[IMGCAP(1)]You're most likely familiar with the concept of the Peter Principle, which describes how people get promoted to a level just above their level of competence. That it has a name suggests how common it is, and it's likely that many of you have run into a manager who is perpetually out of his depth, or a partner who just doesn't know how to manage her practice area, or even a managing partner or business owner who is simply incapable of running a business.

It's a fascinating and very useful diagnosis for a great many failures (both personal and organizational) across businesses of all types, including accounting firms, and is frequently applied -- perhaps more frequently than is actually called for, as we'll see in a minute. As useful and widely applicable as it is, the Peter Principle requires two important amendments.

The first is in the form of a corollary: Let's call it the Temporary Peter Principle. With the regular Peter Principle, it's assumed that those to whom it's applied are hopeless; they've been promoted to their level of incompetence, after all. But what it they're not actually incompetent? What if they were simply never told how to do the job they've been promoted to?

Think about it: When does the Peter Principle always reveal itself? After a promotion -- and most promotions involve a change in responsibilities. Being good at preparing taxes may get you promoted to manager, but it doesn't mean you know anything about managing other tax preparers. Similarly, running a successful tax department doesn't mean you know anything about running an entire firm. The skill sets are very different, which is also true among your business clients, where the skills involved in, say, cooking a delicious meal or manufacturing an outstanding widget are not the same as those involved in running a restaurant or building a business that sells widgets. (That many of those business owners are self-promoted doesn't change the gap between the skill sets.)

The fact is that most people who rise to a new position are at least momentarily incompetent. The Temporary Peter Principle kicks in, until they're trained in their new responsibilities or (and this is much more common) until they figure it all out on their own. My suspicion is that a great many people who've been tarred with the Peter Principle are actually only cases of the Temporary Peter Principle who never got the outside help they needed.

That brings us to the second amendment to the Peter Principle, which is to properly lay the blame. Who is worse: the person who has been promoted to their level of incompetence, or the person who promoted them to it? Call it the Petered Principle: For every incident of the Peter Principle, there is an equal and corresponding incident of someone being incompetent at hiring and promoting people.

The lesson, then, is two-fold. For employees, it's crucial to understand what each new position entails, and to learn which skills you must develop to perform it successfully. The assumption that you are ready to do a job simply because you have been promoted to it is a critical contributing factor in every case of the Peter Principle.

Second, organizations of all sizes need to understand the disservice they're doing to many of their employees right at the moment when they think they are doing them a great favor. Organizations that pay serious attention to promotion and training naturally have far fewer instances of the Peter Principle. Even a cursory explanation of what's expected in a new position can help, but nothing can take the place of proper training and education.

We may never be able to stamp out incompetence, but we may be able to make it a lot less common.

Register or login for access to this item and much more

All Accounting Today content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access