HOW TO MISMANAGE AN ORGANISATION: THE PETER PRINCIPLE

It is not unusual for employees to allege that the organisations for which they work are mismanaged. Even if these allegations are unsupported, the fact that they are raised certainly justifies an examination of how organisations may be mismanaged. An action by senior management which may potentially result in the mismanagement of their organisations involves the appointment of employees to their level of incompetence which, in turn, may lead to occupational stress and low staff morale.

Laurence J. Peter and Raymond Hull argue in their celebrated book The Peter Principle that “in a hierarchy every employee tends to rise to his level of incompetence” (Bantam, New York, 1972, 7). There is evidence suggesting that occupational stress and low staff morale are generated (and indeed exacerbated) if there is a systemic tendency to promote people to positions for which they are not properly prepared or for which their qualifications and experience are inadequate. The Peter Principle, which concerns the appointment of people to their level of incompetence, is not often linked to the literature of role-related stress, but it provides insights into how a mismatch of jobs and competencies acts as stressor.

For example, a successful employee may be promoted to divisional sales manager, and removed from the day-to-day sales activity, because of his ability to regularly exceed the sales target of the company. However, if the employee is promoted to his level of incompetence, the company may be forfeiting the income that otherwise would be generated by the excellent salesperson. Moreover, as the sales manager does not function effectively in his new management role, he may generate a stressful environment that infects the whole company.

Oct-Dec 2014 Issue

Curtin Law School