Peter Principle

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For the sitcom, see The Peter Principle.

The Peter Principle is a colloquial principle of hierarchiology, stated as "In a hierarchy every employee tends to rise to his level of incompetence." Formulated by Dr. Laurence J. Peter in his 1968 book of the same name, the Peter Principle pertains to the level of competence of the human resources in a hierarchical organization. The principle explains the upward, downward, and lateral movement of personnel within a hierarchically organized system of ranks.

On a personal level, the practical application of the Peter Principle is that it allows assessment of the potential of any given employee for a promotion to a higher rank on the basis of job performance in his or her current position. It states that members of a hierarchical organization are eventually promoted to their highest level of competence, after which further promotion raises them to a level at which they may become incompetent. Such a level is called the employee's "level of incompetence", at which the employee has a dismal or no chance at all of being promoted any further, thus achieving the ceiling of his or her career growth within a given organization.

The employee's incompetence is not necessarily exposed as a result of the higher-ranking position being "more difficult" — it may be simply that the position is different from the position in which the employee previously excelled, and thus requires different skills, which the employee may not possess. An example used by Peter involves a factory worker whose excellence at his work results in him being promoted into a management position, in which the skills that got him promoted in the first place are no longer of any use.

One way that organizations attempt to avoid this effect is to refrain from promoting a person until that person already shows the skills or habits necessary to succeed at the next higher position. Thus, a person is not promoted to manage others if he or she does not already display management abilities. The corollary of this is that employees who are dedicated to their current jobs will not be promoted for their efforts, but might get a pay raise instead.

One complication is that competent employees will often pretend to be incompetent. The simplest reasons for this might be to avoid the jealousy of coworkers and/or to annoy managers. A more complex reason would be to avoid being promoted to a management position (Peter referred to this as "Creative Incompetence"). (This is especially common in industries such as big box retail chains where managers' base pay is rather low, and where they are "exempt" employees who are not entitled to overtime pay. It may often happen for cultural reasons, such as a strong identity with the working class leading to someone to wish to stay in a working class job rather than "selling out" or the disdain some highly-skilled workers have for management decisions leading them to avoid management roles) Companies which practice performance improvement techniques often find that employees will deliberately leave room for improvement by starting out at less than peak effectiveness and only ramp up to full productivity later. Employees will also deliberately underperform in order to keep quotas and other expectations from being set too high.

A second complication that entry level jobs that are detail oriented and restrictive "favor" detail oriented individuals, while hindering creative and innovative individuals (by both definition and necessity, "entry level jobs" tend to be the jobs that fulfill the "assembly line" role of an organization, and thus the most creative and innovative employees start at a "position of incompetence"). The detail oriented individuals are thus promoted over the creative employees. Often these creative employees are incapable of showing their strengths due to the structured and restrictive environments, and are tagged as "bad employees". The reality is that these creative employees are more suited to the management positions, but because they are unable to utilize their strengths in the positions they hold, they never make it to management, and the innate flexibility and innovation needed for management is often lost. The end result for an organization as a whole is that the organization is prone to collapse when the number of incompetents among its ranks reaches a critical number, resulting in the inability of the organization to perform its functions.

Peter himself suggested that a way of addressing the problem is by means of class, or caste (social stratification). Let us say that we declare an essentially random selection of people to be of the "boilermaker" caste. In that group, there will certainly be one or two persons who will be excellent boilermakers. Thanks to the lack of social mobility they will reach the top of the boilermaker caste and never be promoted out of it, and so the society in question will always have the services of a few very decent boilermakers — although not necessarily the very best possible. Thus, while social stratification seems dysfunctional, it is actually very functional indeed. In a similar vein, some organisations recognise that technical people may be poor managers, and so provide career paths whereby a good technical person may eventually make as much money as a good manager — a reversal of the notion that a manager must always make more money than their subordinates.

Although written in a lighthearted manner, Peter's book contains many real-world examples and thought-provoking explanations of human behavior. Similar observations on incompetence can be found in the Dilbert cartoon series (such as The Dilbert Principle).

In 1981 Avalon Hill made a board game on the topic titled "The Peter Principle Game." [1]

[edit] See also

[edit] References

Dr. Laurence J. Peter; Raymond Hull (1969). The Peter Principle: why things always go wrong. New York: William Morrow & Company, Inc., 179 pages.
Dr. Laurence J. Peter; Raymond Hull (1970). The Peter Principle. Pan Books. ISBN 0-330-02519-8.
Lazear, E. (2001). The Peter Principle: Promotions and Declining Productivity. Working Paper 8094. NBER.