Peter Principle - Solutions

Solutions

There are methods organizations can use to mitigate the risk associated with the Peter Principle. However, the implementation of such methods must be applied at all levels to be effective.

One way that organizations can avoid this effect is by having an "up or out" policy that requires termination of an employee who fails to attain a promotion after a certain amount of time. Example: A people manager is able to handle the vast majority of his or her current job responsibilities, but does not reveal the skill set necessary for promotion. The people manager possesses the potential to cause harm within the company, by way of preventing those beneath them with higher potential from moving up, as well as lowering morale once such employees become aware of this fact. The United States Military, for instance, requires that certain ranks be held for no longer than a set amount of time, a lack of compliance with which could render grounds for dismissal. This, of course, may have the effect of institutionalising the promotion of individuals into a role beyond their competence.

Another method is to refrain from promoting a worker until they show the skills and work habits needed to succeed at the next higher job. Thus, a worker is not promoted to managing others if they do not already display management abilities.

• The first corollary is that employees who are dedicated to their current jobs should not be promoted for their efforts (as in The Dilbert Principle), and instead should be rewarded with, say, a pay raise, while remaining in their current position.
• The second corollary is that employees might be promoted only after being sufficiently trained to the new position. This places the burden of discovering individuals with poor managerial capabilities before (as opposed to after) they are promoted.

Peter states that a class, or caste (social stratification) system is more efficient at avoiding incompetence. Lower-level competent workers will not be promoted above their level of competence as the higher jobs are reserved for members of a higher class. "The prospect of starting near the top of the pyramid will attract to the hierarchy a group of brilliant employees who would never have come there at all if they had been forced to start at the bottom". Thus he concludes that the hierarchies "are more efficient than those of a classless or egalitarian society" .

In a similar vein, some real-life organizations recognize that technical people may be very valuable for their skills but poor managers, and so provide parallel career paths allowing a good technical person to acquire pay and status reserved for management in most organizations.

Alessandro Pluchino, Andrea Rapisarda and Cesare Garofalo used an agent-based modelling approach to simulate the promotion of employees and tested alternative strategies. Although counter-intuitive, they found that the best way to improve efficiency in an enterprise is to promote people randomly, or to shortlist the best and the worst performer in a given group, from which the person to be promoted is then selected randomly. This work won the 2010 Ig Nobel Prize in management science.

Another technique for overcoming the effects of the Peter Principle can be found in the use of contractors (for example in the IT industry). IT contractors are selected for their relevant experience, supported by recent references, and are usually taken on for short periods (up to 6 months at a time, with renewals if competent). If incompetence is detected, they can be easily laid off (e.g. by simply not renewing their contract).

The contractor is not a part of the hierarchy, is not usually eligible for promotion, and is well remunerated and thus content with the contracted position, as well as being under pressure to perform to ensure continued employment.