Does Promoting Competent Employees Will Work As You Think?

Figure 1: Promotion hierarchy of a typical organization (Tech Tello)

HR Theory: Peter principle 

    The peter principle was first described by Dr. Laurence Peter in 1968 (Hayes, 2021). The idea is competent employees will be promoted until they reach a point where their duties will be too challenging. They are not trained or good at it because they don’t have the skills, they need to succeed in their new job role. Instead, they would have been more productive at the initial level. 

Real-Time Examples

    For the first example, think of a scenario of a talented mechanic. Management thinks he works hard, and is talented. So, they promote him as a Mechanic Foreman (or the next position in his hierarchy), where he needs to manage a team of junior mechanics. But this person might be lacking soft skills like team management and not be able to tackle the team. 

According to Adam Hayes, in his article, he mentions that in 2018, economists Alan Benson, Danielle Li, and Kelly Shue analyzed sales workers' performance and promotion practices at 214 American businesses to test the Peter principle. They found that companies did indeed tend to promote employees to management positions based on their performance in their previous position, rather than based on managerial potential. Consistent with the Peter principle, the researchers found that high performing sales employees who have great people skills to sell products or services were likelier to be promoted and that they were also more likely to perform poorly as managers, due to a lack of leadership skills to handle the team leading to considerable costs to the businesses (Hayes, 2021).

This principle is more explained in the below video which will give explanations about the background of how he came up with this principle.

Video 1: Peter Principle (YouTube, 2019)

The other important factor is that most employees will not reject a promotion, especially if it comes with a greater paycheck and prestige. Even if they know that they are unqualified or unfit for the position.

So how can we retain and acknowledge these competent employees? 

• Some organizations continue offering education to the employees to make them competent for their next position. Many companies sponsor from their MBA or relevant professional certifications. 

• Sending the employees to training camps

• Providing workers with feedback on their abilities to perform the next job, in addition to current job relative performance information, improves the effective sorting of workers, but it comes at the cost of reduced promotion-based incentives (Chan, 2018).

• Assess the skills of the employee for the new position

• Have a mentorship program within the organization 

Conclusion

    The principle will hold always because there will be a job where employees cannot perform. If this happens organizational hierarchy will be filled up with people who are not competent enough which is a dire situation for the company. So, what will be the next step when the employee reaches this position? 

What are your thoughts and comments on this?  

Reference

1. Tech Tello, Peter Principle, And The Surprising Truth About Promotions, Available at: https://www.techtello.com/the-peter-principle/ [Accessed online at 3/22/2022]

   
   
2. Adam Hayes, 2021, Investopedia,  Peter Principle Available at: https://www.investopedia.com/terms/p/peter-principle.asp#:~:text=What%20Is%20the%20Peter%20Principle,a%20level%20of%20respective%20incompetence. [Accessed online 3/22/2022]
   
   
3. Chan, E. W. 2018. Promotion, Relative Performance Information, and the Peter Principle. The Accounting Review, 93, 83-103.
   
   
4. Sprouts (2019) Peter Principle: When People Get Promoted Into Maximum Incompetence. (October 10). Available at:https://www.youtube.com/watch?v=IbFr5DAyZBM