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The Peter Principle and the limits of our current understanding of organizational incompetence

November 2017
Conference: 2100 Projects Association Joint Conferences - Business Sustainability VII, Virtual and Networked Organizations Emergent Technologies and
Tools VI · At: Pavoa de Varzim, Portugalia
Authors:

Valentina Mihaela Ghinea Ramona Cantaragiu Mihai Ghinea

Bucharest Academy of Economic Studies Bucharest Academy of Economic Studies Polytechnic University of Bucharest

Why
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Abstract

This article discusses the implications of the Peter Principle, as it re ects the intriguing
reality of the most organizational systems. Deliberately or not, the latter frequently Discover the world's research
encourage individuals to climb to their level of incompetence ending up in a situation in
20+ million
which most job positions are occupied by employees incapable of carrying out their duties,
members
and leaving the few remaining ones to actually accomplish organizational goals. The
article contains a comprehensive analysis of previous research and, based on these 135+ million
ndings, develops several research directions which would bring to light new insights for publications
the effectiveness of organizations and their HR strategies. 700k+ research
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The Peter Principle and the limits

Ghinea Valentina Mihaela
The Bucharest University of our current understanding
Economic Studies
UNESCO for Business Administration
organizational incompetence
010731, Bucharest
Romania Advertise

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valentina_ghinea@yahoo.com
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Cantaragiu Ramona Abstract
This article discusses the implications of the Peter Principle, as it reflect
The Bucharest University of
intriguing reality of the most organizational systems. Deliberately or not
Economic Studies latter frequently encourage individuals to climb to their level of incompet
UNESCO for Business Administration ending up in a situation in which most job positions are occupie
010731, Bucharest employees incapable of carrying out their duties, and leaving the
Romania remaining ones to actually accomplish organizational goals. The a
contains a comprehensive analysis of previous research and, based on
ramona_cantaragiu@yahoo.com findings, develops several research directions which would bring to light
insights for the effectiveness of organizations and their HR strategies.
Ghinea Mihalache Keywords
University Politehnica of Bucharest Peter Principle; performance evaluation; promotion; incompetence; organizat
culture
Machines and Manufacturing
Systems
060042, Bucharest
Romania 1. Introduction
ghinea2003@yahoo.com
Incompetence defies the barriers of time or place. People come acro
during their entire lives, and feel its effects every day, in various fo
and with a tremendous impact on their activity, career and pers
development. In organizations, incompetent people occupying deci
making positions are even more harmful. Given the direct connec
between the success or failure of an organization and the caliber o
employees, without the right person in the right place, organizat
cannot sustainably progress and prosper. In other words, decisions a
placing people are critical because they determine the performance o
entire organization (Drucker, 1998). If, by any mistake, a conside
number of employees eventually reach their level of incompetence,
remain to be effective and productive (Peter and Hull, 1969). How
even in this scenario, a company may survive due to the sufficient g
decisions made by the right people who will compensate the mistake
lack of action of the incompetent ones.
This solution is only suitable in the short run, whereas in the long r
will negatively affect the welfare of the company. The explanation res
in the employees’ operational conditioning. Employees tend to imp
their own activity when they see others being rewarded . Yet, w
rewards go to non-performance, flattery or mere cleverness, P
Principle is going to emerge and the organization risks developi
culture of incompetence (Drucker, 1998). In this case, incompetent pe
prevail, and the competent ones will eventually leave hindering
company’s growth.
Now part of the business world lexicon, Peter Principle is oftentimes
to ridicule those aspiring for promotions out of the job that they
(over)qualified for until they reach the one exceeding their leve
competence, or those who have been on the executive seats for a

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2 Proceedings of 2100 Projects Association Joint Conferences 5 (2016) X-X Wh

time (Peter and Hull, 1969; Faria, 2000). Since it refers to the rampant incompetence found everywhere,
only in business, Peter Principle continues to fascinate both scholars and practitioners. As any organiza
could end up at a certain point with incompetent leaders and losing its best individual performers, the is
raised by the Peter Principle remain just as true nowadays as in 1969, when the theory was concei
Exploring the issues that lead to the manifestation of the Peter Principle in organizations is useful for crea
strategies to avoid them and warning system to detect them, thus leading to improved HR practices.
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2. Description of the Peter Principle
Promotions are essential for a hierarchical organization, as they play both as incentive and enhance
organization efficiency and performance by assigning employees to the jobs that best suit their abi
(Milgrom and Roberts, 1992). Theoretically, firms initially place individuals in jobs where they can do
harm, and those who prove able are then promoted to positions that require a higher level of ability.
approach is the core of the tournament model (Lazear and Rosen, 1981), which explains the positive effect
promotion and an associated increase of wage has on employees. The employee is generally motivated to e
effort and take actions beneficial for the organization. However, this conventional view is increasingly ca
into question, as it has been observed that promotions, if not wisely managed, could also have a nega
impact as well.

