The Peter Principle

Promotions & the Peter Principle: how to find the sweet spot where employees succeed

How do you choose which employees to promote? If you’re like most managers, your answer is straightforward: You move up the workers who perform their duties most competently. Unfortunately, relying on strong performance as your only criterion for promotion may cause your organization to suffer from the Peter Principle. This principle was identified over four decades ago by Dr. Laurence J. Peter and Raymond Hull. They observed that as workers were steadily moved upward in a hierarchy, they eventually reached a position where their competence could no longer warrant further promotion. As a manager, it’s crucial that you understand and guard against the Peter Principle operating in your organization. Here are some insights to help you build an effective promotion strategy and make sure each employee is positioned at the level of his or her greatest strength.

Maintain a fluid organizational structure

Steve Jobs encouraged innovation at Apple by moving workers around from one project to another, taking advantage of individual skills and combating stagnation. Likewise, Zappos fueled its vigorous profit margin by eliminating the classic management hierarchy in favor of a model made up of team “circles.” By sidestepping the traditional hierarchies, these successful companies enable workers to display a wider range of abilities. People skilled at a particular function receive pay raises rather than promotions, thus rewarding them while maintaining them where they excel. Individuals with leadership skills are able to put their talents to use in an organic way, emerging over time as natural leaders.

Identify the unique skills each position requires

Each successive level of responsibility doesn’t necessarily require more the same skills as the previous position. Proctor and Gamble chairman A.G. Lafley observes in Harvard Business Review that promotions can be a “jump shift,” especially at the executive level. Humana Board Member William J. McDonald adds, “I think one of the biggest mistakes boards make is to assess people only in the context of their current jobs.” If you clarify the precise skill set of the new position, you can objectively decide which candidate is best equipped for the job.

Test out and nurture leadership ability

There is no magic formula for recognizing intrinsic leadership talent among the ranks of your employees. But if you make a practice of giving everyone occasional responsibilities outside of their usual duties, you can discover unexpected abilities. Switching up the standard task allotment has the additional benefit of breaking up boredom and increasing worker motivation. Management development expert Jeanette Suflita advises, “Provide your potential leaders with temporary leadership opportunities. It’s an excellent way for them to try out their skills and to identify both strengths and areas for improvement.” Those with standout management talent can be offered mentoring, coaching and formal leadership development training so that they’ll be ready when a new position becomes available.

Understanding the Peter Principle is essential for the health of your business, because an incompetent manager will drive your best employees to look for more satisfying positions. A recent Gallup study found that 50 percent of employees who left their jobs cited bad managers as their primary reason. If you promote your natural leaders to management roles, and leave the talented line workers in place to apply their unique competence, you can build a robust, productive organization.

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