The Peter Principle - A Simple to Understand Business Principle with Profound Effects on Efficiency

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INTRODUCTION

This page is an introduction to 'The Peter Principle', a business principle which is really astonishingly easy to understand, and indeed requires no knowledge of business whatsoever in order to understand it - and yet it is a concept which may have a profound impact on the success of businesses and companies, organisations and institutions the world over.


DR LAURENCE J PETER

Laurence J Peter (1919-1990) was born in Vancouver, Canada. After schooling, he became a teacher by profession, and later served as the coordinator of mental health services for the Vancouver School Board. He began advanced studies in education practice in Canada and the U.S.A which culminated in a doctorate in education awarded by Washington State University in 1963, and in 1966 he became Professor of Education at the University of Southern California.

In 1969, Dr Peter and professional writer Raymond Hull wrote a satirical book about a new business philosophy he had founded, which he described as the 'Science of Hierarchiology' - in other words - how things work in any hierarchical organisation such as a business company. The book was initially rejected by many publishers, but once in print went on to sell eight million copies in 38 languages. Although light-hearted, the book had a serious underlying message, appreciated by many in the business community. So successful was it in fact, that Laurence Peter would soon give up his academic work and devote his remaining years to writing and promoting his theories on human behaviour, and pragmatic solutions to the problems brought about by inherent weaknesses in human social behaviour. The book which Dr Peter published in 1969 was called 'The Peter Principle', and this page explains its most important lesson. It's a lesson which anyone can learn.


AN AGE OLD THEORY

As long ago as 1767, German author Gotthold Ephraim Lessing wrote a comic play 'Minna von Barnhelm' in which a soldier thinks about promotion:

  • 'To become more than a sergeant? I don't consider it. I am a good sergeant; I might easily make a bad captain, and certainly an even worse general. One knows from experience.'

So the idea of people having a niche in which they can work efficiently, but who may then be promoted to a position to which they are not suited, is nothing new. But it was Dr Laurence Peter who formulated it, expanded it and took it to its logical conclusions.

SO WHAT EXACTLY IS 'THE PETER PRINCIPLE' ?

'The Peter Principle' is very easy to understand because it is not really a business concept. It has nothing to do with market forces or stocks and shares or taxation or any such things. Rather, it is a concept based upon human nature and human aspiration, and the way people work together. It just so happens that this particular concept of human behaviour can also have a very significant impact in the business world. And unfortunately it is a negative effect. As expressed in the cartoon above, 'The Peter Principle' simply states that:

  • 'Individuals in a hierarchy who do a good job are promoted to the next level. If they are still competent, they are promoted again to the next higher level. If they are not competent, they are not promoted and they remain at that level. Thus, people stop getting promotions and remain one level above the last level at which they were competent.'

Robert I Sutton, Professor of Management Science and Engineering at Stanford University, explains it well when writing about 'The Peter Principle' in the Bloomberg Businessweek Magazine. He wrote:

  • 'When people do their jobs well, society [or management] can't leave well enough alone. We ask for more and more until we ask too much. Then these individuals are promoted to positions in which they are doomed to fail.'

So what does this mean? How is it that employees end up doing a job which they are incompetent to do? First, we must make a few assumptions about employees and employers.


THE QUOTES OF LAURENCE J PETER

Although an academic, Dr Peter was clearly a man with a sense of humour. 'The Peter Principle' itself, was intended as a humorous book, and Peter was known for his wit. These are a few of his quotes:

'Democracy is a process by which people are free to choose the man who will get the blame'.

'An economist is an expert who will know tomorrow why the things he predicted yesterday didn't happen today'.

'Against logic there is no armor like ignorance'.

'Speak when you are angry - and you'll make the best speech you'll ever regret'.

'Television has changed the American child from an irresistible force into an immovable object'.

'If two wrongs don't make a right, try three.'

'The noblest dog is the hot dog. It feeds the hand that bites it'.

THE BASIS OF THE PETER PRINCIPLE - FUNDAMENTAL ASSUMPTIONS

To understand and accept the logic behind 'The Peter Principle' there are just three basic assumptions about business and employee aspirations which one has to take on board. If you do not accept these fundamental assumptions, then you will not believe in the validity of 'The Peter Principle. However, these assumptions - though generalisations - are, I would suggest, common sense. These then, are the three basics of 'The Peter Principle':

1) THE DESIRE FOR PROMOTION

The great majority of people who work for companies would hope to achieve a number of staged promotions during their working careers. Most people do not like to feel they are in a 'dead-end job'. They like to believe they can get on in life, make more money, rise through the ranks. If they are offered promotion, most people would want to accept it.

