The Peter Principle: When Good Employees Become Terrible Bosses

Ever wondered why your brilliant salesperson suddenly can’t manage a team to save their life?

Welcome to the Peter Principle!

It’s a simple idea: In hierarchies, people rise to their level of incompetence.

Sounds like a joke, right? Well, the joke’s on us because it’s costing companies billions.

Here’s a fun fact:

A recent study of 214 firms found that doubling a salesperson’s performance increased their chances of promotion by 14.3%.

Seems logical, doesn’t it? Well, it’s as logical as asking a fish to climb a tree because it’s great at swimming.

The same study showed that these star salespeople often make the worst managers:

Doubling a new manager’s pre-promotion sales corresponded to a 7.5% decline in each member of their team’s performance.

Great sports players act based on their distinct intuition, but they find it challenging to verbalize it, where many fail careers as coaches.

It’s just different skills.

Now, you might be thinking, “Onur, why should I care?”

Simple.

This mismatched leadership is leaving money on the table.

The study estimates that if firms promoted based on managerial potential instead of sales performance, they could boost team performance by 30%.

That’s not pocket change.

So, what’s really going on here?

At OGC Labs, we don’t just identify the problem; we perform surgery on it. Let me paint you a picture from a recent client:

• 68% of team leads were promoted based solely on their sales wizardry
• Only 23% had any leadership training (and no, watching “The Office” doesn’t count)
• Team productivity had nosedived by 31% in 18 months

Our solution?

We didn’t just slap a band-aid on it. We rewired the entire system.

We implemented leadership training that didn’t put people to sleep.

We matched new managers with mentors who’d been in the trenches.

We even dared to suggest that technical skills shouldn’t be the only criteria for the promotion.

The result?

In six months, productivity shot up by 27%, and employee turnover dropped by 40%.

It turns out that when you put the right people in the right seats, the bus actually moves forward. Who knew?

Here’s the bottom line:

The study found that collaboration experience positively predicts managerial performance. Yet firms aren’t consistently factoring this into promotions.

The Peter Principle is alive and well in most companies. It’s the elephant in the room that everyone sees but no one wants to talk about.

But there’s hope.

The research shows that firms with larger teams are starting to catch on, placing less weight on sales performance in promotion decisions.

So, are you ready to stop playing leadership roulette and start building a team that actually works?

Let’s talk.

Because in the game of business, the house doesn’t always have to win.

References

[1] Benson, A., Li, D., & Shue, K. (2018). Promotions and the Peter Principle. National Bureau of Economic Research. Link: https://www.nber.org/system/files/working_papers/w24343/w24343.pdf

[2] Zenger, J., & Folkman, J. (2022). “To Get Results, the Best Leaders Both Push and Pull Their Teams” Harvard Business Review. Link: https://hbr.org/2022/05/to-get-results-the-best-l eaders-both-push-and-pull-their-teams