2.1. Defining Peter Principle

In 1969, Peter and Hull advanced an apparently paradoxical principle summarized as follows: “Every
member in a hierarchical organization climbs the hierarchy until he reaches his level of incompetence” (P
and Hull, 1969, p. 34). It is generally agreed that, in a hierarchy, promotion is strongly connected to the w
competently done. However, the Peter Principle highlights serious flaws in the classical promotion theory,
it even contradicts the conventional view that it acts as a major source of incentives.
The theory sustains that, sooner or later, employees will be promoted to a position for which they will b
longer competent, as the competence necessary for the new level could be uncorrelated to that require
the previous one. Thus, employees fall into (un)conscious incompetence or even deliberate incompet
(requiring supplementary payment for seriously working). The upward process eventually stops, and there
downward process since bureaucracy makes it very difficult to demote an employee, even if that person w
much better fit in a lower job. It is not surprising then that most of the higher levels end up being filled by i
people simply promoted because they were good at different tasks before promotion. Moreover,
phenomenon is not limited in scope, since it could happen to any employee at any level in the hierarchy,
business, industry, trade-unions, politics, government, armed forces, religion, or education (Peter and
1969). Nevertheless, it should be made clear that the Peter Principle is not a law (Schaap and Ogulinck, 20
but only a generalized principle, explaining a general tendency. The basic idea is that a new job requir
different set of skills in which the employee did not previously excel and which he usually does not possess.

2.2. Dealing with Peter Principle

There are various processes and characteristics of organization which help the Peter Principle emerge. Ou
these, we only mention a few of them, namely hierarchical exfoliation, paternal in-step, and the political na
of organizations. If the first one describes how organizations rid themselves of both the least and the m
competent employees (as all of them are objectionable), the second one brings into discussion how a fa
member is suddenly promoted several steps above his level of competence (Peter and Hull, 1969). Moreo
politics usually interferes with the reward and promotion organizational practices and thus real competen
neglected and the pay-back promotions achieved (Beeman, 1981).
Dealing with Peter Principle is difficult because there are employees who never realize that, one wa
another, they have reached their level of incompetence. They are “perpetually busy”, “never lose t
expectation of further promotion”, and “remain happy and healthy” while joking instead of seriously analy
things. Fundamentally, this could be seen as an act of substitution in which the employee replaces real w
with other tasks that he is able to carry out. In extreme cases, an employee reaching his level of incompete
can no longer do any useful work. He is overly stressed, mentally disturbed and frequently sick. Final placem
syndrome is a term describing this situation, and displays a variety of behavioral and psychological c

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Proceedings of 2100 Projects Association Join Conferences 5 (2016) X-X

pointing it out (Peter and Hull, 1969): a) fonofilia (need to use several means of communication to keep c
contact with colleagues and subordinates); b) papyrophobia or papiromania (having a clean desk to give
impression of efficiency or keeping the desk full to give the impression of too much work); c) clasofilia (m
for the classification of work documents of fear of not losing them); d) tabag gigantism (obsession with ha
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thePDF
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e) tabulophobia (excluding
full-text f) rigor work citation
Download desks
from the office); f) self-pity (based on prev
Copypreoccupation
link
experiences of competence); cartis (abnormal
and inflexible for elabora
organizational charts, graphs and diagrams); g) unpredictability (as a defensive attitude to hide incompete
and irrational prejudices related to employees’ appearance; h) Coupp syndrome (hiding the inability to m
decisions behind a democratic decision making process); and i) structurophilia (excessive preoccupation
building instead of for the work that should be done).
Considering the cascade effect that the manifestation of Peter Principle could trigger within an organizat
some techniques were thought of for dealing with employees who have reached their level of incompete
Percussive sublimation is a pseudo-promotion technique used to hide the flaws in the organization’s promo
policy. It consists of promoting an incompetent employee to a higher position where he has no
responsibility in order to enable a more competent employee to step into the previous position . This supp
staff morale and maintains the hierarchy. Reversely, firing the incompetent person might result in him getti
job with a competitor where, despite his incompetence, his knowledge could be dangerous. Another pse
promotion is lateral arabesque which refers to giving the incompetent employee the impression
promotion through a more impressive title and then moving his office outside the principal working a
without an actual increase in rank or in pay (Peter and Hull, 1969).

