The Peter Principle is a theory originated by Dr. Laurence J. Peter which states that employees within a hierarchical organization advance to their highest level of competence, are then promoted to a level where they are incompetent, and then stay in that position.
This follows from the use of promotion as a reward for success. As long as a person is competent in his current position, he will be promoted to the next higher one. By iteration, the only way a person can stop being promoted is to reach a level where he is no longer able to do well, and thus does not appear eligible for promotion.
The theory was set out in a humorous style in the book The Peter Principle, first published in 1969. Peter describes the theme of his book as hierarchiology. The central principle is stated in the book as follows:
- In a Hierarchy Every Employee Tends to Rise to His Level of Incompetence.
The employee's eventual incompetence is not necessarily a result of the higher-ranking position being "more difficult" - it may be simply that the position is different from the position in which the employee previously excelled, and thus requires different skills which the employee may not possess. An example used by Peter involves a factory worker whose excellence at his work results in him being promoted into a management position, in which the skills that got him promoted in the first place are no longer of any use.
One way that organizations attempt to avoid this effect is to refrain from promoting a person until that person already shows the skills or habits necessary to succeed at the next higher position. Thus, a person is not promoted to manage others who does not already show leadership, for instance.