Laurence J Peters in his book “The Peter Principle” (Peters & Hull, 1969) argues that people are likely to be promoted until they reach a point where they are unacceptably incompetent.  At this point, they are unlikely to be promoted any further (at least in a well ordered organisation) because they are no longer competent and so remain at that level indefinitely.  The great worry about this is that they are incompetent at this level so the organisation is impacted by the presence of these incompetent people.

This happens in all organisations - large and small – but a small business with fewer staff is likely to be more impacted.

Very often this problem occurs when someone is moved from a technical competency – say a bookkeeper – to a management role where they manage people doing things rather than doing things themselves.  They may be good at bookkeeping but hopeless at managing people.  So you end up with an incompetent manager.  What do you do then?

You might reduce the probability of this happening by using ‘acting’ appointments where the person ‘acts’ in the role for long enough to show if they can do the job.  If not, they can be moved back to their previous position without too much loss of ‘face’ and you can try someone else in the position.

You can do what Peters calls a ‘lateral arabesque’ which is a sideways step in dance language.  It means the person is moved sideways out of the line of promotion thereby reducing their damaging impact on those below them and clearing the pipeline for more promotion for their old subordinates.  In a small business with few staff this is less practical and certainly not well advised.  If you buy an existing company, you may well find a number of staff who have been ‘laterally arabesqued’ to get them out of the way of the real workers.  Family members filling a meaningless position are a very common example.  As any such people are taking a wage from the company without earning it, they should be pruned heavily.

If you have enough opportunities for staff to be promoted (you are a business of a decent size) and you notice that some that should be promoted are not being promoted, you might like to introduce a policy that if they don’t rise up the chain you let them go; or at least have a serious investigation as to why they have stalled.  Though this seems tough, they may already be incompetent and they are probably acting as a roadblock on the promotion of better people from below them.

You might be surprised that incompetent people often know in their heart that they are not up to the job and understand why they are being moved on.

A Middle Management Problem

In a fast growing company, those internal people capable of managing growth at speed might rapidly be fully consumed in the present growth leaving little talent available to manage for future growth.

In the absence of such talent, mediocre players may be promoted into the spot (the Peter Principal at work) and thereby put your growth trajectory at risk.

If you are fast growing, or aspire to be, you should consider building up a reserve, or buffer, of potential middle managers so that you don't run out of talent.

When hiring more junior staff, also factor into the selection matrix their potential for growth into a management slot. Select for both technical competence at their point of entry and room to grow.

Maybe you are the Problem: Part 1

If you are an owner-operator, as you grow your business, there may come a point when the job has outgrown your skills.

This is a difficult decision point; and one that only you can make.

You might decide to slow down growth and adapt the business to a format that you can both manage and which gives you some personal satisfaction. Maybe change your personal and business goal from rapid growth to maximize profit.

On the other hand, you might decide to keep growing but bring in a CEO who is capable of managing that growth.  This has happened at any number of high tech successes like Goolge where the founders bought in professional management on top of them. If you learn from that manager, maybe you can take up the reins again at a later date.

Another by-product of this problem might be that you have trouble keeping competent staff who have options and might move on because they are not learning and developing under your management.

Maybe you are the Problem: Part 2

Be aware that you might be the cause of the Peter Principle.

A very common problem small business owners have is their inability to see that others don’t have their drive, knowledge and experience.  They tend to promote someone, throw them in at the deep end and then be surprised that they don’t do well.  So they fire them and start again.  You are the problem here and the sooner you recognise it the more likely you are to avoid losing a lot of good people because of your lack of management skill.

To reduce this problem in newly promoted staff, maybe you should send new promotions to a couple of days of training on e.g. how to be a front line manager.  It costs but it is much much cheaper than burning up your human resources by giving them impossible and demoralising tasks.  You can bet other staff are watching when you fire someone and are thinking 'maybe I am next'.

Maybe you are not very good at choosing people for promotion if you are getting it wrong on a regular basis.  For this reason, it is always better to have several people on a selection panel.  Their job is to throw up aspects of the candidate’s personality and experience that you might not have noticed, have pushed to one side, or are not close enough to them to be aware.  Make sure your hiring and promotions team has both genders.  Men and women will see things in candidates of their own gender that those in the other gender will often not see.  Also a range of experience and, very importantly, people that will argue with you about the candidate.



Refer to other articles on staffing from the Human Resources Menu.

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