Peter Principle

What is the Peter Principle?

The Peter Principle states that in hierarchical organizations, competent employees are promoted until they reach a role in which they are no longer competent. In other words, people rise to their level of incompetence: promotions reward past performance, but the skills that made an employee successful in one role may not transfer to the next.

History

The concept was articulated by Laurence J. Peter in his 1968 book The Peter Principle. Peter argued that employees are promoted for success in their current jobs, not for the abilities required by the next job. As a result, excellent performers eventually occupy positions where they perform unsatisfactorily and tend to remain there, because simple incompetence usually does not lead to termination.

Effects on productivity and morale

When promotions place people into roles they are unsuited for, organizations may experience:

• Poor management and direction
• Increased errors, defects, or quality problems
• Cascading performance declines among subordinates
• Lower employee morale and resentment toward ineffective managers
• Multiple layers of weak management if promotions continue unchecked

How organizations can avoid the Peter Principle

Preventing or mitigating the Peter Principle requires deliberate HR and development practices:

• Assess fit for the target role, not just past performance — evaluate managerial potential and job-specific competencies.
• Provide role-specific training before and after promotion (leadership, communication, delegation, performance management).
• Offer alternative career paths (technical or specialist tracks) so high performers can advance without moving into management.
• Use probationary periods, mentorship, and coaching for newly promoted employees.
• Implement competency-based promotion criteria and objective performance metrics for managers.
• Encourage lateral moves or stretch assignments to test skills required for higher roles.

Example evidence

A study of sales workers across 214 U.S. firms found that companies commonly promoted top sales performers into management based on prior sales performance rather than managerial potential. Consistent with the Peter Principle, many promoted high performers underperformed as managers, generating costs for their firms.

Corollary and related ideas

Peter’s Corollary: Over time, every position in an organization will tend to be filled by someone who cannot competently perform its duties, potentially compounding mismanagement.

Dilbert Principle: Coined as a counterpoint, this idea suggests that some organizations deliberately promote their least competent employees into management to minimize the disruption they cause to productive operations.

Paula Principle: A related observation that women are often held below levels of competence due to structural barriers such as discrimination, weaker professional networks, and competing home responsibilities.

HR and legal considerations

Promotion practices should be fair and documented. In many jurisdictions, agencies overseeing employment practices set standards for non-discrimination in hiring and promotion; organizations should ensure their promotion processes comply with applicable laws and avoid biased criteria.

Key takeaways

• The Peter Principle explains why employees promoted for past performance may fail in new roles requiring different skills.
• Consequences include poorer management, reduced productivity, and lower morale.
• Organizations can counteract it with competency-based promotions, targeted training, alternative career tracks, mentoring, and objective evaluation of managerial potential.