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Peter Principle

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In a Hierarchy Every Employee Tends to Rise to His Level of Incompetence.

 
Some have observed that individuals perform worse after being promoted. The Peter Principle, which states that people are promoted to their level of incompetence, suggests that something is fundamentally misaligned in the promotion process. This view is unnecessary and inconsistent with the data. Below, it is argued that ability appears lower after promotion purely as a statistical matter. Being promoted is evidence that a standard has been met. Regression to the mean implies that future ability will be lower, on average. Firms optimally account for the regression bias in making promotion decisions, but the effect is never eliminated. Rather than evidence of a mistake, the Peter Principle is a necessary consequence of any promotion rule. Furthermore, firms that take it into account appropriately adopt an optimal strategy. Usually, firms inflate the promotion criterion to offset the Peter Principle effect, and the more important is the transitory component relative to total variation in ability, the larger the amount that the standard is inflated. The same logic applies to other situations. For example, it explains why movie sequels are worse than the original film on which they are based and why second visits to restaurants are less rewarding than the first.

Edward Lazear, Stanford University
in
The Peter Principle: A Theory of Decline

 

The Peter Principle

by Laurence J. Peter, Raymond Hull (Contributor)
Library Binding (October 1996)
Buccaneer Books; ISBN: 1568491611

Along with Parkinson's Law by C. Northcote Parkinson this is a "satirical sociology" masterpiece. And despite being written before programmers became a mass profession it is perfectly applicable to programming. It's a rather short and easy-to-read  book that consists of fictional stories about results of promotions in a typical administrative and business hierarchies. Must read for any programmer or system administrator with more than two year experience :-). Originally published in 1969 it coined the famous "The Peter Principle"

In a Hierarchy Every Employee Tends to Rise to His Level of Incompetence.

The concept is pretty universal and is related to the regression to the mean. As authors aptly states "Competence, like truth, beauty and contact lenses, is in the eye of the beholder. " In reality the performance always has a transitional (random) component.

The end result is that stable companies are more likely to have incompetent managers at many levels of the organizational structure whereas younger and fast growing companies may avert some implication of this principle at least temporary.  "Employees", as the author points out, "do not want to be incompetent", but when management offers promotions that put the employees closer to their level of incompetence, the employees have no way of knowing that ahead of time. After all, if the offer is made. it is because management "knows" the employee can do the job competently on his/her present level. But an interesting side effect observable in large and old organizations is that such decision might be made by  managers who are already at their level of incompetence (Dilbert's PHBs). This effect can be called large organization Catch 22.

Another related phenomenon is called Negative selection - Wikipedia, the free encyclopedia

In politics, negative selection is a process that occurs in rigid hierarchies, most notably dictatorships.

The person on the top of the hierarchy, wishing to remain in power forever, chooses his associates with the prime criterion of incompetence - they must not be competent enough to remove him from power. The associates do the same with those below them in the hierarchy, and the hierarchy is progressively filled with more and more incompetent people.

If the dictator sees that he is threathened nonetheless, he will remove those that threaten him from their positions - "purge" the hierarchy. Emptied positions in the hierarchy are normally filled with people from below - those who were less competent than their previous masters. So, over the course of time, the hierarchy becomes less and less effective. As this happens relatively often, once the dictator dies, or is removed by some external influence, what remains is a grossly ineffective hierarchy.

The Politburo of CPSU of the USSR was the impressive example of negative selection.  If Khrushchev was just marginally incompetent, inaptness of Gorbachyov was legendary and his inability to master Russian language rivaled Bush II.  Like Bushisms, "Gorbachvisms" make him a laughing stock for most of the population. 

Some of the short stories in the book are not only funny, they might well be based on true events. Actually the message of some stories is dead serious: pyramid climbing is a dangerous sport and that's is exactly true in computer programming. Incompetent managers is too serious problem to ignore. This book also served as a cornerstone for Dilbert series which became a cartoon classic (but generally overstayed its welcome: you can't milk the same cow for decades and expect a stellar result).

The book  might helps students, who just joined the large enterprise environment to withstand the pressure and the absurd of the software development and large corporate IT in general.

4 of 5 stars Finally understand the roots of incompetence in higher ranks, February 10, 2000
Reviewer: A reader from USA

The author hit the nail on the head when he discovered this principle! After years of pondering whether it's just me or if there really is such a thing as companies with huge percentages of incompetent managers, I finally feel relieved to know that I was not 'just imagining' things. The book made me take a hard look at myself and question whether I had reached my own level of incompetence, and based on the case studies in the book I started analyzing what WOULD make me reach my level. One thing I would have like to read more about is how those of us who have not yet reached their level of incompetence, can better manage the struggle with those who have reached their level and make our work days miserable.

4 of 5 stars Understanding why we as a nation fail so much, January 22, 2000
Reviewer: Jimmy P Ledbetter (see more about me) from Ridgecrest USA

I read the Peter Principle years ago and have read through it frequently ever since. My first time was while still in the military and it explained to me, a great deal of the things I saw go wrong. It left an impression upon me that lasted throughout my career and which still helps me today. It explained clearly why I was so frustrated with the way things had begun to deteriorate so badly once I was into the second half of my career. And it helped me to make certain career choices that I still believe to day were the most beneficial decision I could have made at the time, and I was glad I had that knowledge to consider.

Dr. Laurence and his associates hit the nail right on the head in describing the failing principles, due to the Peter Principle of our Political system, our Judicial System, and much more. On the whole we do promote to incompetence and it is our number one failing.

