The Peter Principle: What Is It and Why It Could Be Harming Your Business

What is the Peter Principle?

The Peter’s Principle is a management idea created by Dr. Laurence J. Peter, a Canadian educational scholar. Laurence J. Peter and Raymond Hull published a book called The Peters Principle in 1969. In the book, they argue that every employee in a hierarchy will eventually reach a level where they become ineffective.

The Peter’s Principle refers to a competent employees and will earn promotion which requires different skills. If the person promoted lacks the required skills for their new higher position, they will struggle to perform effectively. As a result, further promotions will not consider them.

If they perform well in their new job, they will receive promotions. These promotions will continue until they reach a level where they are no longer competent in their job. They are not qualified for promotion and will remain at the same level for the rest of their career. People refer to this as “Final Placement” or “Peter’s Plateau”.

Peter Principle example in the workplace

According to the book, while level of incompetence is a barrier to further promotion decisions, super-incompetence is grounds for dismissal; so too is high performing. How so? It’s all part of protecting the hierarchy. A small number of employees at the top and bottom of the competence scale are represented on a bell curve, and it’s these employees who must be fired.

Peter called it “hierarchical exfoliation”. A very skilled teacher of children with special needs has done an excellent job teaching them. The children have done even better than expected in reading and math. However, the school fired the teacher because he had neglected to devote enough time to bead-stringing and finger-painting.

Peter’s work is satirical. He has a unique take on the saying “the cream rises to the top”. He says “the cream rises until it sours”. The Peter’s Principle showed problems with how employees are promoted and has been discussed since then.

How can the Peter Principle impact businesses?

We often witness the Peter Principle in action when organizations promote people we deem unsuitable. People determine “wrong” based on their views of their behavior, abilities, and relationships with powerful individuals.

The Peter Principle is still applicable today. The assumption of a company’s hierarchy having many levels created it. However, it did not anticipate the reduction in staff following economic setbacks such as the Global Financial Crisis. It didn’t predict the reduction in staff after economic setbacks like the Global Financial Crisis.

The Peter Principle can cause a slew of negative consequences, such as:

• Perform poorly as effective managers, either due to a lack of managerial positions or technical skills
• High turnover rates within affected teams
• Disconnect between good work and rewards
• Low productivity
• Low morale

How to avoid the Peter Principle in your organisation

Thankfully, flatter org structures aren’t the only element keeping the Peter Principle at bay today. The following three strategies can help to prevent the Peter Principle from developing within your organisation.

1. Defined performance management processes.

The Peter Principle states that the employer measures competence, excluding customers or anyone outside the hierarchy. “Competence, like truth, beauty and contact lenses, is in the eye of the beholder,” the book stated.

Fortunately, 360 reviews and regular performance “check-ins” between employee and manager have transformed performance management. Promotion to a position errors are now less common. This is because employees’ performance is better understood. Additionally, organizations have clearer standards for poor, good, and excellent performance.

Performance Management systems addresses pain points and assists with aligning goals, creating development plans, and facilitating 360 reviews. It is designed to support individuals and teams in line with organizational strategies.

2. A commitment to continuous learning

Peter observed that employee training may be insufficient to prevent organizations from promoting employees to management positions beyond their competence. However, this didn’t factor in the scope of learning options available to employees today.

Gone are the days when employees tended to kiss goodbye to professional development once they hit the workforce. Today’s workers want – and expect – a steady stream of learning and development opportunities. The pace of change in business today reinforces that a learned skill has a half-life of just 5 years.

Learning Management Systems (LMS) help people learn at their own pace and give managers a library of courses to choose from. It also provides tools to keep track of employee training needs, course completion rates and compliance requirements.

3. Sophisticated succession management

In the 1960s, organizations based promotions on employees’ length of service, not on their performance or potential. Back then, organizations awarded promotions to demonstrate loyalty appreciation, and they typically considered only one person for top positions. Today, we understand that successful talent management depends on actively planning for succession. This means getting people ready to assume important roles within the organization.

ELMO Succession Management helps businesses reduce risk by building a pool of talented individuals. It also helps managers identify top performers and assess their potential, performance, flight risk, and readiness for new roles. Additionally, it empowers employees to explore their own career paths.

So, smarter HR operations may have thwarted the Peter Principle from taking hold in some areas of the business world. Now, if only we could take a broader perspective… The last part of The Peter Principle applies Peter’s theory to all humanity.

The book asks: Can we endure the long haul, or will technology outpace us and lead to our extinction? It certainly provokes thought and is more relevant today than ever before – but it’s something to investigate another day!