I was enjoying a delicious cappuccino in my first visit to Bread, Milk and Honey in the city the other day and catching up with a friend when the concept of the Peter Principle came up. Firstly, I realized I seem to have a great memory for concepts but a terrible one for the names of them! Rian who insisted I have the cappuccino, doesn’t seem to have trouble at all and mentioned a few concepts during our chat that I knew but had forgotten the names of.
The Peter Principle
The Peter Principle states: “in a hierarchy every employee tends to rise to his level of incompetence”. This means that employees will tend to be promoted until they reach a position in which they cannot work competently. It originated in 1969 by Dr. Laurence J. Peter and Raymond Hull in their book carrying the title of the principle.
Quoting from the Wikipedia entry on the subject:
The principle holds that in a hierarchy, members are promoted so long as they work competently. Eventually they are promoted to a position at which they are no longer competent (their “level of incompetence”), and there they remain, being unable to earn further promotions. Peter’s Corollary states that “in time, every post tends to be occupied by an employee who is incompetent to carry out their duties” and adds that “work is accomplished by those employees who have not yet reached their level of incompetence.” “Managing upward” is the concept of a subordinate finding ways to subtly “manage” superiors in order to limit the damage that they end up doing.
Unfortunately, there has never been a large-scale statistical verification of the principle and most evidence given for the axiom is usually humorous and anecdotal.
However, I’ve been thinking about this principle ever since our chat in the context of building the “right size” organisation from scratch and how important the initial hires are to a start-up. If the Peter Principle is true then in theory you can’t have one layer of promoted management within the organization. But what would happen if you planned the organization like an empty shell from the start and filled the gaps as revenue and available operational budget grows? That way you recruit someone with the express intention of the final scope of their role which which may or may not include the responsibility for others. If you subscribed to the Roman principles of 10:1 management ratios (which I don’t since Sig so ably ripped it apart) that would peak your organization at 100 people. It does of course depend on the nature of your business, but you can usually achieve a lot with 100 people .
There’s no denying that hiring well is hard, as is managing the expectations of individuals around their “career growth” but that shouldn’t stop us from trying.
Valuing individual contributors
The underlying challenge is whether we create or join a culture where the role of “management” is viewed as something for all to aspire to and a greater goal than that of “individual contributor”. The collateral damage of badly formed cultures is sometimes seen in situations where managers with two-direct reports themselves work for a manager with two-direct reports and compound job titles such Distinguished Senior Principal Something Manager as attempts to standardize pay-grades and give people “something to aim for”.
There has to be respect for the craftsman, the creator, the knowledge worker, the domain expert. Those roles are not ones where you can shift straight into fifth-gear, they take a steady compound month-on-month, year-on-year development of knowledge and skill. Even if you look at an industry like manufacturing which many knowledge workers would look down their nose at, companies like Toyota have proven that an expert and empowered work-force is a powerful one.
In his book, Delivering Happiness, Tony Hsieh descibes how the moved to a more regular and granular approach to setting goals and related merit increases. I believe this could help remove some of these compound job title type issues and improve the motivation for growth within roles.
Management as administration
Joel Spolsky recently wrote a post on management as part of the MBA Mondays series on Fred Wilson’s must-read blog. You need to read the whole thing but these paragraphs really jumped out for me:
The “management team” isn’t the “decision making” team. It’s a support function. You may want to call them administration instead of management, which will keep them from getting too big for their britches.
Administrators aren’t supposed to make the hard decisions. They don’t know enough. All those super genius computer scientists that you had to recruit from MIT at great expense are supposed to make the hard decisions. That’s why you’re paying them. Administrators exist to move the furniture around so that the people at the top of the tree can make the hard decisions.
When two engineers get into an argument about whether to use one big Flash SSD drive or several small SSD drives, do you really think the CEO is going to know better than the two line engineers, who have just spent three days arguing and researching and testing?
If people are hired with the expectation that if they ever get management responsibility they should consider they’ve just moved into an administrative function then maybe some of these problems can be preempted. I’ve met some killer administrators and these deserve their own higher levels of respect!
A recent embarrassing outburst from a former-CEO in the online gaming world led Dave Winer, who continues to push whole communities along with his polarising but well thought-out views wrote:
There’s a lot of hands-off-ness, a lot of delegation. And humanity never entered into it.
OMGPOP was not a 20-year old company, it should not have had an ingrained culture that was impossible to reform due to constraints built up over many years of corridor-walking employees.
Get Out of the Way
Joel’s article closed with:
For every Steve Jobs, there are a thousand leaders who learned to hire smart people and let them build great things in a nurturing environment of empowerment and it was AWESOME. That doesn’t mean lowering your standards. It doesn’t mean letting people do bad work. It means hiring smart people who get things done—and then getting the hell out of the way.
However I believe these thoughts best closed by a quote from a classic two-fighting-brothers band:
“We need each other, we believe in one another” – Acquiesce, Oasis
 I hate it when people refer to organization with less than 100 people a “small business” as it seems so belittling of the achievement of providing that many people with work. In places like South Africa and other similar countries, one person with a job often supports many more people in a family and community group.*