The Peter Principle is a management theory which suggests that organizations risk filling management roles with people who are incompetent if they promote those who are performing well at their current role, rather than those who have proven abilities at the intended role. It is named after Laurence J. Peter who co-authored the 1969 humorous book The Peter Principle: Why Things Always Go Wrong with Raymond Hull. They suggest that people will tend to be promoted until they reach their "position of incompetence".
A similar theory was proposed by Scott Adams, creator of the Dilbert cartoon series. In his 1996 book, The Dilbert Principle, Adams suggested that "the least smart people are promoted, simply because they’re the ones you don't want doing actual work." In other words people are promoted because of their incompetence in their current role, rather than their competence.
In an organizational structure, the assessment of the potential of an employee for a promotion is often based on their performance in the current job which results eventually in their being promoted to their highest level of competence and potentially then to a role in which they are not competent, referred to as their "level of incompetence". The employee has no chance of further promotion, thus reaching his or her career's ceiling in an organization.
Peter suggests that "[i]n time, every post tends to be occupied by an employee who is incompetent to carry out its duties" and that "work is accomplished by those employees who have not yet reached their level of incompetence." He coined the term hierarchiology as the social science concerned with the basic principles of hierarchically organized systems in the human society.
He noted that their incompetence may be a result of the skills required being different rather than more difficult; by way of example, an excellent engineer may find that they made a poor manager due to limited interpersonal skills which a manager requires to lead a team effectively.
Rather than seeking to promote a talented “super-competent” junior employee, Peter suggested that an incompetent manager may set them up to fail or dismiss them because they are likely "violate the first commandment of hierarchical life with incompetent leadership: [namely that] the hierarchy must be preserved".
Staff who find themselves with what they consider to be incompetent superiors may try to "manage upward" and support or manipulate them to be more effective, or may simply devise ways to minimise the damage and influence they have on the organisation.
Peter proposed that systems based on social class (or caste) were more efficient at avoiding incompetence. Lower-level competent workers would not be promoted above their level of competence as the higher jobs were reserved for members of a higher class. "The prospect of starting near the top of the pyramid will attract to the hierarchy a group of brilliant higher class employees who would never have come there at all if they had been forced to start at the bottom". Thus he concludes that the hierarchies were "more efficient than those of a classless or egalitarian society".
There are methods that organizations can use to mitigate the risk associated with the Peter Principle:
- Refrain from promoting workers based on their current performance without proof of their abilities to succeed in the desired role.
- Provide in-service training for the desired roles for those being considered for promotion.
- Provide a parallel career path for good technical staff, possibly with the offer of additional pay, perks or recognition without requiring promotion to management, similar to a warrant officer in the military.
- Implement an Up or out approach as authorized by the Defense Officer Personnel Management Act for the United States Armed Forces and by manning control policies within the British Army, in which personnel who are not promoted above certain ranks within the fixed number of years are deemed to lack the necessary competence and are likely to be dismissed. Some larger businesses, notably major international management consultancies/accountancy firms including McKinsey, BCG, and Bain use a similar method, or the 'vitality curve' or 'rank and yank' used by GE where employees who are ranked in the bottom 5-10% on performance are likely to be fired.
Alessandro Pluchino, Andrea Rapisarda and Cesare Garofalo used an agent-based modelling approach to simulate the promotion of employees in a system where the Peter Principle is assumed to be true. Assuming the Peter Principle to be true, they found that the best way to improve efficiency in an enterprise is to promote people randomly, or to shortlist the best and the worst performer in a given group, from which the person to be promoted is then selected randomly. For this work, they won the 2010 Ig Nobel Prize in management science.
- The Peter Principle (TV series)
- A board game, The Peter Principle Game, published by Avalon Hill in 1981
- Dunning–Kruger effect
- Founder's syndrome
- Negative selection (politics)
- Parkinson's law
- Putt's Law and the Successful Technocrat
- Software Peter principle
- List of eponymous laws
- "En el umbral de la incompetencia". La Opinión (in Spanish). Retrieved 2013-11-30.
- Peter, Laurence J; Hull, Raymond (1969). The Peter Principle: Why Things Always Go Wrong. New York: William Morrow and Company. p. 8. ISBN 0-688-27544-3. OCLC 1038496.
- Bernard Rostker, et al. (1992). The Defense Officer Personnel Management Act of 1980 - A Retrospective Assessment (PDF). ISBN 0-8330-1287-8.
- "Up or Out Policy".
- Jones, Del (April 18, 2005). "Let people know where they stand, Welch says Ranking workers pays, former GE chief says". USA Today (5B). Retrieved 2009-09-09.
- Alessandro Pluchino; Andrea Rapisarda; Cesare Garofalo (2009). "The Peter Principle Revisited: A Computational Study". Physica A 389 (3): 467–472. arXiv:0907.0455. Bibcode:2010PhyA..389..467P. doi:10.1016/j.physa.2009.09.045.
- "The 2010 Ig Nobel Prize Winners" (pdf). Annals of Improbable Research 16 (6): 10–13. 2010.