The Peter Principle Is Real: Why Best Performers Become Weak Managers

In 1969 Laurence Peter and Raymond Hull published a satirical book proposing that, in a hierarchy, every employee tends to rise to their level of incompetence. People are promoted for doing their current job well. They keep being promoted until they reach a job they do badly, and there they stay.

It was written as a joke. Half a century later, researchers with data on tens of thousands of workers tested it and found that the joke describes something real. This guide looks at the evidence, the psychology behind the pattern and the practical alternatives.

What does the evidence show?

The clearest test used sales, a field where performance before and after promotion can both be measured.

The researchers also found a useful signal that firms largely ignored. Salespeople who had more often worked on shared, collaborative deals turned out to be better managers. That information was in the firms’ own systems. It was simply outweighed by the headline sales number.

So the Peter Principle holds in the data, in at least one large occupation. Organisations systematically promote on a measure that does not predict success in the next role, and in this case predicts the opposite.

Why do the skills not transfer?

Because many individual jobs and the job of managing them call for different things, and sometimes opposite ones.

A star who solves every problem personally becomes, as a manager, a bottleneck. The habits that produced the results get in the way. The shift in identity this requires is described in our guide to first-time managers.

There is also a statistical explanation, proposed by the economist Edward Lazear. Performance in any period is partly ability and partly luck. People are promoted after an unusually good run. Afterwards the luck averages out, and performance falls back, even if the two jobs needed identical skills. Some of what looks like incompetence after promotion is regression to the mean.

Does it apply outside sales?

Sales was studied because it offers clean numbers, not because it is unusual. The same logic applies wherever the individual job and the supervisory job differ: the best engineer made engineering manager, the best clinician made clinical director, the best teacher made head of department, the best reporter made editor. In each case the organisation gains a manager of uncertain quality and loses a great deal of the specialist work that person used to do.

The effect is likely to be weaker where the senior role is a larger version of the junior one, and stronger where it is a different kind of work. A useful test is to list what the person will spend their week doing after promotion and to ask how much of it they have ever been observed doing. If the honest answer is “very little”, the promotion is a bet placed on evidence from a different game.

If it works so badly, why do organisations keep doing it?

Because promotion is asked to do two jobs at once. It is a way of filling management posts, and it is a reward. The two purposes conflict.

As a reward, promotion is powerful. Economists describe it as a tournament: the prize of a bigger job motivates everyone competing for it, including those who do not win. Giving the prize to the best performer is what makes the tournament credible. Promote someone else and the top performers conclude that results do not count.

Benson and colleagues suggest firms may be making a deliberate trade: accepting worse managers in exchange for stronger incentives for the sales force. Whether or not it is deliberate, there are psychological forces pushing in the same direction.

• It feels fair. “She earned it” is an argument about desert. It is intuitive and hard to oppose.
• It is measurable. Current results are on a dashboard. Management potential is a judgment.
• It is safe for the decision-maker. No one is criticised for promoting the top performer.
• Halo. Excellence at one thing is assumed to carry over to others, an effect described in our guide to interview bias.
• There is nothing else to give. In many organisations a management title is the only route to higher pay and status.

How can you reward stars without making them managers?

By building a second ladder. Dual career tracks, common in engineering, science, law and medicine, let people rise in pay, title and influence as specialists.

For a technical or expert track to work, three things have to be true. The pay at each level must genuinely match the management equivalent; if “principal engineer” pays less than “engineering manager”, people will read the difference correctly. The roles must carry real authority, such as setting technical standards or signing off designs. And senior leaders must treat the track as equal, which means experts are in the room for important decisions.

Other non-promotion rewards also matter: larger territories or accounts, bonuses, recognition, the choice of projects and a hand in training others. If the only prize on offer is a management job, do not be surprised when people who would hate managing apply for it. How incentives of this kind behave is covered in bonus psychology.

How should you select managers instead?

On evidence about the job they are going to do.

Look for management behaviours in the current role. Who do colleagues go to for help? Who has trained new starters well? Who shares credit? Who has run a project that depended on other people? The sales study found exactly this kind of signal, collaboration, to be predictive.

Create trials. Leading a project team, covering for a manager during leave or mentoring two juniors lets both sides find out what the work is like before a permanent decision.

Assess for the role. Use a structured interview and realistic exercises, such as a role-played difficult conversation or a prioritisation task, built around what the management job demands. The method is in the case for structured interviews.

Ask whether they want it. Many high performers accept a management role because refusing seems like a lack of ambition. A frank discussion of what the job involves, including how little of the old work they will do, saves a great deal of unhappiness.

What do you owe someone you have just promoted?

Training and time. Most new managers receive little preparation; studies and surveys repeatedly find that people are given their first formal management training years after their first management job, if at all. A promoted star who struggles has often simply been asked to do an unfamiliar job with no instruction.

A minimum package includes training in the basics of one-to-ones, feedback and delegation before or shortly after starting, a mentor who is not their line manager, a reduced personal target so that they have time to manage, and a review at six months with an honest conversation about how it is going.

What if it has already gone wrong?

Then the kindest course is to say so early. A struggling manager usually knows. What they fear is the loss of face involved in stepping back, which is why making the return route respectable is so important.

Some organisations address this in advance by treating first management appointments as trial periods with a guaranteed way back to a senior individual role at no loss of status or pay grade. Where that was not arranged, a newly created specialist role with a serious title and remit can achieve the same thing. What does not work is leaving the person in post and managing around them, which damages the team and tells everyone that the organisation tolerates poor management.

The distributor eventually created a “strategic accounts director” role for Viktor, reporting to the managing director, with the largest customers and no direct reports. His income rose. The region got a manager who had been a solid, not spectacular, representative and whom three colleagues had separately named as the person who taught them the most. The managing director now asks that question, who taught you the most, before every management appointment.

Frequently asked questions

Related: for practical ways to promote without falling into the trap, such as sideways moves and skill-based promotion criteria, see Outsmarting the Peter Principle: Smarter Ways to Promote Talent.