What Is The Peter Principle and How Does It Affect Team Performance?

It’s a common workplace scenario: A person who thrived as an individual contributor and subject matter expert gets promoted into a management position. Their people skills? Not so great. As a result, performance suffers. This phenomenon can be explained by The Peter Principle, a management theory identified by Laurence J. Peter. The Peter Principle describes the tendency for members of a hierarchy to get promoted until they reach a level where they are no longer competent. 

Why The Peter Principle exists in organizations 

Well-intentioned leaders perpetuate The Peter Principle on a regular basis in organizations across the world. That’s because its existence is based on a noble premise – to develop talent and incentivize great performance. It’s important to offer opportunities for advancement to your team members if you want to keep them engaged. It creates win-win scenarios where top performers are rewarded and continue having a positive impact on the business as they evolve. Great leaders know this and actively seek to create promotion tracks internally. What they don’t always realize is the effects that The Peter Principle can have on the dynamic of the team as a whole.  “In many professions, such as engineering, law, architecture, and others, the more competent you are in the technical aspects of your work, the more likely you are to be recognized and promoted,” says Moshe Cohen, leadership expert, author and senior lecturer at Boston University’s Questrom School of Business. “The best engineer becomes team leader, the best legal mind becomes a partner, and the best architect becomes a principal.”  “Unfortunately, the skills required to succeed as a manager, once promoted, are not the same as the ones required to achieve the promotion,” adds Cohen. “Organizational, listening and communication skills supersede technical skills as do the ability to motivate, teach, empower, and resolve conflict among team members.”  This is exacerbated further in environments where leadership development is not prioritized. As Cohen explains, new managers often lack these crucial competencies, and oftentimes their companies don’t give them the direction and support they need to become good managers. 

The impact of The Peter Principle on team performance 

As a result, engagement levels and productivity can drop. You know what they say: People leave bosses, not companies. Since culture trickles down from the top, The Peter Principle can have devastating effects on the culture of an organization.  “Many new managers struggle to provide leadership to their teams and struggle with communication and conflict management. They might micromanage their team members to maintain control, or alternatively, go back to focusing on the technical aspects of their work and leave their teams directionless. As their teams become frustrated and demoralized, people start to leave,” according to Cohen. 

How to counteract The Peter Principle

Understanding the existence and pitfalls of The Peter Principle is the first step to counteracting its effects. Thankfully, there are a few things leaders and companies can do to incentivize performance in a more conscious way. “Companies need to first examine the criteria they use to promote people into management, prioritizing people skills in addition to technical competence,” adds Cohen.  What about those great technical performers who are motivated to advance? According to Harvard Business Review, companies can reward people through pay rather than promotion. Since prestige is also a powerful incentive, they can create “dual career ladders” where people get promoted up a technical track or a manager track with similar pay and prestigious value. “These ladders allow people to progress in their career, drawing on their existing passions and talents rather than requiring them to shift job duties,” according to HBR. In other words, it’s about separating management skills and responsibilities from other skill sets and putting people in positions where they can thrive without penalizing them.  Additionally, you’ll want to set up new managers for success. Leadership skills can be developed, and people who demonstrate managerial potential should be offered the mentorship and training required to fully develop their skills. “New managers then need to be given the training, direction, support, and coaching they need to grow into their roles and develop into effective leaders,” says Cohen.  The most important thing to remember to avoid The Peter Principle and optimize team competencies and performance is that leadership skills and technical competence are distinct. Build and grow your team accordingly.