Why do some good employees make bad Managers and even worse Leaders? Where does our system fail and who should be held accountable?
Over the past two decades, I have participated in countless promotion discussions and witnessed how a simple performance review process often determines the future of employees hoping to climb the corporate ladder and get into leadership positions. I have developed various frameworks for assessing performance which I use along with the managers to decide on ratings, rewards, promotions etc. However, I realized that we often failed to recognize one critical factor – the Peter Principle. What is the Peter Principle, and why do we tend to overlook it?
The Peter Principle, coined by Canadian educator Laurence J. Peter and elaborated in his 1969 book The Peter Principle (co-authored with Raymond Hull), asserts that “In a hierarchy, every employee tends to rise to his level of incompetence” i.e employees are promoted based on their success in previous roles until they reach a position where they are no longer competent. The concept may be amusing, but the reality is far from it for those who are unfortunate enough to experience it.
So here’s how it works: Often skilled employees are gradually promoted into managerial positions as part of their career progression. The decision to promote is usually based on their past job performance, rather than their competence for the intended promotion which could also involve managing and leading teams. This new role requires a different skill set, and if the employee possesses these new skills, the promotion is justified. However, if he lacks the necessary skills, the individual may struggle and underperform in the new role. In such a case he would become incompetent in the new position or, at best, less effective than expected. Unable to meet the demands of the new role, such individuals hit a plateau, which is known as Peter’s Plateau, and are unlikely to receive further promotions. In this process competent individual contributors are often transformed into ineffective Managers or Team Leads, as organizations ignore the fact that competence in individual roles does not guarantee effectiveness in managerial positions.
So, why do we fall prey to the Peter Principle? Who is to blame—employers or employees? I would argue both share responsibility. There are several reasons why this happens:
- Most companies strongly believe in promoting from within
- Organizations often use promotions to retain talented employees
- Seniority alone becomes the deciding factor in taking promotion related decisions
- When planning their careers, employees typically see promotion as the most obvious path forward
- Sometimes, employees are offered fancy titles to compensate for smaller salary increases
- In many countries, titles carry significant weight and prestige
- Managing a team is often perceived as more prestigious than excelling in an individual contributor role
What many organizations fail to realize is that promotions, when used as a tool to retain employees or attract candidates, can often result in a decline in the company’s overall growth. When a high performer is promoted into a role for which they lack the necessary skills, the organization loses a valuable contributor and ends up with underperforming teams, led by an ineffective manager.
So, how can organizations avoid falling into this trap? Here are several steps they can take:
- Raise the standards for promotion criteria to counter the effects of the Peter Principle.
- Ensure that job descriptions (JDs) are detailed, outlining not only the technical skills required but also the necessary soft skills.
- Accept the hard truth: if a high performer insists on a promotion but is not yet ready for it, the organization may have to let him go.
- Every manager should have a clear career development plan for their high performers, starting training early to prepare them for the next role.
- Implement a strong recruitment process that assesses candidates not only for their current role but also for potential future roles.
- Hire externally, when necessary, rather than promoting an internal candidate who is only partially prepared for a higher role.
- Look for ways to enrich roles and responsibilities without resorting to promotions.
- Ensure that a new promotee is provided adequate support and constant feedback in the new role to reduce chances of failure.
Lastly, employees themselves also play a critical role in assessing their own capabilities. It may sometimes be difficult to evaluate skills objectively, because people normally believe they are more prepared or more able than they actually are. Here seeking feedback from colleagues, friends and mentors can provide valuable inputs. Coaches can also help uncover one’s true potential. It’s important to remember that chasing a flashy title at the cost of being unprepared can set one up for failure. In such a case, it’s better to decline a promotion than underperform in the new role.
While the strategies outlined above may be effective in avoiding the Peter Principle, how practical are they to implement? Given the way organizations typically operate, not all of these measures may be feasible all the time. However, even if we can implement just a few of them, we could significantly reduce the creation of incompetent employees, adversely affecting the organization’s growth. In that sense, the effort is worthwhile.
Some organizations have adopted a detailed framework for promotions and are able to avoid falling into the trap of the Peter Principle. However, it remains a widely encountered concept, often with limited awareness.