From the military point of view there are quite a few additional contributing factors, all Peter Principle related, which resulted in a decline in the American Military. Which include the radical feminist movement, promoting for gender rather than merit, the radical quota promotions, promoting by race, rather than merit, and our leader's failure to stand firm for core values.

The up or out policy is the epitome of the Peter Principle, as is the guaranteed promotion policy, and the reenlistment bonus program which has been a great failure. Of course this book applies to all walks of life and even applies to our Present White House occupant and many of our congressional members. And will apply to many of those running for political office today.

The Peter Principle is a must read for the student of our American social, political and judicial decline and what horror is in store for us in the twenty first century if we do not recognize the beast and kill it before it becomes unstoppable, which it may already be. A great read.

On a negative side the book promotes too simplistic understanding of corporate bureaucracy.  Unlike its portrait in the book corporate bureaucracy is first and foremost a political coalition, aimed on preserving and maintaining power of members. 


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[Sep 10, 2011] A New Look at The Peter Principle By Bob Sutton

March 31, 2009 | BusinessWeek

The Peter Principle came as a revelation to my father, Lewis Sutton. He ran a little company in San Francisco called Oceanic Marine that sold furniture and related equipment, which he installed on United States Navy ships. His livelihood depended on U.S. government bureaucrats and shipyard managers, who often made him miserable. I grew up listening to his tirades about how these "overpaid idiots" insisted that he produce and procure poorly designed furnishings, how they could barely do their jobs, and how pathetically lazy they were. To make matters worse, senior government officials produced an onslaught of absurd procedures that required him to jump through an ever-expanding maze of administrative hoops—which wasted his time, drove up his costs, and made him crazy. He concluded: "The morons at the top must be paid to waste as much taxpayer money as possible."

My father loved The Peter Principle because it explained why life could be so maddening—and why everyone around you seems, or is doomed to become, incompetent. The people who ran the U.S. Navy and the shipyards didn't intend to do such lousy work. They were simply victims of Dr. Peter's immutable principle. They had been promoted inevitably, maddeningly, absurdly to their "level of incompetence." Dr. Peter also taught my father not to expect the few competent bureaucrats and managers he encountered to stick around for long, as they would soon be promoted to a job that they were unable to perform properly. Dr. Peter even showed that such incompetence had pervaded my dad's business for hundreds of years. The book quotes a report from 1684 about the British Navy: "The naval administration was a prodigy of wastefulness, corruption, ignorance, and indolence…no estimate could be trusted…no contract was performed…no check was enforced."

My dad took special delight in the pseudoscientific jargon that Dr. Peter invented to describe the weird and wasteful behaviors displayed by those languishing at their level of incompetence. Peter gave absurd and comedic names to the tragic realities of working life. The root of the entire book, the condition of incompetence that Peter called "Final Placement Syndrome," leads some to develop "Abnormal Tabulology" (an "unusual and highly significant arrangement of his desk"). This pathology is manifested, for example, in "Tabulatory Gigantism" (an obsession with having a bigger desk than his colleagues).

My father's business was especially afflicted with the "Teeter-Totter Syndrome" ("a complete inability to make decisions") and "Cachinatory Inertia" ("the habit of telling jokes instead of getting on with business"). As with so many others who were buoyed by this international bestseller, Dr. Peter's sense of the absurd helped my father combat this tragedy of ineptitude by responding with laughter rather than rage.

I have a soft spot for The Peter Principle because my dad loved it so much. Before revisiting it to write this foreword, I hadn't read it since it was first published in 1969 (when I was fifteen). I expected it would be a quaint curiosity, that Dr. Peter's old book would be largely irrelevant to today's workplace. I presumed that the application of business knowledge developed over the last forty years would have stamped out many maladies described by Dr. Peter, that market forces would have eliminated many or most organizations that were riddled with incompetence, and that subsequent writings on the subject would be more useful and engaging than The Peter Principle. I was wrong on all three counts.

Yes, the book is archaic in some ways, especially in its use of sexist language and examples. Yet the book's main ideas remain as pertinent to running and working in an organization today as they were forty years ago. None of this would have surprised Dr. Peter, who depicted his ideas as timeless and immutable facts of organizational life.

"Incompetence," he argued, "knows no barrier of time or place." Dr. Peter observed that one reason so many employees are incompetent is that that the skills required to get a job often have nothing to do with what is required do the job itself. The skills required to run a great political campaign have little to do with the skills required to govern. There is nothing about being a great surgeon that prepares a doctor to run a hospital. Learning to be a great litigator in no way prepares a lawyer to run a law firm. Many organizations, from hospitals to law firms, use such standards to select new leaders—yet devote little or no attention to their management skills. They often end up with lousy leaders and lose their best individual performers. These observations remain just as true in 2009 as they did in 1969.

Or consider Dr. Peter's counterintuitive claim that "in most hierarchies, super-competence is more objectionable than incompetence." He warned that extremely skilled and productive employees often face criticism, and are fired if they don't start performing worse. Their presence "disrupts and therefore violates the first commandment of hierarchical life: the hierarchy must be preserved." Unfortunately, this pattern persists in many modern organizations. Several fantastic teachers that I know at prestigious universities have been pressured by peers and leaders to do a worse job of teaching because "you are making everyone else look bad." One of these professors insists that he received tenure partly because he worked to earn teaching evaluations that were no better than those of the professors who evaluated his case.