3. Previous studies on Peter Principle

There are scholars who agree with the validity of Peter Principle, and there are also others contesting it.
former are keen on finding explanations that support their point of view and examples confirming it, whe
the latter look for evidence proving that nothing abnormal is happening. In between these extremes, there
others not focused on the frequency of occurrence or the degree of accuracy of the Peter Principle, but ra
on finding methods to avoid and/or alleviate incompetence within organizations.
a. Organizational hiring and promotion practices within organizations foster incompetence

The way in which employee competence is judged by superiors depends on the level of competence of
latter (Peter and Hull, 1969). If these superiors are still at a level of competence, they will eval
subordinates in terms of the performance of useful work. If the contrary, they will probably rate subordinat
terms of institutional values (i.e. supporting rules, rituals, and forms of the status quo). Bernhardt (1995)
Faria (2000) argued that even if promotion is based on the good performance of one task, the skills require
a new one may be quite different. This can lead to the appearance of the Peter Principle as Kane (1970) fo
that it is unlikely for an employee who has been promoted to perform as well as on his former position, s
he has new tasks and responsibilities, and much of his experience is of little help. Moreover, once arrived
position for which he is no longer competent, the employee is unlikely to be demoted because the employ
aware of the need to pay a bonus to retain a demoted worker (Bernhardt, 1995). Aside, Acosta (2010) sho
that the opportunity for future promotion is strongly negatively related to the frequency of prior promot
and that incumbent employees are disadvantaged in comparison to externals.

In 2007, Baleanu highlighted the existence of certain groups within the organization that compete for lim
resources and constantly bargain for the fulfillment of their group’s desired goal. By utilizing the push and
method advocated by Peter and Hull (1969), employees are able to meet the goals of their group, w
attempting to fulfill the overall objectives of the organization. The end result is that a worker is promote
levels where his decision making more strongly serves the group, than the larger organizational objectives,
thus the employee appears incompetent. Moreover, Fairburn and Malcomson (2000) showed that motiva
an individual to perform well in a certain position by promising a promotion might result in a transfe
another position for which the person is not suited, and that employees can sway performance evaluat
with bribes (collude with their supervisors to extract higher wages with no additional effort), which m
promotions based on evaluations biased. On the other hand, by making workers’ earnings contingent on t
job, and managers’ pay contingent on the firm’s profits, managers’ interests become closely related to thos

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4 Proceedings of 2100 Projects Association Joint Conferences 5 (2016) X-X

the owners. Therefore, even in cases of organizations reputed for honest behavior, Peter Principle may ha

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3/23/2021 (PDF) The Peter Principle and the limits of our current understanding of organizational incompetence
sound basis unless incentives for promotion are not tied directly to managers’ incentive programs.
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b. Incompetence is only a temporary/relative state or the result of psychological stress
Patz (1975) researched on the idea that employees have a beginning ability potential, an upper limit (ceil
and that their ability develops at a rate proportional to the difference between the ability ceiling and
current level. Besides, the ability ceiling itself rises at a rate proportional to the rate of change in ability
that, given the cyclical nature of ability development, it is possible to simply wait until an employee begin
reassert a level of ability matching the demands upon him. A different approach had Hess (1976). He rel
incompetence to a certain level of anxiety and depression arising from childhood conditioning which tea
individuals that their success is the defeat of others. As a result, when placed into higher roles , emplo
shutdown, become ineffective, and consequently, they are considered incompetent. Later on, Lazear (2
argued that decline in an employee’s ability after promotion is actually the natural outcome of a statis
process. It displays regression to the mean and therefore Peter Principle is a necessary consequence of
promotion rule, as the expected ability of those promoted is naturally lower after promotion than before.
c1. To avoid incompetence, training methodologies should be used
Cummings (1971) and Rimler (1971) stated that proper training and employee development programs are
answer for creating strong and robust organizations. In their opinion, if managers embrace robust lear
initiatives, the Peter Principle can be nullified. Moreover, it was emphasized that the performance re
process has to be designed for the purpose of self-development with provisions for guiding, counseling
training and all managers have to be taught to motivate, lead and control the activities of their subordin
(Anderson, Dubinsky and Mehta, 1999). Cann and Cang emi had approached, also in 1971, the idea that, in
short run, each employee has a unique competence plateau that could be increased through education
practice.
c2. To avoid incompetence, organizational design of conventional hierarchies needs to be reconsidered
Shull and Mosely (1970) argued that conventional structures and bureaucratic controls no longer keep
with technological advances required by firms. They asserted that modern employees must participate an
involved in the management process, and they pleaded for on-going organizational relations
Consequently, as the nature of the organizational structure partially determines the style of supervis
evaluation and promotion, and implicitly the type of leadership, the former needs to be changed in the s
vein. Tracy (1972) concluded that vertical organizational structures are the root of all evil. He also argued t
in order to survive, a dominant hierarchy must create and maintain a “parahierarchy” composed of mem
of a subordinate class to whom the Peter Principle does not apply.
c3. To avoid incompetence, more effective promotion criteria have to be identified
In an article on the promotion of engineers to management, Gately (1996) found that technical ability
often the number one factor for promotion. Although the study pointed out author’s concern that tech
engineering ability is not a strong indicator of management success, it was asserted that Peter Principle ca
avoided, as long as promotion is based on technical merit and accomplishment. Later on, Buchman (2010)
Pluchino, Rapisarda and Garofalo (2010) explored alternative promotion tactics and concluded
randomization is the most effective strategy, despite the possible poor morale and alienated workers result
After all, it appears that not much has truly changed in the many years since Laurence J. Peter formulated
principle. The literature review performed in this paper is a strong evidence of the fact that the Peter Princ
is still thriving and can still be found in most of the organizations.

