Written by: Dimitris Papadimitriou
Original LinkedIn Post

The Peter Principle: The Illusion that Everyone is Fit to be a Manager, Leader or Co-founder.

As a company grows and expands, it is often common practice to promote top-performing employees to management roles. However, this practice may not always result in success.

Many individual performers believe that they have the potential at all times to become successful leaders by taking on increased responsibilities. Could this fact be an illusion? If so, why and what are the behaviors they typically develop?

Many companies promote a successful individual performer to manager (or co-founder perhaps if it is a startup). But is success always a given? Is it a given and unquestionable for example that an accountant can become an effective Chief Financial Officer or a graphic designer an effective and fast strategic Marketing Director or founder in a startup?

This article is not just about my thoughts. Like any article that can be of value, it is based on scientific background and documented reporting so that awareness of any topic is carried out with validity. It is with the same attention and approach that we carry out all of our learning journeys at Business Pathways, based on solid scientific background.

In this piece you will get acquainted with the famous Peter Principle that might provide some clarity on the important topic of promotions to managerial positions, first-time-managers success and the significance of evaluating your criteria when choosing a co-founder.

Discover The Peter Principle: simple yet of high importance

The answer to all the above stated questions is provided by the "Peter Principle". This concept was originally formulated by Dr Laurence Peter and Raymond Hull in 1969.

This principle explains that an employee is promoted to a higher level based on the criterion of this decision on the basis of their success in previous positions, until they eventually reach a level where they are no longer competent as the skills in this position are different from those in previous positions.

In other words, a person who is currently competent in their job today will possibly take up a higher position tomorrow, which nevertheless requires different skills, attitudes and behaviors. If that person does not have the skills required for the new role, they will be incompetent and unproductive, and often a burden to the company, in that position.

In short, in any hierarchy, each employee as he or she rises, tends to approach the level of incompetence. According to Raymont Hull, when people reach this level, they are not aware of their situation as they have adopted a strong illusion about their contribution and their supposed abilities. The key is to understand this in time and take action.

Scientific research has also supported the idea of the Peter Principle that promoting employees without considering their competence in the new role can have negative effects. A study published in the Harvard Business Review found that when a top performer was promoted either within the same team or a new one, there was a 7.5% decline in the performance of each of this manager’s subordinates. (A. Benson, D. Li, K. Shue, HBR, 2018).

The underlying consequences: Promoting employees using false criteria

Employees that rise to a higher hierarchy position becoming first-time-managers without necessarily having developed the skills and attitudes needed, may create significant issues in the team and the company.

The most common according to R.Hull are:

• Significantly delaying their deliverables

• The quality of their work is low resulting in others being involved as well, until the final deliverable is achieved

• Creating false expectations for their partners and clients

• Taking on excessive responsibilities which they never complete

• Not recognising the necessity of the organizational structure and hierarchy as they feel threatened by more competitive colleagues

• Their partners struggle to give them feedback, failing to do so most of the times

• Believing that they contribute much more than they actually do and are usually driven to behave in ways that are incomprehensible to the team until they finally give up with severe symptoms of frustration

• As a significant problem is now created by their presence, their attitude, decisions and interpretation of reality, they are influenced by the illusion of a 'hypothetical' success and simultaneously a sense of injustice. This sense of injustice and at the same time of success leads to the disregard of basic principles such as gratitude, teamwork, honesty, cooperation, transparency, etc.

Avoid the pitfalls described by The Peter Principle: 4 Practical Actions

1. Job Titles and Descriptions
   Organizations must pay attention to job titles. Positions must be directly and clearly linked to job descriptions, responsibilities, duties and required skills otherwise they are considered mere titles of courtesy and may "inflate" minds and create illusions.
   
   Giving titles with increased social influence may motivate employees who may lack enthusiasm or work for lower salaries than they may want. On the other hand it promotes the speed of emergence of The Peter Principle with geometric progression.
2. Benefits System
   Many positions deserve to be rewarded not with promotion but with other practical rewards. For instance, salespeople are not immediately promoted to sales managers but receive sales bonuses for high performance.
3. Team Culture
   Cultivating a growth mindset culture (at the time The Peter Principle was formulated, this concept had not yet been formulated) in which employees become aware of areas for improvement and invest in them.
4. Downgrading as a Tool
   The decriminalization of “downgrading" if it is done with the best interests of the employee or the company in mind, instead of the eventual forced dismissal with "honors" - provided that the employee cannot or does not want to grow further and develop the necessary skills for a managerial position.

The bottom line

In conclusion, the Peter Principle highlights the importance of understanding the potential consequences of promoting individuals without considering their competence in the new role. By taking steps to avoid the pitfalls, companies can help ensure the success of their first-time-managers and the overall success of their team and organization.

If you consider that an employee has reached the upper limit of their ability in the current role (this, as Peter says is something inevitable), there are two main options: to keep them in that same position and explain why, or to develop them and assist in acquiring the necessary skills providing training opportunities.

The latter requires that employees realize and accept that they have reached the limit of their abilities, and this is usually the most difficult part in these situations.

Gain further insight into skill enhancement and provide your employees with an advantage in their new management roles by exploring our training programs for First-Time-Managers at Business Pathways.