Hospo Stories

The Peter Principle: Why Competence Declines

"In a hierarchy, every employee tends to rise to his level of incompetence."

This is a summation of the Peter Principle*, a concept in organisational management that anyone who has suffered under an ineffective boss is sure to see some truth in. In simple terms, it states that within a hierarchical structure, high performing employees tend to be rewarded with promotions. This continues until they reach a position in which they are no longer competent or capable of effectively fulfilling their new role, at which point they will remain there - incompetence is rarely enough of a reason to be fired. (Sometimes of course, they are given another role to make them someone else’s problem.)

This concept highlights a potential flaw in traditional promotion systems, as it assumes that competence in one position necessarily translates to competence in the next higher position. However, skills and competencies required for different roles can vary significantly, and not every top-performing employee possesses the qualities necessary for effective leadership or management. They may be an excellent salesperson with little patience for guiding others, a great assistant manager who just can’t understand how to budget, or a people person with no stomach for making hard choices.

The Peter Principle serves as a reminder for organisations to consider factors beyond mere performance when making promotion decisions. This includes assessing candidates' aptitude and skills relevant to the new role to avoid placing employees in positions where they may struggle or fail, as well as considering the employee’s own desire for the new role – this is too often overlooked and can have a significant impact on future performance.

In many hospitality businesses, employees are sorted into categories based on annual reviews: star performers, competent and incompetent, perhaps a fourth group of those with potential but who need more time. When we have a role to fill, we typically look at our star performers. The Peter Principle, however, offers a cautionary guideline when making promotion decisions. If you find yourself with a vacant position, try using these strategies to make more strategic moves:

Identify core competencies: Clearly define the key competencies and skills required for each level of leadership within the organisation. This helps in assessing candidates' suitability for the new role and ensures that promotions are based on relevant qualifications, not just past performance.

Offer training and development programs: Provide ongoing training and development opportunities to nurture and enhance the skills and competencies required for higher-level roles. This can prepare employees for future promotions and mitigate the risk of promoting individuals solely based on their current performance. Don't forget as well that once you do promote someone they will need further training and support to give them the best chance of success.

Utilize job rotations and temporary assignments: Temporary assignments or job rotations can help assess an employee's capabilities in different roles and responsibilities. This allows management to gauge whether an individual has the potential to handle more significant responsibilities and make informed decisions about their promotion. It also gives individuals an opportunity to gauge for themselves if taking on more responsibility is both something that they want and something they can do.

Promote based on potential: Consider promoting employees based on their potential to grow and succeed in higher positions, rather than solely relying on their performance in their current roles. Identifying individuals with a strong drive to learn, adapt, and lead can be a better indicator of success in a higher-level position. An ‘acting’ manager role, with an agreed upon timeline, can give everyone a chance to try things out.

Encourage self-assessment and feedback: Create a culture where employees are encouraged to self-assess their skills and competencies honestly. Additionally, provide regular feedback and performance reviews to help employees understand their areas of improvement and potential for growth. These conversations should go both ways however – you also need to understand what your employee’s goals are, so that career plans suit both the business and the individual.

Offer lateral moves: Instead of promoting someone to a higher position immediately, consider lateral moves within the organisation. This gives employees an opportunity to develop new skills and experiences before they are promoted to a higher level. This is especially valuable in hotels, in which there are numerous departments which depend on one another for success.

Mentorship and coaching: Establish mentorship and coaching programs to support employees' growth and development. Experienced leaders can provide valuable guidance to potential candidates for higher positions, helping them prepare for future challenges.

A final challenge is to consider poor or mediocre performance and make an honest assessment of the reasons for it. It could be that the individual is simply unmotivated, but it could also be that they are in the wrong role for their personal competencies. Someone struggling as a waiter could thrive in reservations – it’s worth getting past any frustration to make an honest assessment if it means you don’t lose a good person from the organisation overall.

By incorporating these strategies, hospitality businesses can make more effective decisions about promotions, ensuring that individuals with the right mix of skills, competencies, and potential are placed in leadership positions. Remember, though, that transparent communication with your team will be an essential component to the success of this strategy. Star performers ‘passed over’ for a promotion in favour of someone who is perceived as less competent may be demotivated if they don’t understand why, especially if you are basing your decision on potential rather than demonstrated leadership. Regular conversations around performance, transparency about the key competencies for a position, and projects which give everyone opportunities to take a leadership role can help to mitigate such concerns.

*The Peter Principle was formulated by Dr. Laurence J. Peter, who published, "The Peter Principle: Why Things Always Go Wrong" in 1969