Back in 1969, a guy called Laurence Peter made a shrewd observation and published a book on it – The Peter Principle.
If you are someone’s boss, you probably know this. You can skip ahead to the part where I discuss how to counter the Peter Principle.
I’m certain everyone has a friend who complains about how everyone sucks at their job and how incompetent they are.
What if I tell you that your friend is not exaggerating. There really is a reason why you feel your colleagues/co-workers suck at work and don’t deserve their position & pay.
Don’t worry, not every employee is incompetent. I’m not saying YOU are incompetent.
Table of Contents
So what is the Peter Principle?
L. Peter observed that people who excel at work are promoted, and a series of these promotions bring them to a point where they are incompetent. With every promotion, you are closer to newer and more complex job needs. This incrementally makes you worse at your job to the point of incompetency.
This is when your juniors and freshers will think – you suck, how the hell were you promoted?
The Peter Principle: In a Hierarchy Every Employee Tends to Rise to His Level of Incompetence.
Another way to interpret the Peter principle is that employees start performing worse after a promotion. There is a disparity between a job’s skill requirement and your actual skill set. The requirement is higher.
What Peter observed was quite intuitive. It made sense to employees and bosses all over the world making his book a best seller. His book SOLD over A MILLION COPIES and was a best-seller in the US for 33 weeks.
Here is the book. You can click the link to buy it.
The Peter Principle: Why things always go wrong
Is this observation profound? What does the research say?
Mechanisms Behind The Peter Principle
Researchers at the University of Minnesota and Yale University analyzed data from 214 firms and found that promotion decisions are based on an employee’s current performance level. However, the current/latest performance level does not correctly predict performance after a promotion.
Many promotions involve moving away from a technical job profile and adapting to a managerial job profile. Management requires managerial skills – such as accountability, problem-solving in team conflicts, decision making after technical counsel, etc. Technical jobs don’t always involve these skills. There is incongruence between one’s current and future job profiles if this happens.
It makes sense that managerial skills predict manger-level performance. And yet, companies spend resources to award promotions based on the wrong predictor – current job performance.
Edward P. Lazear took a different approach to understand the Peter principle. He says that the incompetence is not a mistake committed by an employer/employee. It is a statistical artifact. Let us see how. He argues that regression to the mean is at play. What does that mean?
Regression to the mean is a statistical phenomenon where one variable tends to be closer to the expected average if it was measured to be extreme. Say you are playing a game on your phone. You make a score of 1000 which is really high. The next time you play, your score is likely to be close to the mean. If you’ve scored very poorly in an exam, you are just statistically likely to score better if you retake it.
Variables which are measured to be extreme in quantity (high or low) tend to move toward the average on the next measurement.
Why is this so important for understanding promotions and work-place incompetence?
Say employee X has been outperforming everyone for a good 3 months and his sales were incredible. He might earn a promotion. Every sales rep wants to be that guy right? This guy is likely to suck at sales right after a quick promotion. Why? His performance will regress toward the mean. He will be average in his next sales round. Promotion or no promotion, he would still regress toward the mean.
This is also why movie sequels tend to worse than the first one or music albums have a few hits and a few average ones. It is unlikely that every song written by an artist turns out to be a hit. Not every movie in a movie series turns out to be amazing (Sharknado 1 to 6 is a clear exception). One could expect 1 out of a few thousand artists to produce a significant number of hits. It is statistically expected.
So regression to the mean explains the peter principle in a way that makes the principle an artifact.
Let us look at a related question. Is the training offered after a promotion effective? The training is often designed to reduce the disparity between the current performance level and newer job demands.
- A case study on a big telecommunication company in Uganda shows that training has effectively improved employee performance.
- A review of existing literature on training on employee performance shows that training is effective.
- Even in the Indian Banking Sector, training is seen to positively impact work performance.
I could list all the studies I can find, but the general consensus is that training is helpful.
So why the incompetence after promotion? Is it that people only feel that their colleagues & seniors suck at their job?
The above- average effect. Or the superiority bias. Or the leniency error. Or the Wobegon effect.
All of these terms point to one thing: People judge themselves to be better than the average across all facets of life & self – memory, skills, social standing, work, entitlement, etc.
This superiority illusion is why the majority of drivers think they are better than average. But you know… Only 50% of all drivers can be better than average. Not 90%, Not 80%, Not 60%. Just 50. That is a statistical fact. It is by definition that exactly half the people will be below average and exactly half the people will be above average.
Let us review what the research says:
- Companies promote employees based on their current performance even though that does not predict good performance in the next job profile.
- Training modules to improve productivity are mostly useful.
- Regression to the mean shows that one would tend to have average performance if the previous performance was exceptionally high. Consistency in high performance is rare, statistically rare.
- People feel they are better than others when they are usually not. Their self-evaluation is inflated, and that is a feeling, not a fact.
Everybody doesn’t suck. Nor do you. Not always. Research shows that this is an artifact of the nature of performance over time and the promotional system. We tend to be at our own average.
The 4 arguments I’ve highlighted make a case that the Peter principle is True & False at the same time.
At the feeling level, it might be true. At an objective level where we say the employees are incompetent, it might not be true. After all, when training is implemented, they improve. Suppose you do face a serious PP issue (Peter Principle, what were you thinking?). What do you do then? Do you try to figure out why everybody sucks at their job or do you try to understand and counter this artifact?
8 ways to overcome the Peter principle and counter the feeling of incompetence
Let us look at how we can overcome the Peter principle now. We will no longer focus on why everyone sucks.
These are my recommendations:
1. Training in the company should focus on global training as well as a here & now training where employees learn to be more competent on the job. Not in a separate ‘lecture series’ once a year that may or may not have lasting effects. This also ensures that there fewer periods or relative incompetency between 2 training sessions.
2. Employees & employers learn to evaluate work objectively and give proper feedback based on performance. This will enable accurate reality-checks. No judgment, no opinion, just fact-driven feedback.
3. Decisions to promote can be based on assessing future skill needs rather than make predictions on existing skills.
4. The transition to a promotion can be smoothened by offering training before a promotion, a trial period, and incremental advancement in task demands.
5. If promotions require skill pivots such as technical coding to managing coders and promotions are due, a pay raise with the same profile will help. Then, refer to point 4.
6. Each level of an organizational hierarchy can have multiple sections. Within each section, there are job profiles and responsibilities that are higher than the next up in the hierarchy. This would help with observational learning & familiarity with what the future entails.
7. Competition is good, but cooperation w/ a hint of competition is better. When people work together cooperatively, they tend to identify with a unit of people. This tendency can moderately promote the idea of shared contribution. This will help counter the above-average effect in the workplace.
8. Look at what an employee needs. Some need well being, job satisfaction at the level of involvement (mutual respect & engagement). People want to be valued in the workplace. Promotions don’t always guarantee happiness in the workplace. Employers need to explore what satisfies their employees before using promotions to make them happy. If you are interested in looking at the numbers, here you go. In summary, the correlations between job satisfaction & previous promotions, and small increases in wages are really low. Significant, but low.
I recommend a book called The Science of Story. I’ve drawn these tips after reading that book. It’s a pretty solid book on brand development & the purpose of a workforce. It’s a light read. Quite useful if you are running a start-up.
I’ll conclude by saying that the Peter principle is conditionally true but and subjective in nature. It’s more about human perception than an accurate representation of reality.
You might find this interesting:
Is listening to music at work a good idea?