Even the youngest super-competent people in our society still face criticism and ostracism—like nine-year-old Jericho Scott, a star little league baseball pitcher in New Haven, Connecticut. Jericho had never hurt an opposing player with his well-controlled, 40-mile-per-hour fastball. But when his coach refused to stop Jericho from pitching, the league hierarchy responded by barring Jericho from pitching and disbanding his undefeated team. Jericho's coach complained—to no avail—that his young star was punished for being too good. As for Jericho, he told the Associated Press that "I feel sad," and that "I feel like it's all my fault nobody could play." If Jericho wants to play in this league, I guess his choices are to play another position (like second base) where he isn't super-competent or to figure out how to become a mediocre pitcher.

Another reason The Peter Principle has no peer is that it somehow manages to be devilishly silly yet accurate and useful all at the same time. It reads like a first-rate parody of a business book—it reminds me of the best stuff in Mad magazine or the Onion. Yet Dr. Peter applies such silliness to describe how and why incompetence happens with dead accuracy. Satire works when it exposes the truth and upends fallacy. The Peter Principle is so funny because it is so true. It is filled with practical ideas that we can all use to limit the damage that incompetence does to our organizations and ourselves.

One reason the book is so hilarious is that Dr. Peter was not only an incisive thinker but masterfully creative with words. If Dr. Seuss and Peter Drucker had joined forces to write a business book, The Peter Principle might been have been the result. Peter invented dozens of strange, stilted, and pseudoscientific phrases and words. I suggest reading the glossary of over 100 phrases and words from "the science of hierarchiology" in the back before turning to the rest of the book. The translations will help you absorb Dr. Peter's ideas more quickly and more deeply. Plus, the silly pseudoscientific jargon (paired with well-crafted definitions) will get you into the right mindset for entering Dr. Peter's strange and wonderful world. Words he invented, such as hierarchiology, structurophillia, and staticmanship, weren't in any dictionary in 1969, and don't seem to have entered the English language some forty years later.

And I can't find any behavioral science research on terms such as "Percussive Sublimation" ("being kicked upstairs: a pseudo promotion") and "Peter's Circumambulation" ("a detour around a super-incumbent," who is "a person above you who, having reached his level of incompetence, blocks your path to promotion."). All these words sound just like the jargon used in well-developed scientific fields. Yet, unlike experts of who unintentionally develop absurd and often incomprehensible jargon, Dr. Peter meant to be silly when he invented the language for a field that did not (and still does not) exist.

The silliness persists with the names invented for case studies of employees and organizations. People such as J.S. Minion, G. Spender, and Miss T. Totland, or organizations such as the Excelsior City Special Education Department, are given fake names, and it is often difficult to tell if the stories themselves are real or fictional. The boldness of Dr. Peter's claims also somehow mocks the overconfidence that runs through most self-help and business books, while simultaneously making his arguments more convincing.

He states repeatedly that "there are no exceptions to the Peter Principle." This claim is absurd on the face of it because, as he says, "the science of hierarchiology" is based on limited evidence and requires much work to develop. Yet taking such a strong position enabled Dr. Peter to present his ideas in efficient and persuasive ways. I laughed a lot through Chapter III, which argues that all apparent exceptions to the Peter Principle are not exceptions at all. In rapid-fire fashion, he shows that Percussive Sublimation, the Paternal Instep (promoting a family member several steps above his or her level of incompetence), and a host of other apparent exceptions to the principle, in fact, demonstrate the power of the principle. By the end of the chapter, I suspect that many of the most cynical and logical readers will be convinced by his arguments.

That is the wonderful thing about The Peter Principle. It doesn't seem to matter that the jargon, names, and stories are fake. It doesn't seem to matter that many of the assertions are twisted and, at times, seemingly wildly illogical. Somehow, despite (or perhaps because) of all this nonsense, a host of accurate and useful ideas emerge from this masterpiece. The validity of these ideas isn't just supported by Dr. Peter's rhetorical flourish and keen eye. Many of Dr. Peter's ideas are also supported by modern behavioral science research.

Stanford Professor and renowned economist Edward P. Lazear published an academic paper in 2001 called "The Peter Principle: A Theory of Decline." Professor Lazear provides a string of impressive and (to most of us) incomprehensible mathematical formulas to explain why "individuals perform worse after having received promotion." He lends mathematical proof to the truths Peter revealed through close (and cynical) observation. Some of these formulas show that, even if all employees promoted to the next level were competent in their previous jobs, some percentage will be incompetent in their new jobs. Professor Lazear lifts this assertion directly from The Peter Principle. He then calculates—just as Dr. Peter proposed—that this age-old scenario occurs partly because performance standards get tougher as one moves up the hierarchy.

To give you a taste, here is just one of the many intertwined formulas Professor Lazear provides:

A + E(€1 | A + €1 > A*) > A + E(€2 | A + €1 > A*)

Got that? Neither do I. I have no idea what this formula means, but Lazear concludes after this fancy math: "Thus, expected ability falls for promoted individuals from period 1 to period 2."

Not all research that supports Dr. Peter's assertions about hierarchiology is so difficult to understand. Professor Lazear summarizes a host of other, simpler studies suggesting that people with stronger skills tend to be promoted more quickly and that people with weaker skills tend to get stuck in their current jobs after just one or two promotions—as The Peter Principle proposes. Research related to The Peter Principle confirms that many of these ideas aren't just right; they are also useful. Dr. Peter provides advice for employees who strive to rise to their level of incompetence as quickly as possible.

