Friday, July 10, 2009

The Peter Principle proven

People who perform well at one level get be promoted on the assumption that they will also do well at another level. Common sense tells us so - a worker who is competent at a given level will also be competent at a higher level of the hierarchy. So it may well seem a good idea to promote such an individual to the next level. Or is it? The problem is that common sense can be counterintuitive. A new position requires different skills, thus the competence at one level may not necessarily mean equal competence in doing another task. We remember in Management 101 this seeming paradox known as Peter's Principle, after the Canadian psychologist Laurence Peter who succinctly described it thus:
"All new members in a hierarchical organization climb the hierarchy until they reach their level of maximum incompetence."
This could lead to the spread of incompetence throughout an organization. But is there a better way of choosing individuals for promotion?

Lately mathematical models are used to take into account collective behavior to discover features often counterintuitive and difficult to predict following the common sense. Scientists study the Peter Principle process within a general context where different promotion strategies compete with others for maximizing the global efficiency of a given hierarchical system.

Alessandro Pluchino, et al, Italian physicists/scientists, have simulated the Peter Principle practice with an agent-based model. Their results (02 July 2009), contained in a paper submitted to Elsevier Science, indicate that the Peter Principle indeed leads to a significant reduction in the efficiency of an organization, as incompetency spreads through it.

So is there a better way of choosing individuals for promotion? Pluchino and co. say there may be better ways.  Their model shows that two other strategies outperform the conventional method of promotion. One is to alternately promote first the most competent and then the least competent individuals. Another way is to promote individuals at random. Both of these methods improve, or at least do not diminish, the efficiency of an organization.

Their simulation showed that what Peter said in 1969 can happen. What the new study does not show is the potential decrease in morale (not just efficiency) due to the Peter Principle. The lower morale can have a multiplier effect in further bringing down efficiency. On the other hand, the study also did not take into account the possible decrease in overall morale if the competent ones are not promoted at all and if promotion was random or given to the least deserving. That defies the reward system and is heartless. As it is, promotions should be made regardless of the probable Peter Principle backlash. If and when the Peter Principle manifests itself, top management should be able to counteract. Top management surely does not want the Peter Principle to happen, but when it does, it must do something about it.

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