Nearly half a century ago the Canadian educator Laurence Peter described what became known as the ‘Peter Principle’.
This suggested that managers “rise to their level of incompetence” because they are promoted on the basis of performance in their current role, even if that is not likely to translate to success in the next one.
Although it is an accepted adage, the Peter Principle was never empirically tested on a large scale – until a 2016 study examined whether firms really do pass over their best potential managers in favour of employees with superior technical skills (Benson et al., 2016).
The researchers examined performance data for 53,035 sales reps and managers at 214 companies in a variety of industries – sales is an ideal field for testing the phenomenon, because performance is easily measured.
The study found:
- That success as a rep was indeed predictive of promotion:
- Each increase in sales rank (equal to a doubling of sales) raised a rep’s chances of becoming a manager by about 15%.
- Sales performance was negatively associated with managerial success:
- Each increase in sales rank correlated with a 7.5% decline in the performance of each of the new manager’s subordinates.
The study also showed that reps who frequently split commissions with colleagues – meaning they worked collaboratively to close deals – made better managers than “lone wolves.”
“Using microdata on the performance of sales workers at 214 firms, we find evidence consistent with the Peter Principle: when making promotion decisions, firms prioritize current job performance at the expense of other observable characteristics that better predict managerial performance.” (Benson et al., 2016, p.1).
However, the Benson and colleagues state that these findings do not necessarily mean that a company’s policies are misguided. They point out that firms may heavily weight current job performance in promotion decisions to encourage workers to exert effort in their current job roles and to maintain norms of fairness.
“The best worker is not always the best candidate for manager.” (Benson et al., 2016, p.1).
Still, leaders should evaluate the costs of moving their best individual contributors into management positions and consider rewarding top performers with pay rather than promotions.
They might also contemplate the use of dual career tracks – one for people with outstanding technical skills, the
other for those with strong leadership potential.
Reference
Benson, A., Li, D. & Shue, K. (2016) Promotions and the Peter Principle. Available from World Wide Web: https://pdfs.semanticscholar.org/a2ee/72253f99e98f828abd5949af70fe8da1aa38.pdf. [Accessed: 13 June, 2019].