We all fail upwards, though some of us do so sooner than others. Dr. Peter explains, for example, how an employee can use a "patron" to pull him up the hierarchy, along with details about how to motivate the patron, how to get around people who block the way, and ways that multiple patrons can join together to pull an employee up the hierarchy. Much of Dr. Peter's advice about using "pull" echoes Jeffrey Pfeffer's Managing with Power, the main text used in many business schools to teach MBAs how to get ahead in organizations. Pfeffer's analysis and advice is more detailed and sophticated, but the basic ideas are remarkably similar.

The Peter Principle also offers many promising ideas that have yet to be studied carefully. I would be curious, for instance, to see research on Dr. Peter's assertion that ignorance is bliss. Peter contends that many employees never realize they have reached their level of incompetence, which he proposes is good for an employee because "he keeps perpetually busy, never loses his expectation of further promotion, and so remains happy and healthy." This conclusion clashes with numerous experts who exhort employees—especially managers—to face "brutal truths" and "hard facts." The idea behind most employee performance evaluations is that, if you give employees accurate feedback about their strengths and weaknesses, they will be motivated to eliminate the weakness, and thus perform better.

Dr. Peter uses entirely different logic. He asserts that many employees in every organization have risen to their level of incompetence, all will do so eventually, and organizations rarely fire incompetent people. (Sounds right, doesn't it?) Following this logic, performance evaluations given to people who have achieved "final placement" might best be used to fuel their delusions of competence—not to identify weaknesses they are incapable of repairing. I've never heard of a performance evaluation system designed to provoke ignorance and denial, but Dr. Peter's logic suggests that such a system would lead to happier and healthy employees—thus reducing sick days and employee turnover.

Creative incompetence is another idea from The Peter Principle ripe for development. Peter believed that doing things badly, intentionally, and publicly was the best way for an employee to avoid final placement and, if widely applied, the best way to build organizations filled with competent people. Dr. Peter tells a story about "P. Greene," a competent gardener who loved his work and had no interest in promotion to foreman. Rather than taking the risk of being offered a promotion (which would be difficult to decline), "P. Greene" intentionally loses numerous receipts and packing slips, which leads to reprimands from the accounting department and causes his superiors to conclude that he has achieved final placement.

The popular press occasionally writes about this theme, such as in Jared Sandberg's 2007 Wall Street Journal piece on the virtues of "strategic incompetence." Sandberg reports that a manager named Steve Crawley was assigned to organize an office picnic, but was eventually relieved of the job (which he didn't want) by intentionally demonstrating deep confusion and incompetence. As Sandberg concludes, "Strategic incompetence isn't about having a strategy that fails, but a failure that succeeds. It almost always works to deflect work one doesn't want to do—without ever having to admit it."

If creative incompetence is a widespread and effective strategy, we need more research here, but my mind races ahead, regardless. Imagine university classes and management workshops where students learn how to dress in slightly unprofessional ways, or how to give poor and boring speeches (I can hear the professor advising, "mumble more" and "please, please stop looking at the audience"), and how to "forget" to attend scheduled meetings with superiors so they will conclude that you have reached your level of incompetence. If incompetence is inevitable, perhaps we should all learn to master it on our own terms—and stop spending so much time trying to achieve competence, which is, by Peter's definition, elusive.

As strange as Dr. Peter's twisted take on organizational hierarchies may seem, the book's core ideas—and many of the crazy little ideas too—are valid facts of organizational life. After reading this book a few times, I suspect I know why Dr. Peter (and coauthor Raymond Hull) decided to cloak these ideas in such a delightfully weird and perversely funny package. The Peter Principle clashes with piles of serious advice spewed out by an enormous industry of business educators, consultants, and gurus (this was true in 1969 and truer in 2009). Perhaps Dr. Peter realized that these unconventional and contrary ideas wouldn't spread if they were enclosed in the usual, overly somber business book. The success and enduring relevance of this gem suggests that, regardless of Dr. Peter's intentions, writing a serious business book disguised as a parody was a stroke of genius.

Bob Sutton, a management professor at Stanford University, has written a new foreword to The Peter Principle, available in bookstores Apr. 14, 2009. He is also the author of The No Asshole Rule.

[Sep 10, 2011] The Peter Principle Revisited A Computational Study

Authors: Alessandro Pluchino, Andrea Rapisarda, Cesare Garofalo

(Submitted on 2 Jul 2009 (v1), last revised 29 Oct 2009 (this version, v3))
Abstract: In the late sixties the Canadian psychologist Laurence J. Peter advanced an apparently paradoxical principle, named since then after him, which can be summarized as follows: {\it 'Every new member in a hierarchical organization climbs the hierarchy until he/she reaches his/her level of maximum incompetence'}. Despite its apparent unreasonableness, such a principle would realistically act in any organization where the mechanism of promotion rewards the best members and where the mechanism at their new level in the hierarchical structure does not depend on the competence they had at the previous level, usually because the tasks of the levels are very different to each other. Here we show, by means of agent based simulations, that if the latter two features actually hold in a given model of an organization with a hierarchical structure, then not only is the Peter principle unavoidable, but also it yields in turn a significant reduction of the global efficiency of the organization.

Within a game theory-like approach, we explore different promotion strategies and we find, counterintuitively, that in order to avoid such an effect the best ways for improving the efficiency of a given organization are either to promote each time an agent at random or to promote randomly the best and the worst members in terms of competence.

