What is the Peter Principle?

Definition: The Peter Principle is an organizational structure hypothesis that states that each individual will be promoted in a given institution until they reach a position they are incompetent to perform. It portraits the idea that promotions are based in performance and people will get promoted until they start performing poorly.

What Does Peter Principle Mean?

This principle was first brought up by Dr. Lawrence Peter in his book The Peter Principle, published in 1969. It draws the reader attention to the fact that many people get promotions based on past work performance and they climb the corporate ladder taking positions that may not be suited for their skill set, since the only factor considered sometimes is performance, not suitability.

In such scenarios, promotions stop at the moment the individual starts to under-perform and that means everyone in the corporate ladder is condemned to be placed in jobs they are incompetent at. The logic behind this principle lies in the fact that many employers are basing career-path decisions in performance evaluations rather than competence assessments, to properly allocate personnel. There are two practical solutions that might reduce the Peter’s principle; the first one is to train individuals properly before they take a new job position and second one, to assess the skills of each person and find out if they actually suit the position that they are being promoted to.

Example

Marcus is currently a Plant Manager at White Woods Co. a company that manufactures furniture made of wood. He started working for the company as a Plant Operator, sawing wood logs. After a few months, since Marcus was outperforming his peers, he was promoted to Production Line Supervisor. Marcus didn’t had proper management training but since he substituted other operators when they didn’t show up to work, he was viewed by his bosses as a very effective manager.

Finally, he was promoted to be Plant Manager, still having no knowledge or training about management whatsoever. After a while the plant experienced problems with maintenances and staff complains about Marcus being unresponsive. He is the perfect example of the Peter Principle. Marcus was promoted because of excellent past performance but he was placed in a position that he was not prepared to fulfill, therefore he reached the level of his incompetency.