2) THE GREATER SKILLS AND RESPONSIBILITIES WHICH COME WITH PROMOTION

Promotion generally brings with it more demanding requirements of the employee. Not necessarily in a physical sense - indeed usually it is the most lowly paid who do the hardest physical work - but in all other regards, promotion places rather greater demands on the employee. As one rises through the ranks perhaps to junior and then senior management level, so one is expected to take more responsibility for one's actions, become much more involved in making decisions, perhaps handle sums of company money which grow with each promotion, develop social skills for talking to colleagues, clients or juniors. The promotion requires of the employee, more abilities in more fields.

3) THE UNCOMMONNESS OF DEMOTION

In business, promotion is quite common. Demotion is quite rare. Getting fired for inefficiency is even rarer. There are notable exceptions - professional footballers may well be demoted to the substitutes bench or to the reserves if their performance on the pitch isn't good enough. Politicians, no less, will soon be voted out of office in a democracy if the public don't think they're up to the job, come election time. And of course in times of financial crisis, any employee may lose his job. But in the great majority of businesses and other organisations, employees don't get fired unless they behave in a reckless, criminal manner, or in a manner totally out of keeping with their terms of employment. Not only do they not get fired, they are not demoted either. Managers don't demote people unless they are grossly incompetent. Simply not being very good, isn't a good enough reason.


Although there are undoubtedly exceptions, I think that in the great majority of cases these three assumptions hold true.


When you reach the top of your own personal ladder - stop climbing!
When you reach the top of your own personal ladder - stop climbing! | Source

THE IMPLICATIONS OF THESE ASSUMPTIONS

What are the implications of these assumptions? What consequences flow from them? Let us consider a typical, average employee in an average company which offers the opportunity to climb the ladder of success.

1) A young man - we'll call him Joe - joins the ABC Company at a junior level. It doesn't matter for the purpose of this exercise what his job is. All that matters is that his job is pretty basic. He is answerable to his immediate boss, he just does what he's told to do, he works 9 to 5, he doesn't have to think. Joe has a brain, and he's enthusiastic, so he can do this job way above and beyond the level that is expected of him. It's a waste of talent. He can handle bigger challenges.

2) After a period of some months, Joe has mastered all the skills necessary for what is effectively a trainee status, and is not feeling stressed in the slightest. Of course he starts to get bored with this job, and ABC don't want to waste a supervisor constantly checking up on him. He doesn't require constant supervision, so he's promoted to a level whereby he can work a little independently whilst still being answerable to others. Even though he now has to act more responsibly and think for himself, the skill levels are still easy to acquire, and he is still more than capable of doing this job really efficiently and well. A creditable employee, and a big asset.

3) Eventually ABC realise they can make use of Joe to help train new employees and lead juniors, so they ask him to take on these new roles. He readily accepts the offer of promotion because it means more money. Joe can still work 9 to 5 most days, though he has to attend a few courses to broaden his skills, including a management course which the company encourage him to take because it will be advantageous for his career prospects. He has to be responsible in dealing with more junior employees, and he has to make some decisions himself. His duties mean that he now has to concentrate more, but there's not too much pressure on him, and he can seek advice when necessary. He copes effectively with this job.

4) After being in the company for a few years, Joe is one of the most experienced workers, and he knows his job well. A Junior Management position now becomes available, and it means quite a bit more money and a chance to stretch himself. He applies for the post, and the Management promote him as a reward for his years of good service. The job is more demanding. He can do it OK, but the skills required are more diverse. He is in charge of his own little team of workers and has to liaise between workers and his manager, and this requires more social skills. He has more responsibilities. Joe can still do this job OK, and Management has no worries about him. But it's challenging, and he's having to work harder to keep on top of things. He's still happy however, because he's earning good money, he is well respected, and he can cope.

  • As Joe matures in the company, the time will come when he wants to move on still further up the ladder. Perhaps he has got married, and needs more money for a growing family. Perhaps he feels despite the demands of his job, he can now do it fine. Perhaps he sees others who have been in the company less time than him rising up the ladder of success and he certainly doesn't want to stagnate or be left behind. He wants to secure his future. A more senior management position becomes available. Joe has excelled at his job in the past, and is still coping without cause for concern, and he has acquired a lot of experience, so ABC is happy to promote him again.