[Sep 10, 2011] The generalized Peter Principle

In evolution systems tend to develop up to the limit of their adaptive competence


The Peter Principle was first introduced by L. Peter in a humoristic book (of the same title) describing the pitfalls of bureaucratic organization. The original principle states that in a hierarchically structured administration, people tend to be promoted up to their "level of incompetence". The principle is based on the observation that in such an organization new employees typically start in the lower ranks, but when they prove to be competent in the task to which they are assigned, they get promoted to a higher rank. This process of climbing up the hierarchical ladder can go on indefinitely, until the employee reaches a position where he or she is no longer competent. At that moment the process typically stops, since the established rules of bureacracies make that it is very difficult to "demote" someone to a lower rank, even if that person would be much better fitted and more happy in that lower position. The net result is that most of the higher levels of a bureaucracy will be filled by incompetent people, who got there because they were quite good at doing a different (and usually, but not always, easier) task than the one they are expected to do.

The evolutionary generalization of the principle is less pessimistic in its implications, since evolution lacks the bureaucratic inertia that pushes and maintains people in an unfit position. But what will certainly remain is that systems confronted by evolutionary problems will quickly tackle the easy ones, but tend to get stuck in the difficult ones. The better (more fit, smarter, more competent, more adaptive) a system is, the more quickly it will solve all the easy problems, but the more difficult the problem will be it finally gets stuck in. Getting stuck here does not mean "being unfit", it just means having reached the limit of one's competence, and thus having great difficulty advancing further. This explains why even the most complex and adaptive species (such as ourselves, humans) are always still "struggling for survival" in their niches as energetically as are the most primitive organisms such as bacteria. If ever a species would get control over all its evolutionary problems, then the "Red Queen Principle" would make sure that new, more complex problems would arise, so that the species would continue to balance on the border of its domain of incompetence. In conclusion, the generalized Peter principle states that in evolution systems tend to develop up to the limit of their adaptive competence.

Solving the Peter Principle One Word Darts By Paul Kedrosky

July 3, 2009 | Paul Kedrosky's Infectious Greed

There is a fun new working paper out from some Italian scientists that models the Peter Principle. The principle says, of course, that people climb in an organization until they reach their level of maximum incompetence.

How would that happen? Well, the authors argue it should be expected in any organization where the following two conditions hold:

  1. The best member are rewarded with promotions
  2. Competence in a new position is not highly correlated with competence at a prior level

The authors simulated the preceding in a pyramidal organizational form using a mathematical agent model. Here is the outcome:

Here we show, by means of agent based simulations, that if the [above two conditions] actually hold in a given model of an organization with a hierarchical structure, then not only the "Peter principle" is unavoidable, but it yields in turn a significant reduction of the global efficiency of the organization. [Emphasis mine]

Granted, this shouldn't be surprising news, one would think, to anyone who has spent any time around large organizations. A disproportionate number of the positions always seem filled by people who elicit a WTF? reaction from reasonable-minded observers.

So, do we just live with it? After all, we can hardly get around elevating the best people, and it isn't unreasonable to think that one's experience in a former position doesn't adequately prepare for the new one.

Not necessarily, according to the authors:

...the best strategies to improve, or at least not to diminish, the efficiency of an organization, when one ignores the actual way of competence transmission, are those of promoting an agent at random or of randomly alternating the promotion of the best and the worst members. We think that these results could be useful to guide the management of large real hierarchical systems of different nature and in different fields.

Whoa, it turns out calling someone's promotion "random" is a compliment. Who knew darts could be so handy at promotion time?

Source:

The Peter Principle Revisited: A Computational Study
Authors: Alessandro Pluchino, Andrea Rapisarda, Cesare Garofalo

Gregor ·

Sounds like the ratchet, in Parrondo's Paradox. Alternating between winning and losing strategies. Also reminds of AndrewSullivan's recent musings on Hawk, Dove, and Retaliator role-play in game theory. Only the Retaliator alternates strategy.

Admitting we know a lot less than we think we know could turn out to be lots of fun.

Matt

I don't think we spend enough time with people, getting to know them. They are asked to complete a specific set of tasks, and we observe them in that role without further understanding of their abilities. Everyone has underutilized skills and talents that co-workers don't know about: if the time were spent, a complete profile of a person would be integral to maximizing their use to the organization.

Successful promotion relies on knowledge of the unseen talents and latent interests of employees. We have an experience-based business culture that emphasizes the opposite.

fresno dan

Interesting - my own view is that it is an arbitrary construct that a "manager" does something of more skill, or rarer ability, than many of the people the manager oversees. In the sciences, the people being overseen have a lot of knowledge - and typically another scientist ends up managing them. But that scientist manager really has no training, or experience that suits them for that position. I would take it a step further - in most circumstances, the manager should be paid less than the technicians they are managing. Its a holdover from the assembly line that the manager should make more than the workers. They ofter don't have much technical knowledge, and most business theory is too much theory and too little reality.

Carlos666 ·

The problem seems to lay in the fact that many of the entry level hires are incompetent to deliver papers on a newspaper route so the starting level folks are over their competence level from the get go. The Peter Principle is in effect when they walk through the door. Carlos666

Kievite

This is a pretty primitive, abet funny model, that does not capture the reality of the situation. First of all in many cases middle "managers are just a place holders and has very little autonomy being squeezed between despotic higher ups and resentful "people in the trenches". In this case kiss up, kick down" is the most viable strategy and it does not require too much skills just a personal predisposition.

Another problem with that view is that it presuppose that people who are promoted are just passive agents. This is not true in any organization. And this completely opposite of a typical sociopath line of behavior. specifically sociopaths are very actively seeking promotion and that's probably why higher layers on large organization often include them.

I know the case of woman sociopath in IT organization, who threatened to sue the company for discrimination unless promoted.

