“The Peter Principle” was first introduced by Lawrence Peter in a book titled “The Peter Principle”. This book describes the downfalls of bureaucratic organizations. The book states that in a hierarchically structured business, people tend to be promoted up to their level of incompetence.
This principle is based on the fact that in bureaucratic organizations new employees usually start in the lower ranks, but when they prove to be competent in the job that they were assigned, they get promoted to a higher-ranking job. This process of climbing the ladder can go on indefinitely, until the employee reaches a position where they are no longer competent. This is the moment the process stops, since the basic established rules in bureaucracies make it very difficult to demote someone to a lower rank, even if that person would be much better fitted and more happy in that lower position. The result is that most of the higher level positions will be filled with incompetent people, who get there because they were good at doing a different and usually easier task then the one that they are expected to do.
This is a very disturbing concept since we all tend to rise to our own level of incompetence. This concept is most likely and usually is ignored by most senior managers since to admit it is to admit that they too may also be at their own level of incompetence.
The end result is that non-growing companies are most likely to have incompetent people at many levels in the organizational structure. Where growing companies add new positions and employees fast enough that the results of the “Peter Principle”, which seems to be inevitable, are delayed as long as there is continuing growth.
It may be asked, how does a company stay alive? What is seen is the work being done by people that have not reached their level of incompetence. This is why organizations can still function while the Peter Principle causes employees to take one to many promotions. Dr. Peter’s conclusion is that “In time, every post tends to be occupied by an employee who is incompetent to carry out its duties.”
In organizations that see some one as being incompetent will move that person up or laterally to make room for a competent person. The new employee would not be at his level of incompetence and would be able to do the job as it is meant to be. Is this the right thing to do? I believe it is not, I believe that mentorship would stop the “Peter Principle”. Also more training in the new position could have positive effects. As is stated in Dr. Peter’s book hiring a new employee that can do the job would increase total output of the organization. This statement may be true but what about all the dead horses that are lying around. Would it not be morally and financially better to utilize the resources that already exist. Providing training and mentors seems to be an area that needs to be looked at also demotion (as a last resort), as hard as that may seem.
Dr. Peter points out that employees do not want to be incompetent, but they are offered promotions that put them into their level of incompetence. It is most unlikely that the employee knows that this would happen ahead of time. After all if the offer is made it is because management knows that the employee can do the job competently. Many managers are at their own level of incompetence this is why they make these poor decisions.