Peter Principle Explained: How to Overcome the Peter Principle

The Peter Principle states that when an employee works in an organization that has a hierarchy, they will use that position and its status to get promoted to a higher level with different skills at their next or current job. If this process continues, further promotion will ultimately elevate that worker to a level at which they are no longer competent. The new role requires vastly different skills from their previous job, and they cannot climb any higher in the organization.

With enough time—during which the employee reaches successively higher levels— gaps in knowledge become more apparent. You may consider a once-good employee an incompetent employee.

When those in management positions are looking to hire someone into a new role, they might consider this theory of decline in terms of an employee’s knowledge and skills. This concept could also be relevant to promotion decisions for current employees or even a company’s overall promotion practices.

The concept of the Peter Principle originally came from the bestseller The Peter Principle by Dr. Laurence J. Peter and Raymond Hull. Reportedly, the book intended to satirize the business world, but instead people interpreted it to be true.

In 2019, Alan Benson, Danielle Li, and Kelly Shue published their paper “Promotions and the Peter Principle” in The Quarterly Journal of Economics. In it, the economists discussed the theory of hierarchiology (the study of hierarchies) and cited evidence for the Peter Principle being real. They went on to say that the Peter Principle costs companies money, and there are incompetent managers in organizational hierarchies as a result.

The Peter Principle states that an employee—be it an individual contributor or a manager—sees a decrease in their level of competence the higher they climb in the corporate hierarchy. If you are in a leadership role at your company, here are tips for overcoming the Peter Principle:

1. 1. Assess the skills of job candidates carefully. When you’re considering someone for a new position, it’s important that their skills closely align with the requirements of the role. You might find it worthwhile to ask yourself if their talents better fit a different position—one in which they would have more opportunity for promotion within their expertise (or within areas they are at least motivated to develop). A candidate’s willingness to embrace an alternative final placement might surprise y9u.
2. 2. Develop a mentorship program. If an employee’s development progress has stagnated or you identify them as having reached the level of their incompetence, consider having good leaders and effective managers within the company mentor them. Receiving assistance from a qualified mentor can better prepare an employee.
3. 3. Invest in quality training for your employees. If an employee is happy in their current job but wants to become a good manager, training could help them bridge knowledge gaps. When lower-level employees look to move up to a new level, specialized training can make a difference in terms of success.

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