5) Now Joe is in a position which is just a bit too demanding for his abilities. he starts to find it hard to cope with his increased workload. Above all, he has also discovered that there are some skills he just doesn't have. He has to think on his feet. He has to organise his day efficiently. He has to have the tact to deal with disputes, and he has to have the confidence to deal with customers or suppliers. He has to be able to negotiate, and he also needs a head for finance. And he needs to keep abreast of the latest developments in his business. Now Joe has some of these skills, but he lacks others. And they may be skills which cannot simply be learned through experience. In short, there are now aspects of his job which Joe cannot do very well at all. He is under-performing in many tasks. He is now in a job at which he is less than fully competent. (And of course, this may not be the only downside - Joe was excellent in most of his previous jobs, and those jobs will now be taken by juniors who may be less competent or less experienced than Joe was - all round the organisation, competency has been reduced by Joe's promotion).

  • So what happens next? Well, Joe is not a bad man. he's not lazy, he's not deceitful, he's doing his best, and he does his job without causing a major crisis. In these circumstances it would be wrong to sack him, and unless he suffers a stress related crisis and voluntarily seeks a lighter working role with reduced pay, he is unlikely to be demoted. If managers demoted everyone they felt was not doing the job perfectly, the demoted would feel a sense of humiliation, there would be low morale in the company, and there would be conflict with trade unions. Nobody would feel comfortable in their jobs. An atmosphere of disenchantment would result.
  • So the result of all this is that Joe just continues in the level in which he now finds himself, doing a job modestly, and just about competently, but not doing it particularly well or efficiently. He is occupying a role in the company which may be more effectively filled by another person. He has risen through the ranks first doing his job extremely well, and then doing it competently well, until he has reached a level in which he does his job with only a mediocre level of ability. He is no longer a real asset to ABC. He has brought this upon himself with the company's acquiescence, and whereas the company once had an employee who was really good at his job, now the company has an employee who is only mediocre at his job. And that's the way it will remain for the rest of Joe's working life at ABC.


JOE IS NOW A PRIME EXAMPLE OF 'THE PETER PRINCIPLE' IN ACTION.

Some time ago there was a short-lived BBC sitcom called 'The Peter Principle'. Starring Jim Broadbent, it featured a small-time bank manager, who was incompetently struggling to stay on top of his job
Some time ago there was a short-lived BBC sitcom called 'The Peter Principle'. Starring Jim Broadbent, it featured a small-time bank manager, who was incompetently struggling to stay on top of his job | Source

IF YOU WISH TO READ MORE

IS THIS EXAMPLE TYPICAL?

Of course the above example is only a generalisation. Joe is just one employee in the ABC Company in which there is a specific promotion path. In other organisations there may well be different opportunities for advancement, and other employees may well have different skills. Some will be perfectly capable of progressing further than Joe, whilst others will never get beyond the first or second rung on the ladder of success. But I think it is easy to see how this natural progression to a position of reduced competence may occur in almost any organisation.

I do feel the implication in the cartoon at the top of the page that every employee is promoted to a level of incompetence is a bit extreme, firstly because 'incompetence' is too harsh a word ('mediocrity' or 'under-performance' are better), and secondly because many employees for whatever reason do not have these aspirations to advance to the top of the ladder. But it must surely be true that a significant number of employees are indeed promoted to a level at which they are less than well equipped to do their job. They cease to be a real asset to the company.


UNDER-PROMOTION

Although Dr Peter's theory is primarily concerned with people who are over-promoted to positions in which they no longer perform as effectively as they once did, 'The Peter Principle' also explains the opposite effect - how people with potential may be under-promoted. They never get on in life, because they are stuck in a job which doesn't utilise their talents and therefore they can never get the opportunity to demonstrate their potential. An example would be an employee with great creative or interpersonal skills, who may never get a chance to show these off if they are shut away in a back room somewhere doing a technical job with mediocre ability. Because they don't shine in their current job, they don't get a chance to shine in a more senior job.

In both cases - over-performing and under-performing - the basic message is the same; employers and employees need to be aware of all their strengths and weaknesses - not just those which they display on a daily basis.

ARE THERE WAYS TO COUNTER THE PETER PRINCIPLE ?

