The Peter Principle, created by sociologist Dr. Lawrence Peter, states that employees in an organization are promoted to their highest level of competence and then remain at a level where they are incompetent. This leads to a top-level bureaucracy filled with incompetent people, and the solution remains stalled due to the fear of admitting problems within the internal promotion system.
In the business world, where hierarchy and promotional incentives are at the heart of top-level bureaucracy, no single theory of human behavior has gained more recognition than that created in the late 1960s by sociologist Dr. Lawrence Peter. Throughout his extensive research on the structured business hierarchy, Peter observed that, as a rule, “employees in an organization advance to their highest level of competence and then are promoted to, and remain at, a level where they are incompetent. . ” This observation, better known as the Peter Principle, has become a popular topic for humorous commentary on the foibles of business and government. For corporate managers who recognize the signals within their own hierarchies, the topic has become the cause of much corporate anxiety.
The concept of the Peter Principle is best explained by imagining the familiar pyramid-shaped business model, showing new employees at the lowest level. As these lower-level employees demonstrate that they are competent in their positions, they are rewarded with promotions to the next level – typically, management. This movement up the ladder continues indefinitely until employees reach positions where they are no longer competent. As most structured administrations fail to implement “downgrade” procedures, this is where the process usually stops. An employee who would be happier or perform better outside of management doesn’t have a proper way to handle the situation. So, the theory goes, the employee stays at the top, stays mediocre at work, and spends most of the day covering up incompetence. ” For those in the upper echelons, the Peter Principle reveals a dramatic flaw in the practice of promotion from within.
According to Dr. Peter, the work that keeps the business moving is done by employees who haven’t reached your level of incompetence. If this is true, it is easier to understand how organizations stay afloat even when employees repeatedly accept many promotions. The problems created by the Peter Principle are further compounded by the perception that incompetent managers often make incompetent decisions—such as deciding which competent employee should be promoted to their level of incompetence. Eventually, says the Peter Principle, the top levels of a bureaucratic administration become filled entirely with incompetent people.
In business and government hierarchies, where the Peter Principle is rampant and decisions are obviously made at the highest levels, the solution remains stalled. With money and careers on the line, it seems likely that members of management will choose to ignore the idea that their organizations are run by incompetent people. To make an alternative choice, managers would have to admit problems within their internal promotion system and, in the process, risk the implication that they, too, have likely reached their own level of incompetence.
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