What's the Peter Principle?

Understanding the Peter Principle

The Peter Principle was laid out by Canadian educational scholar and
sociologist, Dr. Laurence J. Peter, in his 1968 book titled "The Peter Principle."
Dr. Peter also stated in his book that an employee's inability to fulfill the
requirements of a given position that he is promoted to may not be the result of
general incompetence on the part of the employee as much as it is due to the
fact that the position simply requires different skills than those the employee
actually possesses.

For example, an employee who is very good at following rules or company

policies may be promoted into the position of creating rules or policies, despite
the fact that being a good rule follower does not mean that an individual is well-
suited to be a good rule creator.

Dr. Peter summed up the Peter Principle with a twist on the old adage that "the
cream rises to the top" by stating that "the cream rises until it sours." In other
words, excellent employee performance is inevitably promoted to the point where
the employee's performance is no longer excellent, or even satisfactory.

According to the Peter Principle, competence is rewarded with

the promotion because competence, in the form of employee output, is
noticeable, and thus usually recognized. However, once an employee reaches a
position in which they are incompetent, they are no longer evaluated based on
their output but instead are evaluated on input factors, such as arriving at work
on time and having a good attitude.

Dr. Peter further argued that employees tend to remain in positions for which
they are incompetent because mere incompetence is rarely sufficient to cause
the employee to be fired from the position. Ordinarily, only extreme
incompetence causes dismissal.

 The Peter Principle is an observation that the tendency in most

organizational hierarchies, such as that of a corporation, is for every
employee to rise in the hierarchy through promotion until they reach a level
of respective incompetence.
 According to the Peter Principle, every position in a given hierarchy will
eventually be filled by employees who are incompetent to fulfill the job
duties of their respective positions.
 A possible solution to the problem posed by the Peter Principle is for
companies to provide adequate skill training for employees receiving a
 promotion, and to ensure the training is appropriate for the position to
which they have been promoted.
Overcoming the Peter Principle
A possible solution to the problem posed by the Peter Principle is for companies
to provide adequate skill training for employees receiving a promotion, and to
ensure the training is appropriate for the position to which they have been
promoted.

However, Dr. Peter pessimistically predicted that even good employee training is
ultimately unable to overcome the general tendency of organizations to promote
employees to positions of incompetence, which he refers to as positions of "final
placement." Promoting people at random has been another proposal, but one
that does not always sit well with employees.

Evidence for the Peter Principle

The Peter Principle sounds intuitive once the idea is understood, and models can
be built that predict the phenomenon. Still, it is difficult to get real-world evidence
for its widespread occurrence.

In 2018, economists Alan Benson, Danielle Li, and Kelly Shue analyzed sales
workers' performance and promotion practices at 214 American businesses to
test the Peter principle. They found that companies did indeed tend to promote
employees to management positions based on their performance in their
previous position, rather than based on managerial potential. Consistent with the
Peter principle, the researchers found that high performing sales employees
were likelier to be promoted and that they were likelier to perform poorly as
managers, leading to considerable costs to the businesses.