The Peter Principle: What It Is and How to Overcome It

What Is the Peter Principle?

The Peter Principle is an observation that the tendency in most organizational hierarchies, such as that of a corporation, is for every employee to rise in the hierarchy through promotion until they reach a level of respective incompetence.

In other words, a front-office secretary who is quite good at their job may thus be promoted to executive assistant to the CEO which they are not trained or prepared for—meaning that the secretary would be more productive if they had not been promoted.

The Peter Principle is thus based on the paradoxical idea that competent employees will continue to be promoted, but at some point will be promoted into positions for which they are incompetent, and they will then remain in those positions because of the fact that they do not demonstrate any further competence that would get them recognized for additional promotion.

According to the Peter Principle, every position in a given hierarchy will eventually be filled by employees who are incompetent to fulfill the job duties of their respective positions.

Key Takeaways

  • The Peter Principle observes that employees rise up through a firm's hierarchy through promotion until they reach a level of respective incompetence.
  • As a result, according to the Peter Principle, every position in a given hierarchy will eventually be filled by employees who are incompetent to fulfill the job duties of their respective positions.
  • A possible solution to the problem posed by the Peter Principle is for companies to provide adequate skill training for employees receiving a promotion, and to ensure the training is appropriate for the position to which they have been promoted.

What's the Peter Principle?

Understanding the Peter Principle

The Peter Principle was laid out by Canadian educational scholar and sociologist, Dr. Laurence J. Peter, in his 1968 book titled The Peter Principle. Dr. Peter stated in his book that an employee's inability to fulfill the requirements of a given position that he is promoted to may not be the result of general incompetence on the part of the employee as much as it is due to the fact that the position simply requires different skills than those the employee actually possesses.

For example, an employee who is very good at following rules or company policies may be promoted into the position of creating rules or policies, despite the fact that being a good rule follower does not mean that an individual is well-suited to be a good rule creator.

Dr. Peter summed up the Peter Principle with a twist on the old adage that "the cream rises to the top" by stating that "the cream rises until it sours." In other words, excellent employee performance is inevitably promoted to the point where the employee's performance is no longer excellent, or even satisfactory.

According to the Peter Principle, competence is rewarded with promotion because competence, in the form of employee output, is noticeable, and thus usually recognized. However, once an employee reaches a position in which they are incompetent, they are no longer evaluated based on their output but instead are evaluated on input factors, such as arriving at work on time and having a good attitude.

Dr. Peter further argued that employees tend to remain in positions for which they are incompetent because mere incompetence is rarely sufficient to cause the employee to be fired from the position. Ordinarily, only extreme incompetence causes dismissal.

Most people will not turn down a promotion, especially if it comes with greater pay and prestige—even if they know they are unqualified for the position.

How to Overcome the Peter Principle

A possible solution to the problem posed by the Peter Principle is for companies to provide adequate skills training for employees both before and after receiving a promotion, and to ensure the training is appropriate for the position to which they have been promoted.

It is also important to carefully assess the job skills of all candidates, especially for internal promotions. Many valuable skill sets do not transfer well to higher positions—for example, a person may be an exceptionally skilled engineer but lack the social skills to be an effective manager. Having a clear picture of the employee's skills will allow the company to find placements that suit their interests.

However, Dr. Peter pessimistically predicted that even good employee training is ultimately unable to overcome the general tendency of organizations to promote employees to positions of incompetence, which he refers to as positions of "final placement." Promoting people at random has been another proposal, but one that does not always sit well with employees.

Evidence for the Peter Principle

The Peter Principle sounds intuitive once the idea is understood, and models can be built that predict the phenomenon. Still, it is difficult to get real-world evidence for its widespread occurrence.

In 2018, economists Alan Benson, Danielle Li, and Kelly Shue analyzed sales workers' performance and promotion practices at 214 American businesses to test the Peter principle. They found that companies did indeed tend to promote employees to management positions based on their performance in their previous position, rather than based on managerial potential.

Consistent with the Peter principle, the researchers found that high-performing sales employees were more likely to be promoted and that they were also more likely to perform poorly as managers, leading to considerable costs to the businesses.

How the Peter Principle Affects a Business

The Peter Principle can have several negative effects on a company's productivity and morale.

Perhaps the greatest consequence is less effective leadership: Since the newly-promoted managers are not well-suited to their roles, they may be less able to provide effective management and direction to their employees. This can also lead to high rates of error or defects if their new responsibilities are associated with quality control.

These problems can trickle down to other employees, who will make more mistakes as a result of poor management. Lower-level workers may continue to be promoted, resulting in several layers of managers who lack the skills or training for their jobs. This can also damage employee morale, since remaining employees may resent their poor management.

Peter Principle vs. the Dilbert Principle

The Peter Principle is the inverse of the Dilbert Principle, an idea coined by the cartoonist Scott Adams for the comic strip Dilbert. This rule states that companies tend to promote their least-competent employees to management roles where they are least likely to interfere with production.

Both rules seek to explain the presence of incompetent people in management positions but use different explanations. The Peter Principle states that people are promoted until they reach a position where they are no longer competent; the Dilbert Principle states that they are promoted because of their incompetence.

What Is the Corollary to the Peter Principle?

Peter's Corollary is an extension of the Peter Principle. It states that in time, every position within an organization will be filled with someone who is not competent to fulfill the duties of their role. This may result in compounded mismanagement and poor leadership.

What Is the Peter Principle for Women?

Sometimes dubbed "the Paula Principle," this rule states that women tend to work in positions that are below the level of their competence. Tom Schuller, who coined the term, suggested five potential reasons for this "competency gap:

  1. Sexist discrimination still exists.
  2. Women lack the "old boy's network" of professional contacts that male colleagues use to gain promotions.
  3. Women are more likely to admit that they lack some of the skills for a job.
  4. Women bear most of the burdens of child care.
  5. Women may make a "positive choice" not to rise as high as they might.

How Do Companies Solve the Peter Principle?

Companies can solve the Peter Principle by carefully assessing the skills and interests of their employees, and promoting them only to roles that are well-suited to their abilities and personalities. They should also provide additional mentoring and skills training to help newly promoted employees grow into their new roles.

The Bottom Line

The Peter Principle is a theory of management that seeks to explain why many companies have seemingly ineffective management staff. It states that rather than promoting people to the roles they are best suited for, companies will tend to promote effective employees to roles where they are not qualified. This can sometimes result in poor management and ineffective leadership.

Article Sources
Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.
  1. Quarterly Journal of Economics. "Promotions and the Peter Principle."

  2. The Paula Principle. "About."

Take the Next Step to Invest
The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace.