Does your organization practice the top-down management style and is the organization’s structure such that you do more internal promotions than external hires and do you promote employees based on their technical competencies in their current role rather than their overall competencies for the new and higher role?

If you answer yes, yes and yes… oh what a tangled web you weave. You are creating a complex, difficult and confusing situation for your organization that it is bound to spiral out of control.

With the top-down management style jobs are altered and completed based on higher authority, employees receive specific tasks and tasks are delegated by higher management.

However, for this style of management to be advantageous to an organization, the people in positions of authority must be appropriated skilled to reduce risk in decision-making.

When a vacancy arises in an organization, there are basically two options – institutional knowledge or new perspective.

For companies that use internal promotion as one of their main retention strategies, institutional knowledge is usually their first option.
While an internal hire may prove to be cheaper in the short-term it could prevent the company from innovating and creates a who range of problems for the organization.

Within the next couple weeks, we will revisit a trending problem that was identified by Dr. Laurence J. Peter in his well-researched analysis called “The Peter Principle”. According to Dr. Peter, an employee who works for a company that practices top-down management is likely to be promoted until he is promoted to a level above his competence. Dr. Peter referred to this level as the “final placement.”

The Peter Principle is encouraged within organizations where most entry level jobs require technical expertise or some special kind of skill.

Skilled employees who exhibit technical competencies are subsequently promoted based on their technical ability with little or no consideration for their ability to manage or lead. As you move up the ladder, the skills needed to successfully perform your duties change and managers/leaders need less technical skills and more managerial and leadership skills to succeed.

Indeed for Employers, in an article titled “What is The Peter Principle? (And How Can Your Business Avoid It?) Shared the following examples of how The Peter Principle might play out in an organization:

1. The Peter Principle in a fast-food restaurant:

Individuals are hired to work entry-level positions, such as front-counter, drive-thru or grill. Someone who excels at one of these positions because he/she is good at customer service or simply have a strong work ethic might eventually be singled out and promoted to shift supervisor—even if they have no leadership experience or relevant skills. Some of those individuals will remain at shift supervisor positions, probably struggling to succeed, because they don’t have the skills or knowledge to do the job properly.

Meanwhile, those shift supervisors who are able to perform well may eventually move up to store management positions. Eventually, says the Peter Principle, all shift supervisor positions will be held by those who are not competent and this same story will play out at higher levels.

2. The Peter Principle in a sales organization
Studies conclude that sales leadership tends to consider performance and not supervisory experience or other relevant skills. One example would be giving a management position to the highest performing salesperson. However, someone who can meet and exceed sales goals on a regular basis and appears to have a magical ability to close deals does not necessarily have the skills or even the personality to be a good manager.

3. The Peter Principle in a non-profit agency
Employees in a non=profit often begin as volunteers, but what makes a good volunteer doesn’t necessarily make a good employee.
As employees rise in the ranks through a non-profit, they may also experience more of the Peter Principle. For example, someone who is great at providing customer service at fundraising events might not be the best choice for planning and running said events. And the person who excels at planning and running an event may not do well running a permanent team of people or ongoing non-profit accounting processes.

Join us next week as we look at how The Peter Principle could impact your business and how to avoid it.