Let’s talk about the Peter Principle.

Stated simply, it’s the idea that, in a hierarchy – where the best performers at one level of the hierarchy are chosen to rise to the next level – every person eventually rises to his or her level of incompetence.

Nobody wants that.

Not the people rising to a level where they can no longer perform with competence.

Not the people under them or over them in the hierarchy who have to deal with that incompetence.

So how do we avoid the Peter Principle?

I can think of two ways:

1. Abandon the hierarchy as an organizational structure.

Abandoning the hierarchy is hard. Holocracy tries. But the buck has to stop somewhere, right?

So…door number two…

2. Abandon performance as the criterion for rising to the next level.

On its face, it makes sense.

Different jobs require different talents.

The best athletes don’t always make the best coaches.

The best salespeople don’t always make the best sales managers.

Why?

Because, as your stock broker will tell you, past performance is not a predictor of future performance. This is particularly true when you’re talking about a promotion because the qualities that make someone a great individual performer are different from the qualities that define a great manager or leader.

But if we abandon performance as the criterion for promotion, then what criterion should determine who rises to the next level?

Potential. And how do you measure potential?

1. Validated assessment instruments. This is first because it’s best. Here’s why.
2. Targeted observation. In the absence of a validated assessment instrument, these questions can help you identify management or leadership potential:

• Who asks great questions that push us beyond the status quo?
• Who is always learning more and connecting new ideas to our overarching goals?
• Who has the influence (even without formal authority) to advance ideas for making things work better?
• Who has a knack for seeing what other people do well and positioning those people to succeed in the process of achieving bigger picture team goals?
• Who do people naturally turn to for answers, advice or a listening ear?
• Who do you implicitly trust?
• Who elevates the game and the intensity of every other player when he or she walks onto the field?
• Who manages change and conflict in ways that keep people focused on achievement?

Less than 1/3 of U.S workers are engaged at work, and managers account for 70% of the variance in employee engagement (source).

How much of that disengagement exists because of managers who have been Peter Principled?

The cost of disengagement to American businesses is estimated at $3,400 for every $10,000 in salary, which is roughly 1/3 of a person’s salary.

So how much is the Peter Principle costing your company?

At the risk of beating the dead horse of the puns in the title…when the Peter Principle becomes the rule of advancement in an organization, that organization will ultimately lose money.  The Peter Principle is bad for business, and it’s bad for people. What will you do differently to make sure the Peter Principle doesn’t hurt your business and your people?