for their mentorship programs, leadership training, and cross-functional projects to prep them for their new challenges; (4) smooth the journey — introduce interim roles for employees to warm their seats and see how well they fit the new role.