The Peter Principle is just a natural consequence of very basic human ambition, the natural inclination to believe that one should progress in life from junior to senior positions, and the natural desire to incentivise good work with the reward of promotion. There is nothing morally wrong in any of this. No one is behaving badly - neither the employee nor employer. But if that is so, are there any ways to counteract the effects of human nature which may lead to many people occupying unsuitable positions of employment?

I think there are.

  1. If Joe doesn't get promotion, he might go elsewhere. If ABC really want to keep him in the company as an efficient employee without promoting him to levels at which he becomes much less efficient, one possibility is to reward him in other ways. Doing a job really well could be rewarded with higher pay rates or with longer holidays, or other perks. That way Joe gets the satisfaction of an improved lifestyle whilst still doing a job in which he really benefits the organisation.
  2. When promotion is offered, it should be offered to employees on the basis of merit, rather than experience. Just because Joe has been in the job longer than another employee whom we'll call Fred, it doesn't follow that he should be promoted ahead of Fred. Yet that is what often happens in business. Promotion should not go to those who do the job at their current level really well - it should go to those who show the potential to do the job at the next level really well.
  3. An active policy of training for a higher position within the organisation can help the employee to prepare for his new role, and may help identify any problems he has. But of course, some of the 'inabilities' of which I have spoken, cannot be solved by any amount of training, because they may relate to an employee's character or personality. Some difficulties such as the ability or inability to work well under extreme pressure, may not become apparent until the employee takes up his new post.
  4. A possibility is to have a period of 'acting up' - a period of perhaps six months in which the employee's competence to do the higher status job is tested. This may allow the management (or the employee) to discover their weaknesses in advance of a permanent promotion. As the acting up period has no guarantee of permanence, but is essentially a 'learning period', there is less humiliation if the employee subsequently resumes his previous role. It's not a demotion - all that has happened is that he has been given a chance to test himself and gain experience.
  5. Another possibility is to enable some flexibility in the allocation of duties. Promotion usually brings with it a package of new skills and responsibilities. Creative skills, marketing skills, organisational skills, negotiating skills, technical skills. As we have seen in the example of Joe, an employee may have some of these skills, but not all. If it is possible (not always the case) for the job to be tailored to the abilities of the employee, then so much the better.
  6. Not all new jobs have to involve a move up the ladder of success; they can involve a lateral move. This suggestion is quite similar to (5), but instead of tailoring the job to the employee, it may be possible to tailor the employee to a different job. If Joe finds his new job too taxing, there may be several posts of similar responsibility and seniority which require slightly different skill sets. This is particularly likely to be so in a large organisation, where a wide range of jobs each with their own individual skill sets may exist. The promoted employee who is not comfortable in one post, may be able to find a suitable position of equal status in which he is comfortable, competent, and a real asset to the company. The square peg will have found a square hole to fit into - far better than the round hole his boss had first tried to fit him into.


Oh dear - another fine mess ... !
Oh dear - another fine mess ... ! | Source

CONCLUSIONS

So this is 'The Peter Principle'. The book that Dr Laurence Peter wrote, of course, covers the whole subject of employment structure and promotion in a hierarchical organisation in much more depth than I can here. I am no business expert (anybody who knows anything about me could tell you that !!) but the moment I first heard about this theory, the thinking behind it immediately struck me as pure common sense. And it has struck many experts in business in the same way, to the extent that the theory has become an important component in many business studies courses.

The principle explains how people may struggle in their careers, doing jobs for which they are not really suited. They may struggle on, possibly hiding behind a smokescreen of delegating jobs they should be doing themselves, blaming others for mistakes they should have foreseen, or finding excuses for tasks left undone. They may also go through their working life unhappy - feeling quite stressed and overburdened, and yet unwilling for obvious reasons to seek a job with lesser pay. In these scenarios, employees suffer, but also the organisation suffers, as too many are not pulling their weight, are not feeling motivated, or are struggling in tasks which are not their forte.

And yet, there are usually ways around the problem if job description flexibility, promotion flexibility, and an understanding of each individual and his/her own personal needs and abilities is achieved. It is in the interest of both employees and managers that this is done because any organisation of any description, can only benefit if everybody is doing a job in which they are happy, and to which they are ideally suited.


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I WOULD LOVE TO HEAR YOUR COMMENTS. THANKS, ALUN 10 comments

promisem profile image

promisem 2 months ago

This is a remarkably thorough analysis of a book I read decades ago and have seen in action many times during my career.