[May 19, 2003] Talking Shop What the management-level job requires in skills

In his bestseller, The Peter Principle, Dr. Lawrence J. Peter theorized that in a hierarchy, employees tend to rise to their level of incompetence. His view is that you will advance to your highest level of competence and consequently get promoted to a position where you will be hopelessly inept.

If you're a proficient and effective tech support pro, you're most likely demonstrating peak competence in your job right now. Very soon, your boss may commend you for your excellence and valuable contribution to your organization, and, to reward you for your efforts, favorably endorse your promotion to an executive position. But is the managerial level right for you? Or are you getting set up to be a statistic supporting the Peter Principle?

Before you deliberate on which company car will go well with your new upper management title, consider the career shift tips and insights we gathered from three former-techs-turned-managers. Here are the realities you need to consider, along with steps you need to take, to ensure that your promotion from tech to manager doesn't raise you to your level of incompetence.

The Peter Principle Proven

In case you've ever wondered why ignorance rises to the executive level, here is a simple explanation that is also a mathematical proof:

Knowledge is Power.

Time is Money.

And, as every actuary (with some physics training) knows:

Work
---------- = Power
Time

So, if
Knowledge = Power
and
Time = Money

then through simple substitutions,

Work
---------- = Knowledge
Money

Solving for Money, we get:

Work
-------------- = Money
Knowledge

Thus, If Work is held constant as a positive number (no matter how small!) Money approaches infinity as Knowledge approaches zero.

What this means is:

All else being equal, the less you know, the more you make

Magellan's Log The Dick Principle by Harold J. Dick, Ph.D.No. 22 in The Idea Man Series.

In 1969, Laurence Peter set the world of management on its ear by announcing a revelation:

"In a hierarchically structured administration, people tend to be promoted up to their level of incompetence. Thus, every position will eventually be occupied by someone who is not quite capable of doing the job."

The Peter Principle quickly entered the curricula of all with-it MBA programs, but also turned out to have such widespread applicability that it became part of corporate folk knowledge. Everybody immediately grasped the principle because everybody recognized that their own boss was an example of the principle in action.

Careers were made and careers were shattered as people reacted, and overreacted, to Dr. Peter's great insight.

Having acknowledged my debt to the past, I now suggest it is time we update the Peter Principle.

The world that Larry Peter occupied and analyzed so cleverly is one that has come to be labeled the "Old Economy," the world of stable companies creating value the old-fashioned way: they worked for it. Such was the stability in that world that employees could actually expect to spend their careers with one company. It is a world that is still studied as the norm in the degree programs of economics departments and business schools.

That old working world still has applicability, but the time has come to question its pertinence in the brave new world of dot-coms.

For, the Old Economy continues to exist side-by-side with the New Economy, just as various cottage industries hummed along in their quaint medieval ways through much of the 19th century as the Industrial Revolution was rapidly rendering the old ways useless.

Brick-and-mortar we shall not always have with us, but probably for a while yet they will continue, including their legions of careers capped off by the unpleasant reality reflected in the Peter Principle.

The New Economy of the cyberworld requires a new theory of mismanagement, a new statement of the dizzying reality behind the glitzy career life in the dot-coms, the awfulness of careers spent surfing wave after tumultuous wave of IPO's. The New Economy is a world not of slow accretion, of gradual promotions, but of incessant and rapid job-jumping.

I give you, then, the Dick Principle:

In a cyber-economy,
people tend to be RE-hired
at their level of incompetence.

I hasten to explain:

Example No. 1 of the Dick Principle in Action:
Joe makes a software breakthrough at Company A, cashes in as the stock skyrockets. Joe is hot. Company B headhunts and hires Joe to oversee their software development team. Joe is brilliant at writing code but has no talent at nurturing others to write brilliant code. In other words, Joe is a lousy manager. Joe has been hired at the level of his incompetence. Joe has been dicked by the Dick Principle.

Example No. 2 of the Dick Principle in Action:
Jack has a conceptual brainstorm for Company C. The resultant dot-com becomes the overnight darling of NASDAQ. Jack cashes in and is hot. Company D lures Jack to be its CEO. Jack is a solitary, maverick thinker and has no talent at management. Jack has been dicked by the Dick Principle.

Example No. 3 of the Dick Principle in Action:
Mary is a brilliant manager with Company E. She is excellent at nurturing people and rises quickly to V-P for personnel and human resources. Company F makes her a huge offer: Come be our CEO and do for our talented team what you did with Company E. Mary quickly discovers that at Company F she has no time to nurture. The company is under tremendous investor pressure and can think only about what the price of the stock will be five minutes from now. Mary has been dicked by the Dick Principle.

Of course, the difference today is that Joe, Jack, and Mary have no financial worries. By the time they are hired at their level of incompetence, they all come equipped with golden parachutes. Thus, they have no personal need to maintain the pretense of competence in their new jobs any longer than they want to.

They have gained a world of wealth and financial security. All they've lost is meaning in their lives. They're no longer doing what they're good at and what they really enjoy.

The more things change, the more they stay the same. In its effect on people, the New Economy then turns out to be only the Old Economy in dot-com clothing. In moving from the Peter Principle to the Dick Principle, we have exchanged one career dead-end for another, one management foundering in incompetence for another also foundering in incompetence.

On the macro side, the Dick Principle means this: We already know that one price of cyber-technology is instability and rapid change (Moore's Law, etc.). Through the Dick Principle, we can see that the instability and rapid change also include the very people who are supposedly guiding and shaping the brave new world. Structurally, we have traded mid-level, stagnant incompetence for top-level, volatile incompetence.