4. Envisioned studies on Peter Principle

Considering what has been written until now on the manifestation of Peter Principle in organization, we
highlighted a number of areas for future research which would, on the one hand, help solving the dilem
regarding its existence, and, on the other hand, help improve HR promotion strategies.
A. Psychological aspects of Peter Principle

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First
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in a situation of incompete
after being promoted merits further investigation. Several psychological characteristics such as the need
achievement, Machiavellianism, self-awareness etc. could have an effect on the likelihood of accep
positions for which the person is not entirely qualified. Moreover, there could be some psychopathic t
which make certain individuals desire to be constantly promoted and there could be certain fields of activi
which the desire for career climbing is higher than others. From a different perspective, the psycholo
effects that the Peter Principle has on those who realize they are in a position of incompetence also dese
further attention, especially in regards to the ways in which these affect the possibility to learn and incr
capabilities as argued by Patz (1975). Lastly, the application of Peter Principle to cases of delibe
incompetence is also interesting. These employees perform their work duties at a level of incompetence
does not warrant them being fired and require extra pay for doing serious work. In this case, they rarely m
mistakes and they might actually get promoted.
B. Difficulties related to the establishment of criteria used for promotion
Firstly, given the fact that nowadays there is a focus on team work, we need to investigate the means
effective evaluation of the employee proposed for promotion. These would need to distinguish between w
group competencies and those exhibited by the individual employee. Secondly, there is a need to analyze
influence of “favorable circumstances” or “pure luck” and the actual competences and, following Dickinson
Villeval (2012), shed light on the manifestation of Peter Principle in empirical settings by considering selec
bias and the measurement of “luck”. Thirdly, further research is necessary on how the new employee-empl
compact (the agreement between companies and employees in terms of commitment and responsibili
affects the manifestation of the Peter Principle. Hoffman, Casnocha and Yeh (2013) argue that the cur
labor market is no longer based on the idea of advancing up the ladder in single company and that employ
nowadays tend to seek promotion opportunities outside their current places of employment. Acosta (2
studied the difference in promotion opportunities for incumbent versus external hires, but there is still m
work to be done to establish how these briefer periods of employment affect the probability of a ce
organization to fall in the Peter Principle trap. Lastly, if an employee does not perform well on a lower
position due to various reasons (poor recruitment, unavailable higher positions) should he still be prom
and how well does the Peter Principle apply to this type of situation. Is a new corollary necessary?
C. Establishing the conditions for the Peter Principle in an organization
Firstly, it is necessary to establish how long the accommodation period on a new position should be in orde
accurately declare that the employee is incompetent, something which Lazear (2004) discusses in his st
Secondly, research should enlighten how likely a company is to promote a less competent person instead
more competent one and even push the latter to resign. This is in regards to hierarchical exfoliation: su
competent employees often get stuck in their ranks or get dismissed in order to preserve the hierarchy.
persons on top of the hierarchy, wishing to remain in power, choose associates that are not competent eno
to remove them from power. Thus, is there any association between the organizational culture or fiel
activity and the above-mentioned approached? Thirdly, how can Peter Principle be triggered by paterna
step when a family member is promoted several steps above his level of incompetence and what are
consequences of this situation for organizational morale (e.g., considerable ill feeling towards the
appointee might arise) and for the individual (e.g., the negative effects of Peter Principle mentioned by P
and Hull (1969)). Finally, researchers should also look at the way in which Peter’s inversion manifest
organizations. This happens when employees have little or no capacity for independent judgment, always o
and never decide. These are the kind of workers who show obsessive concern with executing job requirem
correctly, permitting no deviations from the established routine. To a person who follows the professi
automaton, paperwork is more important than the purpose for which it was originally designed, in o
words, means are more important than ends. Unfortunately, the automaton appears to be competent from
hierarchy’s point of view and could be considered for promotion and end up in a position where he no long
capable of making decisions. It is at that point that he reaches his level of incompetence. These people
often managed by incompetent managers who care more about sycophancy and courtesy towards bosses,
one’s internal efficiency.

