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The Peter Principle and the Law of Crappy People

dilbert-principle-5-feb-1995

If you’ve ever worked in an organization, you’ve no doubt come across someone in senior management and asked yourself how they ever got promoted.

The Peter Principle, coined by Dr. Laurence J. Peter and Raymond Hull in their 1969 book The Peter Principle, contends that, in a hierarchy, people are sooner or later promoted to positions which they are no longer skilled to handle. This is their “level of incompetence.” This is where they stay.

James March offers some compelling insight into why this happens.

In his book High Output Management, Andy Grove points out that this is largely unavoidable because there is no way to know a priori at what point the person will be incapable of handling further promotions.

In The Hard Thing About Hard Things: Building a Business When There Are No Easy Answers Ben Horowitz discusses the Law of Crappy People.

The Law of Crappy People states: For any title level in a large organization, the talent on that level will eventually converge to the crappiest person with the title. The rationale behind the law is that the other employees in the company with lower titles will naturally benchmark themselves against the crappiest person at the next level. For example, if Jasper is the worst vice president in the company, then all of the directors will benchmark themselves against Jasper and demand promotions as soon as they reach his low level of competency.

Horowitz suggests the best way to overcome this is with a properly constructed and disciplined hiring process.

Ideally, the promotion process should yield a result similar to the very best karate dojos. In top dojos, in order to achieve the next level (for example, being promoted from a brown belt to a black belt), you must defeat an opponent in combat at that level. This guarantees that a new black belt is never a worse fighter than the worst current black belt.

Frustratingly, there is no exact analogue to a fistfight in business, so how can we preserve quality without actual combat?

To begin, start with an extremely crisp definition not only of the responsibilities at each level but also of the skill required to perform the duties. When describing the skills, avoid the generic characterizations such as “must be competent at managing a P&L” or “must have excellent management skills.” In fact, the best leveling tools get extremely specific and even name names: “should be a superstar recruiter— as good as Jenny Rogers.”

Next, define a formal process for all promotions. One key requirement of the process should be that promotions will be leveled across groups. If you let a manager or a single chain of command determine promotions unilaterally, then it’s possible that, for example, HR will have five vice presidents and Engineering only one. One way to level across groups is to hold a regular promotions council that reviews every significant promotion in the company. When a manager wishes to promote an employee, she will submit that employee for review with an explanation of why she believes her employee satisfies the skill criteria required for the level. The committee should then compare the employee with both the level’s skill description and the skills of the other employees at that level to determine whether to approve the promotion. In addition to ensuring fairness and level quality, this process will serve to educate your entire management team on the skills and accomplishments of the employees being submitted for promotion.

Most management teams I’ve worked with spend too little time on promotions, which encourages politics. Employees see gaps in the process and focus on exploiting them. Another big mistake is hiring by consensus, which leads to hiring for a lack of weakness rather than a strength. This kills organizations.