The Peter Principle comes from the 1960’s and is based on research by the Canadian psychologist, Laurence J. Peter. It can be best summarised as ‘every new member in a hierarchical organisation climbs the hierarchy until he/she reaches his/her level of maximum incompetence.’ The Principle has been revisited more recently in 2009.
The study leading to the principle was awarded the ‘IG Nobel prize’ because of it’s suggestion that, if true, organisations would be better off promoting employees randomly rather than promoting people until they reach their level of incompetence.
The researchers’ rationale appears to be based on two points.
There is some truth in the second assertion: successful performance does not mean the same person will succeed in a managerial position (e.g. managing a team). This is partly attributable to the fact that there are a range of different skills required of managers than that of operators. The corollary to this is that new leaders are given training, coaching to support them in their new role. But if skills were appropriate answer, why did the Titanic sink?
Success is not, of itself, a predictor of performance either. Take for example, the well-known movie by Orson Wells, …….. This movie was repeatedly rejected by the movie makers. It was only the skill of Orson Wells that resulted in the film being made. The n the critics panned the movie and yet the movie went on to win many nominations. This helps to illustrate how past performance is not a reliable indicator of success (albeit on different measures).
Strictly speaking the questions for organisations are how can you predict performance and how can you select for performance. On these occupational psychologists have argued for years; biology, social factors, education? Therefore, despite everything, today we are still unsure how to predict and select new leader will perform in the role.
From a common sense perspective you can argue that the importance and impact of great leaders and managers should not be underplayed, often summarised in the maxim ‘employees don’t leave organisations, they leave managers.’
Another factor to consider is that rigorous assessment and selection procedures (for promotion) based on the skills and abilities required in the future role offer a range of benefits including motivation, aspiration and confidence.
The Peter Principle suggests that random promotion would be at least as reliable as the technological means used today. But random promotion would also undermine perceptions of fairness and credibility which can be argued to contribute to self-esteem and overall good morale.
At a different level imagine a publicly quoted company going to the stock market and declaring “today we have appointed our first new Finance Director, he is a first year student at XYZ university.”
What impact would that have on their share value or more importantly, why would it impact the value?
If you would like to read more, click on this link (opens a .pdf document from a third pary).