We at DFC consider ourselves enormously lucky that we get to be our own bosses. This is for the usual reasons: We set our own goals are thoroughly invested in every aspect of our company, and do our work while surrounded by natural beauty of the Frontenac Arch! But there’s a new reason why we’re glad no one’s in charge of us coming down the pipes…
Three professors have taken it upon themselves to attempt to prove the “Peter Principle;” a formulation first presented semi-facetiously by Dr. Laurence J. Peter in 1968, that states: “In a hierarchy, every employee tends to rise to his level of incompetence.” The researchers — Danielle Li (MIT), Kelly Shue (Yale), and Alan Benson (Uminn) — crunched the performance-related numbers from a staggering 53,035 sales reps at 214 different American companies over six years. They did so to see if subjects followed the Peter Principle trajectory: doing well in a position and being promoted as a result, until they hit the failure point of landing in a position they cannot meet the demands of, and can therefore not be promoted up from. Bingo: managerial incompetence.
During the experiment, 1,531 of the best sales reps were promoted to managers, where the numbers quickly showed they began performing poorly. The researchers found a trend of repeated promotions for excellent salespeople, without consideration that their skills — that they were excellent at — might not transfer to management. This led to periods of instability not just for the promoted person, who took a productivity hit while they learned their new job, but for the entire team under them. From Forbes:
“A company that relies too heavily on sales as a criterion for promotion pays twice for the mistake. Removing a high-performing sales associate from the line potentially upsets her client relationships and puts the revenue of those accounts in jeopardy. The team newly under her direction is at greater risk of under-performing as she struggles in a role that demands quite different abilities. […]
The starkness of the results took Dr Benson by surprise. “I expected that the best salespeople would become merely-good managers: some skills translate to management and others don’t,’ he said. ‘To see that the best salespeople were becoming the worst sales managers was surprising.’”
The conclusion standard companies can draw from this new proof of the Peter Principle is that promotions are not as easy as they might seem, and can cost a lot of productivity if candidates are not accurately assessed for their real skills, rather than a demonstrated level of amorphously defined “success.” The conclusion that non-standard companies (like DFC!) can draw? Maybe it’s better to be your own manager — because if your manager is incompetent, you have no one to blame but yoursel