Before I dive into The Peter Principle, and what it means to rise to your level of incompetence, I want to relate a story.
It was early 2013, and I was battling my own Peter Principle. Let me explain.
“Jake,” one of my leading staff members, resigned. I was devastated. I had been living under the illusion that everything was fine with him and my business. I thought he was happy with how things were going with his job and training, but I couldn’t have been more wrong.
I sat down with Jake and conducted an exit interview. Fortunately for me, he was honest and up front about his reasons for leaving.
Jake was leaving, he said, because the business lacked direction and he wanted more training. Things were always somewhat chaotic—and he felt the business was disorganized. It was missing an operations person to run it properly, he said. I was a sales leader, not an ops person, what did I know?
The look on my face must have been that of a fool, for my first thought was that Jake was crazy and didn’t know what he was talking about. He was leaving to work for one of our competitors, and I couldn’t accept that because the competitor’s owner had a reputation for being a difficult character running a mess even more disorganized than what mine apparently was.
After Jake left, however, I reflected on our conversation. I was in denial for a bit, but on further thought, I came to recognize that maybe he had a point. I committed to fixing the issues.
My style until then had been to run my company in an authoritative business style with no collaborative, team-oriented approach. Our business style was one of each person for himself or herself, with a focus on individual contribution rather than being on a journey together and working as a team.
The more I reflected, the more it dawned on me that the staff didn’t have proper job descriptions. I had assumed, wrongly, that everyone would pitch in to do what needed to be done. Crucial tasks were going undone. The staff were all amazing contributors, but no one was responsible for them, they had no leader.
Jake was right.
I was the problem, and I was holding my business back.
Every business and every person eventually reaches a ceiling. They grow just so far, and beyond that point, they need to pivot to reach the next level. It’s often difficult to tell when you’ve reached that ceiling. It’s not like there’s a little birdie up there telling you what to do next. Nor do you have your life plan written in a book that you can just flip to the next chapter.
You need to be self-reflective enough to notice when it’s happening. Sometimes, something happens to make you realize it’s time for a change.
Jake, for me, was my aha moment.
There’s a term for the story I just related. It’s called the “The Peter Principle,” and in my case, The Peter Principle almost killed my business.
The Peter Principle is a management concept developed by Laurence Peter. Peter made an observation that people in an organization “rise to your level of incompetence.”
In many cases, you don’t realize you’ve hit the Peter Principle moment. It often takes an event or person to make you realize that either you or one of your staff, have hit their ceiling. From what I’ve observed in running my business and working with other entrepreneurs, there are often multiple Peter Principle issues battling inside an organization.
Think about it.
You have a staff member that you’re really happy with. They’re exceeding your expectations and delivering on all fronts. Customers and co-workers are happy with their work, and the staff member is well-liked by their peers.
It’s time for a review for the staff member.
During the review, the staff member mentions that they’re interested in moving into a management position, and although they have never managed people before, they suggest that they’re ready for the challenge.
Your new manager once again exceeds expectations in their new role, and once again, they’re promoted. They continue to get promoted up until the point where they struggle in the role. As Peter suggests, they rise to their level of incompetence (hence the term “rise to your level of incompetence”), at which point they’re stuck. Peter calls this the “final placement,” but it is better known as Peter’s Plateau.
Peter contends that the employee, once they realize that they’re Incompetent in their role, will grow increasingly frustrated in the position, which results, in the end, in an unmotivated and potentially less productive employee.
The Owner Growing Beyond the Peter Principle
The Peter Principle applies to everyone, business owner and team member alike of course. The point of this post isn’t to address how you can fix this from a management perspective, but rather to make you aware of how the growth of your business could be impacted by your inability to manage beyond your ceiling.
If your revenues or profits are stagnant, or worse declining, the problem is likely something that the business owner is doing wrong. Sometimes it takes an outside force, person, influence, or factor to jolt you into recognizing that you, the business owner, could be your business’s problem. Maybe it’s time to look at what you’re doing wrong or seek outside assistance from a coach or consultant to help you be objective about what ails your business.
Perhaps you’ve risen to your level of incompetence!
Here’s one of the first articles I wrote: My Journey Post Business Sale as I Sail Into a New Harbour.
Want to know more about me and read some of the other interesting small business growth, profit and wealth stories I’ve written.
Are you a younger entrepreneur? Here’s another interesting article I wrote:
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