The Peter Principle: How Best Employees Turn Out to Be Incompetent
The effect described above is known as the "Peter Principle": in any organization with a hierarchical structure, every employee tends to occupy the position in which he or she will turn out to be incompetent (i.e. unable to succeed and/or to achieve the desired results) and remain in this position. While an employee effectively performs the tasks of each position, he/she keeps being promoted until there is a position which is beyond this employee’s capabilities. It is impossible to return this employee to the previous position: the place is already taken and the reputation of the person in charge might be damaged because of it.
This situation puts a company in a difficult position. If you do not hire employees from outside the company, then after a while it will be full of incompetent employees. And the problem is not just in the lack of "fresh blood": incompetence begets and multiplies incompetence. For example, an incompetent manager assesses not the actual results of his or her subordinates, but the visible manifestation of their contribution to the company's performance: compliance with accepted rules and orders, loyalty and benignity, and absence of threat to manager’s career from them. As the situation unfolds and only incompetent employees and managers take over all levels of hierarchy, the company pays less attention to productive activities, such as achievement of its set goals, the increase of operational efficiency, and finding new opportunities for growth.
Unsurprisingly, all of this has a direct impact on business results: CEB SHL studies show that more than 80% of the decline in performance is caused not by external factors, but by employees’ actions.
Whatever business’s problem is: loss of customers and their loyalty, a ruined reputation and unclear brand positioning, low quality of products and imbalances in the supply chain, erroneous pricing and a poorly thought out business model, senseless investments, and unprofitable alliances - in almost any of them incompetence plays the biggest part.
Remember how DEC and Kodak were on the verge of bankruptcy? A few years prior to that, both companies relied on the well-known, proven popular products. But they ignored the discoveries and solutions which later became the basis for the new generation of technology. The reason was the incompetence of the staff and managers who were responsible for strategic planning and analysis of long-term industry trends.
External recruitment is not a salvation
The problem has two solutions. The first one is to hire more employees from outside the company. However, a difficult economic situation can force most organizations to reduce their external recruitment programs. Competition among applicants during the crisis might double. For instance, in early 2015 Russian job search website hh.ru registered increase from 6 to 12 resumes for each job vacancy due to the crisis in the Russian economy.
However, even in poor economy companies never stop planning further development of business. On the contrary, they seek to retain and grow their market share, improve the efficiency of processes, launch new products and services. To do this, they need people, so it is not surprising that during crisis improvement and education of the existing staff becomes more attractive. But do companies understand the potential of their staff members? Global CEB SHL studies say that within the internal recruitment companies very rarely use objective assessment tools.
Only 40% of surveyed organizations use skills and knowledge tests to assess their current staff, while for external candidates such tests will be offered by 73% of the companies.
The situation is similar with personality questionnaires: only 34% of organizations use them for internal recruitment and promotion, and 62% - in the framework of external recruitment. It is even worse is the case with tests of cognitive and intellectual abilities: 24% and 59% respectively.
It turns out companies tend to check their internal candidates much less carefully. The main source of information about these people is, firstly, the subjective views of their superiors and colleagues, secondly, past achievements and successes at work and, finally, something that can be called social indicators: experience in the company or in previous positions, diplomas and certificates, connections and recommendations, and so on.
Of course, this information is relevant. Especially when it comes to strategically important positions: it allows selecting the candidates, who have already adapted to the culture and style of the company, acquired the necessary connections and reputation and have achieved some results. But this information says very little about the actual potential of an employee. Instead, the focus is primarily put on past successes, which in its turn is precisely why "Peter Principle" occurs, when the promotion of a successful employee can easily lead to completely incompetent company leader emerging.
Of course, there are a lot of tools in the market, which allow you to monitor your employees to check how professional each and every one of them actually is. They come in many shapes and sizes from simple time trackers or screenshot takers to advanced multifaceted programs such as CleverControl, for instance. These kind of programs are undeniably useful for improving business processes in the company, but when it comes to employee assessment it is always better to prevent an incompetent employee from getting an important position than later find out that some promotion was a mistake.
Objective evaluation is the best remedy
What internal candidate information will help a company to choose the most suitable one for a vacant position? What sources of information can be trusted?
The results of an employee in a new position or in a new environment depend primarily on him or her having the necessary competencies, which are sustainable and clearly exhibited behaviors, consistent and effective in real work situations. It is not so easy to assess the level of competencies directly, as it requires large-scale and well-organized assessment centre. During assessment centre candidates demonstrate the real level of their competence, performing various exercises, which simulate the most important aspects of the work activities in detail. But this procedure requires considerable time and human resources.
Therefore, successful organizations have resorted to the assessment of potential - those qualities that constitute the foundation of competencies. Firstly they are intellectual and cognitive abilities, personality traits and factors of motivation and only secondly - tried and tested skills, acquired knowledge and experience, including "survival experience" in the specific company environment.
If the "survival experience" information can be gathered from colleagues of a candidate, then objective assessment tools give an idea specifically about the abilities and personality traits which cannot be assessed subjectively.
The most reliable results are demonstrated by professional aptitude tests and personality questionnaires; Interviews on competencies and situational tests may be useful additional sources of information. To benefit the most from using these tools within the internal recruitment, you need to follow these 3 simple rules:
Every fulfilled position, to which objective assessment tools were not applied, is a risk source for the company.
Obligatoriness and equality of conditions
All candidates for a position must be assessed by the same set of tools.
Objectivity and honesty
In order to make an assessment truly objective, it is necessary to use the tools that are relevant to the position, evaluate the qualities needed for this position, and have proven their validity and reliability.
Objective assessment of internal candidates not only helps you to select the best of the best. The use of modern assessment tools for internal recruitment ensures enhancement of competence across the organization and allows any company to measure the real potential of employees - the basis for their future achievements and victories.