employee retention Archives

How Knowledge Management Can Avoid the Peter Principle

The Peter Principle at Work

Dr. Laurence Peter formulated the Peter Principle in 1968 as an explanation for why incompetent people get promotions. In his book The Peter Principle, Dr. Peter asserted that “the cream rises until it sours”.

In other words, highly competent and skilled workers receive promotions through the ranks of an organization. They continue to receive promotions until they reach a position they have neither the knowledge nor the skills to perform.

The Peter Principle has long been criticized as simply a neat theory. However, recent research has shown that it’s an accurate reflection of corporate hierarchies. One 2018 analysis of over 53,000 sales staff at over 200 companies found that the best salespeople were the most likely to be promoted to managerial positions – and the most likely to perform poorly as managers. The researchers concluded that “the best worker is not always the best candidate for manager.”

The Peter Principle can be seen at work in the 2005 sitcom The Office. Regional manager Michael Scott, while friendly and outgoing, is nonetheless a poor manager. He makes irrational decisions and wastes a considerable amount of time. However, when Scott acts as a salesman, he continually demonstrates a high degree of intelligence, a winning personality, and a persuasive charm that wins over his clients. It was his strong sales record as a salesman that led Scott to be promoted to regional manager. Now, though, he lacks many of the managerial skills needed in a professional workplace.

The Paula Principle

In 2017, educational philosopher Tom Schuller published The Paula Principle, a follow-up to The Peter Principle that aims to explain why women underperform. According to Schuller, the Paula Principle states that “Most women work below their level of competence.”

Schuller argues that bosses fail to recognize women in particular for their competence and performance. He says women often work in positions that under-utilize their full skill-set.

“Women’s career paths are flatter and more broken, their salaries lower, and their retirement incomes smaller,” Schuller writes. In The Paula Principle, Schuller lists five factors to explain why women underperform relative to their level of competency. These factors range from discrimination to lack of childcare to lack of self-confidence and beyond.

How Over-Promotion Can Derail Your Business

The Peter Principle can have myriad effects on your business. When bosses promote workers above their competency, it can show up in ways both predictable and surprising.

For instance, you might notice that recently-promoted employees are suddenly less productive than before – or that they make more mistakes. Perhaps they spend too much time on menial tasks, or maybe they suffer from lower morale.

Over time, these issues can compound and grow. And if you continue promoting employees above their level of competency, you can fall victim to Peter’s Corollary.

Peter’s Corollary states that “in time, every position within an organization will be filled with someone who is not competent to perform the duties of that role.”

By promoting your employees above their level of competency, you’ve created an organization where nobody knows what they’re doing. And when nobody knows what they’re doing, it results in less productivity and more mistakes.

So how can you ward off the Peter Principle? How can you ensure your employees continue to perform well even after giving them well-deserved promotions?

Mitigating the Peter Principle in Your Workplace

The first thing you should understand is that the Peter Principle isn’t evidence of a hiring mistake. It doesn’t necessarily mean you promoted the wrong person to the wrong position, or that it was wrong to hire that person to begin with. Rather, the Peter Principle means the person chosen to fill a role is not currently prepared to perform their duties.

When it comes to mitigating the Peter Principle, there are two important strategies to take: Prevention and mitigation.

If you’ve already promoted someone who’s ill-suited for their new role, you can mitigate that error by giving your recent promotee leadership training and skills training to help them adjust to their new job.

Going forward, you can prevent the Peter Principle from impacting your workplace with a series of new initiatives.

First, you’ll want to implement a new leadership training program for recently-promoted employees. You’ll want to design this program to equip these employees for their new roles by focusing on their new duties and on managerial best practices.

Next, you’ll want to create employee mentorship programs whereby your high-performers can gain new skills and knowledge by observing others. Mentoring and nurturing employees is a great way to ensure they’re prepared for their new roles.

You can also create new rewards incentives for high-performers, like raises and bonuses, in lieu of promotions. These incentives could also be tangible rewards like hockey tickets or gift certificates for restaurants. When you can offer multiple performance rewards beyond just promotions, you’ll be able to promote only the people who are prepared for a new role.

You can create learning cohorts among employees who are up for promotions. This strategy can help your promotees lean on each other for support and help each other learn the job.

Create a New Promotion-Track Program

Finally, you’ll want to open up a number of non-managerial opportunities so that high performers can be promoted within their competency. When the typical promotion track involves promoting tactitians to managers, you’re often forcing your people into a role they aren’t prepared for and don’t have the skills to perform. While someone may be excellent at their current role, that doesn’t necessarily mean they have the temperament and personality needed for a managerial role. So if you can instead offer senior-level and specialist positions that are based on current employees’ skills, you can promote your high-performers without it negatively affecting the rest of your team.

The Peter Principle is a notable threat to productivity and revenue. Without careful monitoring, your organization could quickly find itself in a position of resource waste and incompetent management. But with the proper training programs and skills-based rewards initiatives, you can ensure the right people fill the right positions and keep your organization firing on all cylinders.

How is the Peter Principle affecting your business? What are you doing to give your leaders more skills training?