I will say that the bold bullet point under #5 caught my attention. I agree that many people reach that limit of their abilities and simply get by in their jobs. But I also have known some people who do use deceit to protect themselves if they feel job insecurity.

Loyalty between companies and employees has declined quite a bit in the last decade or so. It creates more potential for unethical behavior by both parties.


Greensleeves Hubs profile image

Greensleeves Hubs 2 years ago from Essex, UK Author

Thanks Mindi :-)


stuff4kids profile image

stuff4kids 2 years ago

Well, I'm not surprised to read that you have made that decision about your work life. It's just the sort of wisdom I would expect from the person who writes the hubs you write.

And my friends call me Mindi. :)


Greensleeves Hubs profile image

Greensleeves Hubs 2 years ago from Essex, UK Author

stuff4kids; I'm sure indeed that 'The Peter Principle' explains much of the incompetence in higher echelons of politics, and indeed in many walks of life.

In my own career working at a hospital, I have deliberately chosen not to apply for additional promotions beyond a certain level because I have felt I would not be good at handling the extra stress involved, and as a result I now feel quite content, confident and capable in the work I do. It must be said I am fortunate in a sense in that I have not needed promotion for extra money, and have preferred instead to lead a relatively relaxed life, but certainly I agree that there are many ways in which excellence in a particular role can be rewarded, without promotion to a new role which may be beyond the ability of the employee.

Glad you enjoyed the page Amanda/Mindi. Your comments are very warm and kind, and I am truly grateful for them. Thanks. Alun.


stuff4kids profile image

stuff4kids 2 years ago

Your hubs are faultless. That was very interesting - and both funny and alarming, too.

This may explain the incompetence of those in the higher echelons of the political class, don't you think?

In the workplace, perhaps the most effective way to by-pass The Peter Principle would be to reward excellence with higher pay or other benefits without a change in role.

Great Hub and so beautifully laid out. You're an artist! :D


Greensleeves Hubs profile image

Greensleeves Hubs 3 years ago from Essex, UK Author

Wayne Brown; That is somewhat depressing. It seems these professors you speak of - though well intentioned in encouraging their students - show no appreciation of the realities of the business world.

dahoglund; As you say, there are pressures on businesses and institutions to promote people almost for the sake of promotion - because it is considered the 'right thing to do'.

Wayne and Don: Both of your comments illustrate the problem. It seems we have a situation where many employees feel they have a 'right' to be promoted, and many employers feel obliged to promote as a kind of reward for employee loyalty. At the end of the day, the only way to run a successful organisation - to both employers' and employees' benefit - is to have people doing jobs they are truly good at, at whatever level that may be within the organisation. My thanks to you both.


Wayne Brown profile image

Wayne Brown 3 years ago from Texas

We have a broad base of younger generation employees now who have been told by their college professors to expect a promotion every three years or quit what you are doing. This advise coming from those who have never worked in the private sector and who depend on tenure to sustain them in their job.


dahoglund profile image

dahoglund 3 years ago from Wisconsin Rapids

I read the book "the Peter Principle" many years ago and found it interesting. My observations of life since then have been that we have gone somewhat beyond it, at least working in government. because of the demands to promote some people for the sake of affirmative action has resulted in many people being promoted far beyond their abilities. There is also a tendency to promote people just to get rid of them.


Greensleeves Hubs profile image

Greensleeves Hubs 3 years ago from Essex, UK Author

My thanks Nettlemere for your contribution. I'm grateful. I would agree that there are other adverse factors such as cronyism which can lead to the wrong people being promoted into jobs they cannot adequately handle - all such wrongly thought out reasons for promotion should be avoided in favour of promotion on merit for those who have the genuine potential to actually do a more pressurised or skilled job.

Of course I would also agree that some who rise to the highest positions available in an organisation are more than capable of handling the responsibilities of those positions, but I do suspect that there are too many who are promoted simply because it is 'their turn' to be rewarded with a better job. They are the ones who may demonstrate the effects of 'The Peter Principle' by taking one step too many up the ladder of success. Cheers, Alun.


Nettlemere profile image

Nettlemere 3 years ago from Burnley, Lancashire, UK

A clear and well written explanation and I can see how it might work in some companies, but in others I think there is a lot of nepotism/cronyism rather than promotion of people who've been there the longest. Plus there must be a fair proportion of people who rise to the top through being competent and are still 'good enough' to shine at the top.

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