Peter Principle

“When you left your old company and started at this one, the average IQ of both places dropped!”

This was a cutting jibe someone in my previous employment used to say to someone if they were getting too big for their boots. At the time, I did not realise there was a real term for this: the Peter principle.

What is it?

The Peter principle states that a person in a job will keep being promoted past roles they are good at, stopping at the point they become incompetent.

Why does it matter?

The most obvious problem is that the person you have in a senior position does not possess the competencies for the role.

The second-order effect, as asserted by the opening jibe of the post, is that the team the person has left has lost one of their top performers, and as a result the company is worse off in two ways.

How to avoid it

A common mindset is that to progress in a career, assumption of increased responsibilty by moving into and through management is the goal.

The double-edged sword of the Peter principle can be avoided by encouraging progression towards one’s skillset. Whether that skillset be deeper into software development, sales or design; or into management of people and processes.

Startup advantage

This reminds me of the “Do One Thing” principle from Zero to One (Chapter 10: Mechanics of Mafia):

“… every individual should be sharply distinguished by their work.”

It went on: “… every person in the company was responsible for one thing. Every person’s one thing was unique, and every-one knew I would evaluate them only on that one thing.”

This method ensures complete incentive alignment between the team member and the company. A sense of success and self worth is then aligned with the value added to the company, rather than promotion.

Further benefits of this aligment include a reduction in internal politics; and increase in tighter teamwork as the battle for a new job title takes second place to the success of the company.

Achieving this gets more difficult as a function of a company’s increasing headcount, and as such is a great advantage to be leveraged by a startup.


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