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The Peter Principle Tested | Alex Tabarrok

The Evidence for the Peter Principle

The Evidence for the Peter Principle

A study looked at promotions and performance of some 40,000 sales workers across 131 firms.

It showed that the best salespeople as measured by sales revenue are more likely to be promoted (top figure) but their value added as managers actually declines in their sales revenues (bottom figure).

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IDEA EXTRACTED FROM:

The Peter Principle Tested | Alex Tabarrok

The Peter Principle Tested | Alex Tabarrok

https://fee.org/articles/the-peter-principle-tested/

fee.org

4

Key Ideas

The Peter Principle

It refers to an observation wherein people who perform well in their job gets promoted until eventually, they will reach a stage where they are incompetent for that job.

The "Purpose" of Promoting Workers

  • To assign the suitable person to the managerial role.
  • To motivate workers excel in their current roles.

However, If firms promoted workers on the basis of managerial potential rather than current performance, employees may have fewer incentives to work as hard.

Motivate Workers without Promoting Them

Workers can be rewarded through incentive pays without the need of promoting them. Firms will be able to promote a more competent worker suitable for the managerial role that could entail larger teams.

There are also leading companies who used split career ladders allowing their worker to advance as individual contributors. This practice recognize workers for succeeding in one area without transferring them to another.

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SIMILAR ARTICLES & IDEAS:

The Peter Principle and Occupational Incompetence
The Peter Principle and Occupational Incompetence

Peter J. Lawrence, whose 1969 bestseller “The Peter Principle” satirically provided many insights on the hows and the whys of incompetents working among us, is now being taken more serious...

Different Competencies

The skills that made a great performer excel, the aggression and the drive, did not translate well when the same performer was in charge of a team, where other skills like people management come into play.

The best teacher of the school cannot be simply promoted as a school principal.

Hiring The Right Person

A manager wouldn’t be able to handle a team of specialists (like Doctors or Scientists) efficiently, without any direct experience. This makes excelling at the current role a huge requirement for anyone being hired as a manager.

A fine balance between the two aspects is required while hiring, with one option being to change the hierarchy of the company itself. The person can be promoted without a typical career ladder, and continue to do his current role, which he is doing well.

one more idea

Promotion of Position = Demotion of Value
Promotion of Position = Demotion of Value

When a person is promoted, they usually turn to different responsibilities and roles which requires completely different skills and insights.

Later on, the company will notice that they made ...

Experience is not everything
Experience is a good thing, but this does not automatically make an employee the best person to be promoted to a more responsible job.

Before promoting an employee, the company should know the employee's level of knowledge, skills and ambitions. They should know if that person really deserves that spot. 

The Peter Principle

Also known as The Peter principle of Incompetence, it claims that people who do their job well are promoted to positions of greater responsibility, and so on, until they reach a position in whic...

Dilbert Principle

The Dilbert Principle refers to the idea that incompetent employees are being promoted to prevent them from causing harm, since higher level positions don't need to be involved in the production of the company, while people that perform well are retained to production jobs, to keep the company going forward.

The Dilbert Principle is just a variation of the Peter Principle and critics think that this principle is only valuable for amusement. 

Dilbert

Is a famous comic strip created by  Scott Adams that shows a humorous look in office life, but also manifests lessons on behavioral economics.

In a series of cartoons published throughout the 1990s, he coined the term the Dilbert Principle. The concept was so successful that in 1996 the book “The Dilbert Principle” was created, which became very successful and it ended up selling over a million copies.