How to avoid the Peter Principle

Don't promote people beyond their competence - focus on effective training.

by Andrew Saunders
Last Updated: 09 Oct 2023
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This article is from our Management Matters series, which argues it's time for a management revival. Businesses should reward, value and respect managers, because they are often the answer to their intractable problems.

Military analogies don’t always translate well into the corporate environment. Business is not the same as war, even if we have all been in meetings which have come close to it. One saying that does resonate however is the old adage favoured by members of elite forces such as the SAS and SBS: ‘Train hard, fight easy’.

This is pretty much the exact opposite to the approach taken by most British firms when it comes to training their managers. They train easy, fight hard and are then surprised when other companies (and countries) with better prepared management teams beat them in the market.

Here are a few survey findings to back up the point. A quarter of British managers have never received any management training (and many of those who have been trained only get one dose when they first become a manager), there are an estimated 2.4m ‘accidental managers’ with inadequate training, and according to the OECD, poor management practices cost the economy around £84bn a year. That’s almost enough to pay for HS2…

And yet in many ways, the job of being a manager has never been more important, or more difficult, than it is now. "It’s a challenging market and lots of companies are really struggling. Core management skills are crucial when it comes to driving up performance," says Celie Floyd, chief proposition officer at Cappfinity.

But thanks to the growing expectations of employees, especially around aspects like wellbeing and mental health, the core skills – performance management, delegation, prioritisation – are no longer enough.

"Being a manager is a tough gig now – as well as the core skills there’s an extra layer of empathy," says Floyd. "Covid was the catalyst for leaders and managers to present their authentic selves, complete with cats and children. That can make it very hard for managers when it comes to having difficult conversations. How do you push someone’s performance at the same time as being really sympathetic towards their work-life balance and mental health?"

But the current unwelcome combination of a chilly economic climate with a tight talent market may be encouraging employers to blow a bit warmer when it comes to investing in their managers.

Some companies are starting to adopt an ‘enterprise talent’ mindset, says Floyd, which involves hanging onto employees by giving them new opportunities in other parts of the organisation. The idea is to reduce the number of people leaving, but it calls for managers who have the time and inclination to get to know the skills and ambitions of their reports, not just how they are doing in their current roles. ‘It benefits the company as a whole, but you can’t do it without really good managers,’ says Floyd.

Innovation guru John Van Reenan (the Ronald Coase School professor at the London School of Economics) has also identified poor management – or to use his preferred academic euphemism ‘variation in management practices’ - as a fundamental reason behind the UK’s oft-pondered productivity gap.

He and co-author Nicholas Bloom ranked the relationship between management performance and productivity on a country basis. By this measure, Britain is in the rather ignominious position of being leader of the also rans, a group that includes France, Australia and Singapore. More catering corps than special forces. The top performers group is headed by the US and also features Japan, German, Sweden and Canada.

Worries about the quality of British managers are nothing new, however. Readers of a certain age will remember Laurence Peter’s hit book The Peter Principle, published way back in 1969. Peter pointed out that employees in a hierarchy will continue to get promoted, until they land a job which is beyond their capabilities. 'Everyone gets promoted to the point of their own incompetence' as Peter succinctly put it.

There are a couple of ways to shortcut the Peter Principle – one is to invest in managers in order to ensure that their competence continues to grow with seniority, and the other is to avoid hierarchical structures.

Not enough is being done on either count says Professor Cary Cooper of Manchester Business School. "More managers than ever need to be trained, but there have been a number of times over the past 30 years when companies were doing more management training than they are now.

"And if we wanted to be ahead of the curve we’d create boxes not hierarchies, so that a really great engineer or marketer, for example, could move up without having to become a manager. But at the moment the only way to get on and get paid a better salary to take the manager route, even if you don’t want to."

One solution to the paucity of management training could be to revisit the old concept of Industrial Training Boards he adds. Leaving aside the urgent need for a rebrand of the name, ITBs amounted to government-mandated training schemes for individual sectors.

So every company in the catering sector for example, paid in 1% of its total salary bill to its ITB and in return, was entitled to free training. "Having paid in the money, employers were incentivised to make sure they got it all back in the form of training. I think the government should look again at clever incentives like that."

However it is done, there is an urgent need to develop better managers whose skills and aptitudes are aligned with the needs of the coming generation of employees – and ultimately, leaders. "I was talking to someone in my network last week who pointed out that the early career professionals they have coming in now don’t know how to navigate big organisations," says Floyd.

In other words, the flair of young people for using digital tools is not always matched by interpersonal virtuosity. "They don’t understand things like networking, stakeholder mapping and building alliances. It’s going to be down to managers to explain that - the manager/employee relationship is really important."

So the message is – invest in your managers for a brighter future. Business isn’t war, and they aren’t the SAS. But give managers a chance and they could put a rocket under your company’s performance all the same.

Illustration created using picture from Getty Images