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Peter Principle proven: This is why top performers make bad bosses

We’ve all heard the cautionary tales of good workers becoming bad bosses. We watch top performers suddenly struggle to lead a team, wondering what happened. We learn from watching newly promoted managers flounder that the skills of your initial job do not necessarily translate to your promoted job. This is a theory that’s been circulating since the 1960’s. In 1969, Canadian educator Laurence J. Peter co-authored a satirical book, “The Peter Principle: Why Things Always Go Wrong” detailing a harsh truth: Good rule-followers get promoted by management until they become bad leaders.

As Peter wryly puts it, “In a hierarchy, every employee tends to rise to his level of incompetence.” Although the business examples within the book were fake, the satire of managerial incompetence struck a chord with workers everywhere, topping bestseller lists. Now there’s data to prove it.

Researchers: Good job performance does not correlate with good management skills

Researchers from Minneapolis, MIT and Yale University decided to put the question posed by the Peter Principle to the test: Do the best workers become the worst managers? In a new paper published in the National Bureau of Economic Research, they lay out evidence to support the Peter Principle.

Looking at the performance of sales workers at 214 firms, they found that firms would prioritize “current job performance in promotion decisions at the expense of other observable characteristics that better predict managerial performance.” Sales workers increased their chances of earning a promotion by about 14% each time they doubled their sales. But just because someone is great at closing deals doesn’t mean they are fit to lead a team.

Researchers found that workers who were the best at sales had a lower success rate with getting their team to meet sales goals when they got promoted to management. In fact, sales declined an average of 7.5% on teams led by managers who had doubled sales when they were just in charge of themselves.

Team players show better leadership

The study challenges us to look beyond certain numbers when defining top performance. The independence and autonomy skills you excelled in as worker do not necessarily help you collaborate with a team. Newly promoted managers who were not stars at increasing sales numbers ended up becoming good managers when they were great at collaboration — a skill overlooked in promotion decisions. Employees who excelled at sales collaboration, or “the number of colleagues with whom a worker shared credit on transactions” ended up being great managers who increased sales by 30% for their teams.

To find good managers in a sea of hard workers, companies need to restructure what good performance actually looks like, so that skills like collaboration get rewarded.

“The costs of not promoting the best potential managers are high,” the study warns. “Firms appear willing to forgo a 30% improvement in subordinate performance to achieve better incentives or to avoid costly politicking.”

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