You’ve probably encountered managers you admire more for their technical skills than for their actual leadership skills.
Perhaps it’s the familiarity of this experience that lends the Peter Principle its popular appeal.
The Peter Principle, was initially laid out in a book by Dr. Laurence J. Peter (1969 ), it describes the following paradox:
If organizations promote the best people at their current jobs, then organizations will inevitably promote people until they’re no longer good at their jobs.
In other words, organizations manage careers so that everyone “rises to the level of their incompetence.”
The Peter Principle problem arises when the skills that make someone successful at one job level don’t translate to success in the next level.
In these cases, organizations must choose whether to reward the top performer with a promotion or to instead promote the worker that has the best skill match with a managerial position.
When organizations reward success in one role with a promotion to another, the usual grumbles ensue; the best engineer doesn’t make the best engineering manager, and the best professor doesn’t make the best dean.
The same problem may apply to scientists, physicians, lawyers, or in any other profession where technical aptitude doesn’t necessarily translate into managerial skill.
While the Peter Principle may sound intuitively plausible, it has never been empirically tested using data from many firms.
Please Click here for further discussion about Peter’s principle
The above discussions actually contains a section on what can be done to combat the effects of the Peter Principle.
It says that the Peter Principle can be combatted in two ways:-
First, firms can reward top performers with pay rather than promotion. In our data, we found that firms with the strongest pay-for-performance also promoted the best managers. In other words, by rewarding sales performance with greater incentive pay, firms are free to promote the best potential managers. The best salespeople don’t feel they “have to” become managers in order to earn more money.
A second solution is to let managers be managers: promote the best candidates for the managerial job role, let them manage large teams, and isolate their managerial responsibilities from their individual contributor responsibilities.
For further details regarding these two methods of combatting Peter’s Principle please click here.
It can be seen from the research undertaken by Alan Benson, Danielle Li and Kelly Shue , that promotion not only results in greater financial gain but also in more prestige. For many people the prestige can be more important than the financial gains.
However, I believe that there is a third way, which in some ways combines the best parts of the above two.
Companies should bring in a system that relies on pay bands, that rewards people equally for their technical and managerial experience. With roles whose job titles carry the same prestige.
Many companies say that pay bands are incredibly complicated and difficult to implement. Personally I believe that this is not just totally untrue, but also a way to keep the current remuneration package which only upside is that incompetent managers not only remain over paid but also in-situ.
There can be an issue of rewarding people of similar service periods and status differently depending on either their managerial or technical ability.
Some employees may not be as technically or managerial competent in their roles as others and so may not get the promotion that they believe they deserve. However, this does not mean that they are not good at the current job.
So the problem here is how to keep the employee who may be very good at their current job, but have reached the pinnacle of their technical/managerial ability, happy in their current position.
This can be overcome by increasing their annual salary so that they still feel appreciated. However, how do you increase their annual salary, but at the same time keep them in the appropriate pay band?
That is not as difficult as it appears, these employees can be given a guaranteed annual ‘bonus’, above their annual pay increase, that can be increased each year.
Once the pay increase had been given then whatever happened to their performance during the next twelve months their next pay increase would be based upon their ‘virtual’ annual salary which is made up of the top of their paygrade base salary and their previous paygrade bonuses.
This means that these employers will effectively get two pay increases each year, both of which would be pensionable. The first would be the annual increase that normally rises with the annual inflation rate, measured by either the Retail Price Index or the Consumer Price Index. The second would be based on their performance and would increase in line with a pay differential, that is based on the difference between their current pay grade and the pay grade of the position they would have been promoted to.
Both of these pay increases would be added to the employees base pensionable salary.
The increases above the pay band would perhaps go some way to enhance he employee’s sense of prestige, but to fully satisfy this sense of prestige there would need to be some progression in job title.
This could be the slightly more difficult part, as how to make the job title meaningful without making it sound condescending?
Speaking from my own experience, as long as the pay increase is ‘in-line’ with what the employee would have expected for the work they have put in, then the job title would not be too important if they felt the financial rewards were appropriate.