Steve Jobs, with his successful return to Apple, is the exception that proves the principle. For every Steve Jobs, you have a thousand... Well, I don't want to get into naming names. If you are involved in, employed by, or invested in the cyber-world, you can easily supply your own examples of the Dick Principle at work.

Peter's Principle and Education

In 1994 I applied for and obtained an Excellence in Teaching award. Looking back I don't know how I even had the cheek to apply. In fact I no longer believe in the concept of a Excellence in Teaching award - perhaps a "Facilitator of Learning" award - or a "He was Lucky to have Good Students" award are worth consideration. (No one teaches people, what happens is that under some circumstances people learn - do you believe that you could write a book that "teaches" someone how to ride a bike?)

The education process is a formal application of the Peter's Principle - "People are promoted to the level of their incompetence". In the worst mode the education system just keeps moving a student up the ladder until he fails. There are a number of possible exits from the education system. A good exit occurs when a student achieves a level and chooses not to proceed to the next level. A poor exit occurs when a student fails between levels, at the second year of a four year course, for example. It does not follow that a student who can achieve a pass in first year subjects will be able to achieve a pass in higher year subjects. I know a bloke who with moderate training ran a marathon in 3 hours 18 minutes. The following year with more intensive training he ran it in 2 hours 56 minutes. Had he trained intensely in an attempt to achieve 2 hours 45 minutes on his third run, he would, most likely, have failed and done himself an injury in the process. It does not follow that a person's capabilities are indefinitely extendible with training. Coping with Pascal in first year does not imply the capacity to cope with C++ and Object Oriented Programming in year 3.

Now that students are encouraged to do double degrees, the failure exit is more likely, the hurdles have been raised, there are more of them and they are of greater diversity. This really is Peter's Principle land!

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Peter Principle - Wikipedia, the free encyclopedia

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Parkinson's law - Wikipedia, the free encyclopedia

The generalized Peter Principle in evolution systems tend to develop up to the limit of their adaptive competence


The Peter Principle was first introduced by L. Peter in a humoristic book (of the same title) describing the pitfalls of bureaucratic organization. The original principle states that in a hierarchically structured administration, people tend to be promoted up to their "level of incompetence". The principle is based on the observation that in such an organization new employees typically start in the lower ranks, but when they prove to be competent in the task to which they are assigned, they get promoted to a higher rank. This process of climbing up the hierarchical ladder can go on indefinitely, until the employee reaches a position where he or she is no longer competent. At that moment the process typically stops, since the established rules of bureacracies make that it is very difficult to "demote" someone to a lower rank, even if that person would be much better fitted and more happy in that lower position. The net result is that most of the higher levels of a bureaucracy will be filled by incompetent people, who got there because they were quite good at doing a different (and usually, but not always, easier) task than the one they are expected to do.
[PDF] The Peter Principle: A Theory of Decline File Format: PDF/Adobe Acrobat - View as HTML

Lazear, Edward P & Rosen, Sherwin, 1981. "Rank-Order Tournaments as Optimum Labor Contracts," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 841-64, October. [Downloadable!]
Other versions:

Fairburn, J.A. & Malcomson, J.M., 2000. "Performance, Promotion, and the Peter Principle," Economics Series Working Papers 9926, University of Oxford, Department of Economics.
Other versions:

Baker, George & Gibbs, Michael & Holmstrom, Bengt, 1994. "The Internal Economics of the Firm: Evidence from Personnel Data," The Quarterly Journal of Economics, MIT Press, vol. 109(4), pages 881-919, November. [Downloadable!]

Joao Ricardo Faria, 2000. "An Economic Analysis of the Peter and Dilbert Principles," Working Paper Series 101, School of Finance and Economics, University of Technology, Sydney. [Downloadable!]

Anderson, Ralph E. & Dubinsky, Alan J. & Mehta, Rajiv, 1999. "Sales managers: Marketing's best example of the peter principle?," Business Horizons, Elsevier, vol. 42(1), pages 19-26. [Downloadable!]


Reviews

Book Review - Peter Principle

Peter Principle

Quotes

    Random Findings

Just a Bump in the Beltway The Peter Principle

Big Bonuses Still Flow, Even if Bosses Miss Goals
By GRETCHEN MORGENSON

It was the kind of mistake that wage slaves can only dream of. Because of what the company called an "improper interpretation" of his employment contract, Sheldon G. Adelson, chairman, chief executive and treasurer of the Las Vegas Sands Corporation, received $3.6 million in salary and bonus last year, almost $1 million more than prescribed under the company's performance plan.

Four more top executives of the Las Vegas Sands, which owns the Venetian Resort Hotel and Casino, received more than they should have. The total in excess bonus payments for the five men was $2.8 million.

The compensation committee of the board conceded that it had made an error. But it said that "the outstanding performance of the company in 2005" justified the extra money, and it allowed the executives to keep it.

Shareholders of Las Vegas Sands did not fare as well. The value of their holdings fell 18 percent last year.

As executive pay packages have rocketed in recent years, their defenders have contended that because most are tied to company performance, they are both earned and deserved. But as the Las Vegas Sands example shows, investors who plow through company filings often find that executive compensation exceeds the amounts allowed under the performance targets set by the directors.

Executives of companies as varied as Halliburton, the military contractor and oil services concern; Assurant, an insurance company; and Big Lots, a discount retailer, all received bonuses and other pay outside the performance parameters set by the boards of those companies.

It is the equivalent of moving the goalposts to shorten the field, compensation experts say.