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Employee Retention: How to Keep Your Top Performers and Fend Off the Great Resignation

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The hiring crunch has been going on for quite some time. Across all industries, at every level, there are more open jobs than there are qualified candidates to fill them. In parallel, people are leaving their jobs in record numbers. In November 2021, the United States’ resignation rate reached a 20-year high. One Pew Research survey examined the top reasons that employees resign. The survey found that most employees leave due to low pay, feeling disrespected, and/or no opportunities for advancement. Other reasons for leaving included: a lack of childcare, no scheduling flexibility, and poor (or no) job benefits. The Great Resignation is primarily being driven by young people, particularly those under age 30. With more employees than ever deciding that it’s time to move on, focusing on employee retention has never mattered more.

Employee Retention Challenges: What’s Driving the Great Resignation?

Economists say the leading cause of the Great Resignation is the pandemic. The COVID-19 pandemic has caused employees to rethink their life priorities. The things employees previously sought (and/or tolerated) in a workplace are no longer the same things they seek out today. But this priority shift isn’t just employees’ concern. Managers have much at stake in the Great Resignation as well. Research has repeatedly found that it can cost at least ⅓ of an employee’s salary to replace that employee. For high-level positions, replacing a lost staff member can easily cost 4 times their annual salary.

If your organization is having trouble hanging onto your employees, you’re looking at lost time and money. Furthermore, your understaffed crew is likely experiencing low morale as they try to pick up the slack. That’s why improving employee retention is one of the best things you can do for employee morale and your bottom line. Here are some things you can do to boost your retention rate and cut down on turnover costs.

Give Your Managers Ongoing Training to Increase Employee Retention

It’s often said that people don’t quit jobs; they quit bosses. While a good manager can win employees’ respect and loyalty, a bad manager can drive away even dedicated staff. That’s why training your managers is one of the best things you can do to ensure your staff stay with you long-term.

Managing people is its own skill-set with its own learning curve. While some people are naturally gifted at team management, others are not. Even if managers have degrees in management or business, their post-secondary education won’t necessarily transfer over to your workplace. Investing in managerial training with focus on motivational tactics and leadership styles can help you to cultivate leaders within your organization that your team likes and respects. That means training your managers will go a long way toward keeping your whole team for the long-term.

Provide Opportunities for Career Advancement & Watch Your Employee Retention Rate Soar

Employees don’t just want opportunities for career advancement – they want to see the path to advancement and understand what it entails. Show your top performers that good work is rewarded, and they’ll feel more invested in your organization.

Hiring from within is also faster and far more affordable than external hiring. When hiring externally, you’ll likely need to pay for a recruiter and training time. You’ll also need to give your new hire time to become acclimated to their new environment. But when you can hire internally, you save the time and money involved in recruitment and training.

It’s also much easier to cultivate and reward your up-and-coming intrapreneurs if you have a training tool that tracks their progress. Your organization likely has intrapreneurs – employees with entrepreneur-like motivation and creativity – working on innovative ideas for your company. If your managers aren’t paying attention, it’s easy to miss these high-performers – and under-utilize them.

But when you can track your employees’ training, you can easily spot the top performers. You can identify the ultra-motivated people who are succeeding at their training and even taking the initiative to train themselves in areas outside their job requirements. With a tool like Cogcentric, for instance, you can instantly identify who’s taking on extra training — so you know who your high-performers are.

Cultivate a Retention-Oriented Workplace Culture

One of the top reasons why employees leave is toxic workplace culture. In January 2022, a team of researchers from Revelio Labs, CultureX, the New York University School of Business, and the MIT Sloan School of Management performed an in-depth analysis of over 34 million online employee profiles, aiming to uncover the top reasons why employees leave their employers. The researchers also created an index called the Culture 500, a list of 500 large private-sector employers across the United States that collectively employ 25% of the American workforce. This study examined the resignation rates across companies and industries, assessing which industries and organizations were most likely to see employees quit.

The findings were complex, but they tell a story about workplace culture. While some industries, like fashion retailers and management consultancies, were most likely to lose employees, there was also significant variation within industries. Within the airline industry, for instance, employees were nearly twice as likely to leave JetBlue as to resign from Southwest Airlines.

Next, the researchers analyzed 1.4 million Glassdoor reviews of the 500 employers, identifying which topics mentioned in reviews were most predictive of a high resignation rate. Surprisingly, pay rate ranked #16 on the list of most-mentioned topics. In other words: Pay rate wasn’t top-of-mind for employees who resigned.

In contrast, the study found that toxic workplace culture is the #1 most common reason for and strongest predictor of employee resignation. Toxic workplace culture is the driving force behind 10 times more resignations than pay; that means no amount of compensation can convince employees to stay in a toxic work environment.

In a follow-up article, the researchers describe the 5 attributes of workplace culture that are the most toxic to an organization. Notably, all of these attributes are things that are within a manager’s control.

Workplace Culture is a Choice

Workplace culture isn’t something that happens by accident; it’s a byproduct of your organization’s leadership. Every manager in your company plays a role in setting your organizational culture. By training your managers and senior staff to counteract these toxic attributes and instead cultivate a positive workplace culture, your organization can improve its retention rate – thereby cutting your hiring costs.

The Great Resignation has employees at all levels questioning their priorities and leaving positions that no longer appeal to them. As employees quit, employers are facing higher recruitment costs driven by high inflation and high staff turnover. With employee recruitment costs easily eclipsing the cost of retention, it’s never been more important to hold onto your staff. You can boost your retention efforts with a mix of managerial training, opportunities for advancement, and a positive workplace culture.

What is your company doing to boost employee retention? How are you equipping your employees to succeed in their roles and enticing them to stay with you?

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