The Peter Principle: Are You Giving Your New Leaders the Best Chance For Success?

We operate with the presumption that if someone is great at their role, we should promote them to a higher one.

And yet, one recent study found that while high-performing salespeople have a higher chance of moving into management, their prior success in sales “negatively predicts managerial performance, even after accounting for selection into the sample of promoted workers.”[1]

The study analysed 214 client firms across several industries. Their analysis indicated that managers who performed well as salespeople “have lower value added from the perspective of increasing the average sales performance of their subordinates”. Of course, we can look at a number of variables that make a good “manager” beyond this key indicator, and the researchers note the limitations and possible alternative explanations for the study.

Still, it’s concerning to think that there are so many people who are promoted to management, only to perform at a lower level than one would expect.

The researchers relate this to the now-famous “Peter Principle”. You may be familiar with the phrase, ‘that person has been promoted to the point of incompetence’ – the idea that people move up in a corporate hierarchy until they are not doing a good enough job to move up anymore. A manager has been promoted to manager because they are a high performing salesperson. Still, because they aren’t a particularly good manager, they’ll stop there – they’ve been promoted to the point of incompetence. Dr Laurence J. Peter coined the Peter Principle in 1968, the idea beautifully summarised as “the cream rises until it sours”.

Of course, it’s not a particularly pretty image to think that people in our business – or ourselves as individuals – might be destined to move up the ranks until we aren’t very good at our jobs.

Sometimes – and Dr Peter references this also – the reason this happens is that the skills assessed in the previous role do not translate over to the skills required for the new position. I have written about this before in the article; Great Salespeople Don’t Necessarily Make Great Leaders. 

I don’t know that there is a concrete solution to the Peter Principle playing out in business in general. I do, however, assert that there are ways to minimise this happening. By placing more focus on and investment into our new managers, and assessing the promotion process carefully, we can give people a better chance to succeed in leadership.

How to Minimise the Cream Rising Until It Turns Sour

1. Consider the New Role When Promoting

For business leaders, it becomes essential to assess, before promoting, what you’re looking for in a managerial candidate. Is the highest performing salesperson enough?

Have you also considered what the managerial role involves – the ability to problem solve, mentor and develop, motivate, understand the accounting side of the business, emotional intelligence, and so on?

Does this person already demonstrate leadership behaviour with their colleagues? Senior salespeople sometimes get great results because they have their blinders on to everything except their results. I would suggest unless you’re merely looking for someone to step in and close deals, that you might be wise to also look to the senior salesperson who also engages with their junior colleagues as a teacher and supporter.

2. Consider Money and Motivation

In some roles, your earning potential is higher if you are a top salesperson than if you were promoted to management, account management, or some other position. While the magic of titles makes management appealing to many, occasionally the high performer might not want to go into a different role.

They may be more motivated to continue serving clients themselves. They may not get excited about the concept of holding team meetings, keeping others accountable, and developing their subordinates.

In this case, I’d suggest that everyone may be a whole lot happier if you looked elsewhere for someone to move into management. It’s always worth getting to know your salespeople enough that you can have transparent conversations about what they want to achieve long term, and develop a succession/promotion plan where everyone is on board. Don’t presume that your plan for someone is their plan.

3. Develop a Strong Upboarding Process

Most businesses will invest a significant amount of time and money into their onboarding process. New employees will get training, mentoring and formal guidance to assist their transition into the business.

What about those employees, though, given an opportunity to move up into a higher position of leadership?

Why do we send them diving into the deep and hope that they don’t drown? 

Upboarding (as opposed to onboarding) is one of the most critical processes that you can develop in business.

This could involve:

• A thorough induction into the new position, where expectations are made very clear and agreed upon by both parties;

• The opportunity (where available) to shadow others in the role, prior to moving into the position;

• Formal and scheduled mentoring sessions with the manager’s manager (the meta-manager), where the new manager can ask questions and learn how to overcome new challenges as the role presents them;

• Formalised training on the skill gaps expected between sales and management. Training should include soft skills, for example, developing others, understanding motivation, conflict resolution, accountability and having difficult or uncomfortable conversations. It should also include training for hard skills like using new software, understanding logistics, stock control, the accounting side of the business, or any other business segment that management must understand;

• Resources provided in the form of training manuals, process guides, key contacts for different parts of the business that the manager now has to engage with, and any other relevant material;

• Continued leadership development and training for all managers within the organisation;

• Continued facilitation of ideas and meetings where managers can collaborate to improve the business and processes; and

• Ideally, in a larger organisation, a mentor/buddy system. This is where each manager is assigned another as their official buddy – they can call each other to discuss business issues, work together and ideally develop a friendship in the process. This system can work well to foster new relationships when they may be less likely to grow organically. In some companies, you would set this up so that more experienced managers are partnered with new managers.

Depending on the business, you may incorporate some or all of these in your upboarding process. Or, it might involve some other factors entirely. The key components are training, support and appreciation.

The point is, we need to stop unfairly treating new managers as though they had absorbed all the new skills and processes of a manager by osmosis when they were in their sales role.

4. If You Are the New Manager, Focus on Your Development

If you are the new manager, take some accountability for your development as a leader. Embrace books (there are so many great ones – start with The One Minute Manager, Leaders Eat Last, or The Dichotomy of Leadership to kick you off), seek out mentorship and look for learning opportunities from the moment you enter the role. Recognise that, as they say, what got you here won’t get you there. Treat your promotion as the start of a new journey, rather than the endpoint.

Summed Up

In a perfect world, before someone becomes a manager, they are developed and mentored by their boss, so they are relatively prepared prior. In reality, much of the time – especially in sales – people attempt to prove their competence through success in their current role. That means the high performing salesperson focuses on consistently generating sales, rather than spending time developing their future potential leadership skills – which makes sense.

When we don’t account for changes between different roles in a promotion setting, we risk supporting the Peter Principle.

I am of the firm belief that if we were to approach internal promotion like we do the recruitment induction process, we would have more success with new managers. By investing in their leadership and management development, and understanding the difference between their previous and current role, we can set people up for success.

It’s all well and good to promote someone based on their leadership potential – but if you don’t take any accountability in helping that person execute and realise that potential, you’ll be left with another manager who could have done great things.

What do you think?

This blog post was originally posted on my training website, Statusone.com.au, on Dec 10, 2019. I have since been moving some of my favourite blog posts from there over to here, as this is now my ‘content hub’ and I want you to have access to some of the cool stuff I’ve written about before. You can still check out the Status One site if you’re interested in corporate training if you want. Also, don’t forget to sign up for the newsletter below for updates and weekly exclusive content. 

[1] Bensen, A., Li, D., and Shue, K. (2019) Promotions and the Peter Principle, The Quarterly Journal of Economics, 134(4), 2085-2134.