"Lowering the hurdles is especially disconcerting because very often the goals are not set all that high to begin with," said Lucian Bebchuk, professor at Harvard Law School and author with Jesse Fried of "Pay Without Performance." Mr. Bebchuk said shareholders should be especially alert to increases in bonuses because more companies were shifting away from stock options and into cash incentives.

Some employment agreements actually stipulate that they will provide bonuses even if company performance declines. The agreement struck in 2004 by Peter Chernin, president and chief operating officer of the News Corporation, entitles him to a bonus even if earnings per share fall at the company. If earnings rise by 15 percent in any given year, Mr. Chernin's bonus is $12.5 million. But if they fall 6.25 percent, Mr. Chernin's bonus is $4.5 million, and an earnings decline of 14 percent translates to a $3.52 million bonus.

Last year, Mr. Chernin received $8.3 million in salary and $18.9 million in bonus pay. A company spokesman declined to comment on the bonus structure. He confirmed that the company's chief executive, Rupert Murdoch, has a similar bonus arrangement. Company filings show that Mr. Murdoch received a bonus of $18.9 million last year.

The rich really are different than you and me. The culture of the extremely affluent has no accountability. This sort of flies in the face of the American myth that you do well by working hard and doing a good job. Above a certain level, that's a crock. The very wealthy protect each other and create a culture of incompetence that's insulated by money. Our very own W is the product of this culture.

The Peter Principle and the Neocon Coup by Robert Scheer

I'm not referring to the latest attempt to reconquer Iraq, but rather the wholesale political revenge campaign being waged by the hard-liners in the Bush administration against anybody and everybody inside the government who challenged the way the second Persian Gulf war in a decade was marketed and run.

Out: Secretary of State Colin Powell, whose political epitaph should now read, "You break it, you own it" for his prescient but unwanted warning to the president on the danger of imperial overreach in Iraq.

Out: Top CIA officials who dared challenge, behind the scenes, the White House's unprecedented exploitation of raw intelligence data in order to sell a war to a Congress and a public hungry for revenge after 9/11.

Out: Veteran CIA counterterrorism expert and Osama bin Laden hunter Michael Scheuer, better known as the best-selling author "Anonymous," whose balanced and devastating critiques of the Iraq war, the CIA and the way President Bush is handling the war on terror have been a welcome counterpoint to the "it's true if we say it's true" idiocy of the White House PR machine.

Meanwhile, incompetence begat by ideological blindness has been rewarded. The neoconservatives who created the ongoing Iraq mess have more than survived the failure of their impossibly rosy scenarios for a peaceful and democratic Iraq under U.S. rule. In fact, despite calls for their resignations — from the former head of the U.S. Central Command, Gen. Anthony Zinni, among others — the neocon gang is thriving. They have not been held responsible for the "16 words" about yellowcake, the rise and fall of Ahmad Chalabi, the Abu Ghraib scandal, the post-invasion looting of Iraq's munitions stores and the disastrous elimination of the Iraqi armed forces.

BELLACIAO - The Peter Principle and the Bush Administration - villy - Collective Bellaciao

Last night on Frontline they broadcast a biting documentary entitled "The Dark Side", which revealed the truth about how the CIA and the Pentagon were at odds about evidence for going to war in Iraq,etc. These guys emerged as the "Gang that couldn’t shoot staight", and reminded me of Lawrence Peters, who created the "principle" IN ANY HEIRARCHY, PEOPLE RISE TO THE LEVELY OF THEIR INCOMPETENCY AND REMAIN THERE.

Nowhere can I find better examples of this rule than in the Bush administration. To wit:

CONDOLEEZZA RICE: She was a talented pianist, an Oil Executive, a Russian studies expert,etc....but when she was made National Security Chief, she was suddenly clueless. Ditto when she "sidestepped" into her current position as Sec. of State.

COLIN POWELL: Despite having committed criminal acts (Iran-Contra Pentagon arms arrangements), Powell was highly respected worldwide until he buckled under and agreed to make the preposterous UN presentation of "evidence" of WMDs. Now he’s in disgrace and tyring to find someone to blame for HIS inadequacy.

DONALD RUMSFELD: A highly successful businessman and experienced government "servant" in past administrations, when he joined the Bush gang he suddenly "lost it", and made a series of absurd errors which fouled things up in Iraq beyond belief.....and he’s still at it. He refuses to resign.

DICK CHENEY: A long time politician and businessman, he was successful (if not popular) in most undertakings until he became VP (at his own request). He then got caught rigging energy contracts, feeding Halliburton good deals, and making endless false statements about WMDs and Husseins’ "connections" to al Qaeda..despite loads of evidence to the contrary. Now he’s among the most despised people in the entire world!

PAUL WOLFOWITZ: The neocon with offices in the Pentagon, Asst. Sec. of Defense, and professional liar once in the administration. He "knew" that Iraq’s prodigious oil output would "pay for the war", and predicted that we’d be welcomed in Iraq "with flowers and chocolate", and that the war would be a "cakewalk"...NOT!

GEORGE W. BUSH: I must say that Dubya just doesn’t fit here, but had to be mentioned, of course.
Bush was never really successful in his own right, having failed with a sports team (although bailed out), an oil company (bailed out) and as governor of Texas (popular, but what did he actully accomplish?). No, he was just a clown who was a part time drunk and alleged drug user who saw the light and straightened up enough to get "selected" as President...twice. Lawrence Peter would be lost when trying to figure out how one of the dumbest and most ignorant of all candidates could ever have achieved what he did.

What does HE know, anyway?

Bushisms "We are ready for any unforseen event which may or may not happen." ...



Etc

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