Peter Principle In A Nutshell

The Peter Principle was first described by Canadian sociologist Lawrence J. Peter in his 1969 book The Peter Principle. The Peter Principle states that people are continually promoted within an organization until they reach their level of incompetence.

Understanding the Peter Principle

Peter argued that in organizations with hierarchical structures, employees were likely to be promoted until they were one rung above their level of competence. Given enough time, every position within an organization would then be filled with incompetent staff.

While the book was originally written as satire, subsequent research into the Peter Principle discovered some degree of truth. 

In the next section, we will discuss some possible causes of position incompetency.

Factors that encourage the Peter Principle

A lack of future skills planning

In 2018, a study of over 200 American businesses found that employees tended to be promoted to managerial positions based on their performance in their previous position. They did not, as a matter of course, consider their managerial potential. 

The study also found that sales employees were more likely to be promoted for management positions based on sales ability alone.

Promotion culture

Many job seekers are attracted to businesses that have a promotion-centric culture. They may have no interest in the nature or scope of the work itself.

As a result, these businesses are more likely to hire unqualified staff who are only motivated by money or status.

How businesses can avoid the Peter Principle

There are some relatively simple ways of avoiding the deleterious effects of the Peter Principle.

These include:

  1. Incorporating a demotion policy. Demoting an employee without the requisite experience is the most obvious solution. But it must be done sensitively and not be equated with failure on the employee’s part. Instead, the individual who authorized the original promotion should accept fault.
  2. Substituting a promotion for better pay. Most employees are thrilled when promoted because of the associated financial benefits. However, a company can still reward excellent work in a role without attaching the reward to a promotion.
  3. Employing self-aware individuals. During the recruitment stage, prospective employees should only be hired if they understand the extent of their capabilities. When a promotion is eventually offered, the employee realizes that the higher workload and broader skillset of the new role are beyond them.
  4. Reassigning employees to another role in a different department. Peter called this process “lateral arabesque”, where incompetent staff are unaware that they’ve been fired from a role they were originally promoted to.

Key takeaways

  • The Peter Principle argues that staff within an organization are promoted until they become incompetent. Given enough time, every position is occupied by someone ill-equipped to carry out their duties.
  • The Peter Principle was originally written as a satirical piece about manager incompetence in hierarchically structured organizations. However, subsequent research has found that the effect has some merit.
  • Businesses can avoid the negative effects of the Peter Principle by incorporating a demotion policy that does not lay blame on the employee receiving the promotion. Screening potential employees for high self-awareness is another excellent strategy.

Related Case Studies

As highlighted by German psychologist Gerd Gigerenzer in the paper “Heuristic Decision Making,” the term heuristic is of Greek origin, meaning “serving to find out or discover.” More precisely, a heuristic is a fast and accurate way to make decisions in the real world, which is driven by uncertainty.
The recognition heuristic is a psychological model of judgment and decision making. It is part of a suite of simple and economical heuristics proposed by psychologists Daniel Goldstein and Gerd Gigerenzer. The recognition heuristic argues that inferences are made about an object based on whether it is recognized or not.
The representativeness heuristic was first described by psychologists Daniel Kahneman and Amos Tversky. The representativeness heuristic judges the probability of an event according to the degree to which that event resembles a broader class. When queried, most will choose the first option because the description of John matches the stereotype we may hold for an archaeologist.
The take-the-best heuristic is a decision-making shortcut that helps an individual choose between several alternatives. The take-the-best (TTB) heuristic decides between two or more alternatives based on a single good attribute, otherwise known as a cue. In the process, less desirable attributes are ignored.
The concept of cognitive biases was introduced and popularized by the work of Amos Tversky and Daniel Kahneman in 1972. Biases are seen as systematic errors and flaws that make humans deviate from the standards of rationality, thus making us inept at making good decisions under uncertainty.
The bundling bias is a cognitive bias in e-commerce where a consumer tends not to use all of the products bought as a group, or bundle. Bundling occurs when individual products or services are sold together as a bundle. Common examples are tickets and experiences. The bundling bias dictates that consumers are less likely to use each item in the bundle. This means that the value of the bundle and indeed the value of each item in the bundle is decreased.
The Barnum Effect is a cognitive bias where individuals believe that generic information – which applies to most people – is specifically tailored for themselves.

Read Next: Heuristics, Biases.

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