However, If firms promoted workers on the basis of managerial potential rather than current performance, employees may have fewer incentives to work as hard.
MORE IDEAS FROM The Peter Principle Tested | Alex Tabarrok
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.
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).
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.
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 a mistake in choosing the right person but will not want to admit it. As a result, the position will be maintained but will either end up unfilled due to voluntary resignation or imminent dismissal of the person.
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 seriously.
People are promoted to a job they are incapable of doing, based on their previous performance. This makes most employees rise to their level of incompetence.
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 which they are incompetent, so they remain stuck in that position.
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