Why The Peter Principle Is Only Half Right
The Leadership Buffer Principle Covers it All
Back in 1969, Dr. Peter and Raymond Hull wrote and published a book called The Peter Principle, where they helped popularize the notion that people tend to rise to their "level of incompetence." In other words, as employees are promoted over time inside an organization, they will eventually reach a point where they become incompetent because they lack the skills to perform in that more expanded role.
While the popularity of the book, and the simplicity principle itself demonstrates how the authors hit a nerve with their notion, it turns out they were only half right. There was another half of the story they left out. Let's call it the Leadership Buffer Principle. Let me explain what I mean.
What the Peter Principle leaves out is how the rapid growth of an organization can also outstrip the abilities of its leaders even if they remain in exactly the same position the whole time. As we move up in a typical organization, our level and scope of responsibilities will naturally expand. But if you work in a rapidly growing company, that scope of responsibilities will expand even faster even if you never change the title on your business card.
The requirements of working in an early-stage company with $10 million in revenue are vastly different than what's needed in a senior role an $80 million company. That's why someone can become incompetent in their role based simply on what's happening around them--which is an important theme that the Peter Principle leaves out.
As I discuss in my book, Great CEOs Are Lazy, human beings can only grow as fast as their ability to execute. That's why it's fairly common to see organizations outgrow their leaders. In fact, one of the primary reasons organizations stall out if they run out of middle managers capable of driving their growth forward. They outstrip their leadership buffer.
This exposes a bit of a paradox in modern organizations in that we are typically happy to spend the necessary time and resources to hire executives. The same is true for more front-line employees who generate revenue (sales) or serve customers. What we don't do, especially in the early days of a company, is spend time on hiring great middle managers. That makes sense to some degree, as it can feel like you're adding overhead, which most entrepreneurs are allergic to.
But when you fail to bring in managers capable of growing at the same pace as the company, you're also putting the health of your company at risk as well. If you don't hire someone who is capable of learning rapidly -- which is the only antidote to dealing with fast growth and expanding your leadership buffer -- then you greatly increase the chances that they will become incompetent as the needs of the organization outstrip their capabilities.
This is why it makes sense to over hire, or "club up," when it comes to hiring middle managers. You want to find the kind of people who not only have enough buffer to keep up with the demands of a rapidly growing organization--but who also have the ability to learn and expand that buffer as the needs of the organization increase over time.
I've actually been working with a rapidly growing organization that operates internationally who's number one objective over the past few years has been to grow the capabilities of their middle managers. They came to recognize that unless they had people capable of expanding their leadership buffer, they risked becoming incompetent--which would then threaten the growth of the company as a whole.
So, while the Peter Principle is an important lesson to keep in mind when it comes to promoting your employees, remember that it's only half the story. The Leadership Buffer Principle covers both promotions and scope expansion without promotion. Watch out for middle managers who lack a sufficient leadership buffer to keep up with the pace of your company's growth--and promote the ones who can learn to expand their own buffer.