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5. Conclusions
There is nothing about being a great surgeon or educator that actually prepares them to manage a hospit
an educational institution. In the same vein, the skills necessary for running a successful political camp
have little to do with those required for governing a county or a country. Unconsciously or unconcerned
possible consequences, many organizations promote good performers based on their up to that p
achievements, irrespective of their relevancy for the future acquired position. Thus, they often end up
incompetent decision-makers and lose their super-competent employees. On the other hand, painfully fun
that most of the employees that validate the Peter Principle do not realize that reaching such a position in
hierarchy has detrimental effects for both themselves and the organization. It works similar to a paradox
more motivated are employees to work hard for proving their competence, the faster is their climb on
hierarchical ladder, and the sooner most of the higher level managerial positions risks to be filled with too p
holder of managerial skills.
However, understanding the triggering factors for this paradoxical situation, the favorable conditions for
emerge and flourish, as well as its possible consequences would help fighting against it, or, at least, witti
make decision. This is what the present article pleads for.

References
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Baleanu, V. (2007) The economic basis in organizational behavior – behavioral theory of the firm, Annals of the Univers
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Emil Papazov · Lyudmila Mihaylova · Valentina Mihaela Ghinea · [...] · Ismail Bilgi

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International Conference on Economic Sciences and Business Administration www.icesba.eu

Rocsana Bucea-Manea-Tonis · Manuela Epure · Luminita Pistol · [...] · Shahrazad Hadad

Bringing together academics and practitioners from various countries and cultural environments around the world, all sharing common
research interests in the main topic of the conference. Contribut ... [more]

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INTERGENERATIONAL GAP

Valentina Mihaela Ghinea

Multi-generational business is nowadays a reality. It challenges and alters communication inside and outside the organization,
seniority and employees engagement, in a word, the traditional way of ... [more]

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https://www.researchgate.net/publication/328879953_The_Peter_Principle_and_the_limits_of_our_current_understanding_of_organizational_incomp… 9/11
3/23/2021 (PDF) The Peter Principle and the limits of our current understanding of organizational incompetence

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The Peter Principle and the Limits of our Current Understanding of Organizational Incompetence

October 2019 · Quality - Access to Success

Valentina Mihaela Ghinea · Ramona Cantaragiu · Mihai Ghinea

This article discusses the implications of the Peter Principle, as it re ects the intriguing reality of the most organizational systems.
Deliberately or not, the latter frequently encourage individuals to climb to their level of incompetence ending up in a situation in which
most job positions are occupied by employees incapable of carrying out their duties, and leaving the few remaining ones to ... [Show
full abstract]

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Article

New development: A new principle—the higher the position, the broader the view

September 2019 · Public Money & Management

Pan Suk Kim

The Peter Principle, introduced over 50 years ago, refers to an organizational phenomenon where employees in a hierarchy are
promoted to positions for which they are not well quali ed (Peter & Hull, 1969). It has been a topic of debate and empirical research in
organizational theory and management literature ever since. This article does not seek to prove or disprove the Peter Principle. Rather,
... [Show full abstract]

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Peter, L.J./Hull, R. (1969): The Peter Principle: Why Things Always Go Wrong (Rezension)
April 2015

Alexandra Mergener · Philipp Sischka

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Article Full-text available

Model of Organizational Culture Dynamics – Works on Increasing Con dence

March 2021 · Quality - Access to Success

Valentina Mihaela Ghinea · Mihai Ghinea · Ramona Cantaragiu

The originality of the paper lies in the treatment of organizational culture as a dynamic system whose current state and evolution is
dictated by a web of in uences resulting not only from various organizational aspects (e.g., organizational constitution, adoption of
IT&C, motivation etc.), but, most importantly, from the speci c type of leadership adopted by key decision-making actors. The ... [Show
full abstract]

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Last Updated: 23 Sep 2020 Wh

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3/23/2021 (PDF) The Peter Principle and the limits of our current understanding of organizational incompetence
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