The Stuff of Heroes Newsletter Vol 5, No.1 for executives, managers, leaders, and entrepreneurs on leadership, strategy, business, marketing, management, and entrepreneurship.

THE JOURNAL OF LEADERSHIP APPLICATIONS

Occasionally I have been asked whether the Peter Principle was one of Peter Drucker’s concepts. It was not. The Peter Principle came from a best selling book of the same name, written by an academic by the name of Laurence J. Peter. Moreover Peter (Drucker that is) thought the “principle” badly mistaken, easily disproved, and likely to lead to serious problems at many levels of management if the “principle” were actually applied as presented. But I’m getting ahead of myself.

We had been discussing staffing and the selection of senior executives. Peter gave us a case which we were to write up and later to discuss regarding a failed promotion. Basically the case concerned a senior appointment as a deputy to the CEO of a corporation. The appointee, a man by the name of “Novak” had a fine record of increasing responsibility over many years with the company. The CEO, who Drucker called “McQuinn,” felt that there was no question but that this was the right man for the job, and he made the appointment without stopping to think twice. Much to his surprise, for the first time in his career, Novak failed miserably. McQuinn felt that Novak had no excuse. He decided that the appropriate solution was to fire Novak for his demonstrated incompetence at this higher level of management. However, the chairman had a policy that all senior firings had to be discussed first with him. So, McQuinn met with the chairman.

The chairman asked McQuinn for his analysis of Novak’s failure. McQuinn told him that Novak made serious errors in judgment, which had cost the company a great deal. When pressed, he could not offer much other that clearly the job was too much for Novak to handle and that he had gone about as far up the corporate ladder as he could.

Much to McQuinn’s surprise, the chairman blamed him for Novak’s failure. He told McQuinn words to the effect that: “The one thing we know for certain is that you made a mistake, since Novak was your appointment.” Moreover, the chairman told him that to fire Novak was not only unfair, it was stupid. “Why should we lose a proven manager as valuable as Novak, just because you made a mistake?”

Drucker asked us what we thought of the chairman’s argument. Almost immediately someone brought up The Peter Principle.

Dr. Laurence J. Peter was at the time an Associate Professor of Education at the University of Southern California. His well-known book based on what he called “The Peter Principle” was published in 1968. It was followed by several other books by him on the same subject. His central concept was: "In a hierarchy every employee tends to rise to his level of incompetence." Being incompetent, he would be promoted no further, yet must be removed from his responsible position. If not, the organization could collapse when the number of incompetents among its ranks reached a sufficient number, resulting in the inability of the organization to perform its functions efficiently, effectively, or competitively.

The Peter Principle is based on the observation that organizations have hierarchies. New employees typically start in the lower ranks. As they do well and prove to be competent in their duties, they get promoted to the next higher rank. The process is then repeated. According to the principle, this process of promotion followed by demonstrated competent performance can go on indefinitely, or at least until the employee reaches a position where he or she is no longer competent. Then the process stops and the employee remains in the position unless some external action is taken. Returning the employee to his previous job at which he performed well is very difficult if not impossible. The net result according to Laurence J. Peter was, if some action to remove them were not taken, is that most of the higher levels of any organization will be filled by incompetent people who attained their positions because they were good at their previous job assignments. This concept resonated with many who were delighted to consider their bosses as having risen to positions where they now demonstrated their incompetence.

While The Peter Principle paid some attention to cautioning that an employee promoted to a new job should be qualified for it, the general solution was that since the corporation could not demote these incompetents who had arrived at their final and incompetent level, it had to discharge them, or suffer the consequence of inevitable failure due to a preponderance of incompetents in critical high level positions. This made the Peter Principle a possible argument in McQuinn’s defense in wanting to fire Novak.

Peter objected to The Peter Principle for several reasons. First, he suggested that the concept was overly simplistic. He stated that as those who worked more with their minds, what Peter called “knowledge workers,” became more important in the workforce due to developing technology, increasing numbers of managers were likely to be placed into positions in which they failed to perform. Everything possible should be done to avoid this happening. Peter said, “We have no right to ask people to take on jobs that will defeat them, no right to break good people. We don’t have enough good young people to practice human sacrifice.” The selection of the right person for the right job was the manager’s responsibility. But even more, the notion that people rise to their levels of incompetence was dangerous to the organization.

The Peter Principle is dangerous because as the principle notes, if an individual has arrived at his or her level of incompetence, logically the organization has little choice but to get rid of the incompetent before the entire organization becomes overloaded with incompetent managers who make more and more bad decisions. Yet, the concept and the recommended action has many downsides. The only anecdote to “incompetence” under the Peter Principle is dismissal. However, first one needs to consider: is a failure due to incompetence, or other factors?

There is a story that Thomas Watson, founder of IBM once asked to see a newly promoted vice president who failed on his first assignment which cost the company a million dollars. The young man reported to the IBM chief ready for the worst. “I guess you called me in to fire me,” he said on entering Watson’s office.

“Fire you!” exclaimed Watson, “We just spent $1,000,000 as part of your education.”

A company that believes and applies the Peter Principle puts significant additional pressure on its managers not to make a mistake. This additional pressure is hardly conducive to willingness to take risks or even assumption of full responsibility, both of which are essential. Such a “zero failure” climate will inevitably create problems. An organization which buys into and practices the obvious solution to the Peter Principle is hardly encouraging or a morale booster for employees at any level. It says that a long term, hard working, talented and loyal employee must eventually and inevitably meet his fate: to be plummeted headlong out of the corporation. And every manager at every level had better take actions to ensure no mistakes, no failures.

This particular problem recalls the ‘70’s movie Logan’s Run. The movie involved a society which required that its members be killed on reaching the age of 30, thus maintaining a societal membership that was forever young. Logan’s murderous society at least gave the appearance of being fair. Those reaching 30 were forced to pass through a gauntlet of lethal laser beams. Those avoiding the beams, and thus surviving, escaped being killed. However, they now lived somewhere else and were never heard from or seen again. In reality, none survived the lethal lasers, but no one in the youthful society knew this except the perpetrators. The laser beams got them all. However, this at least left hope to those when they reached the age of life termination. But the Peter Principle doesn’t leave even hope. It is ruthless in its dictate that managers reaching their level of incompetence must be done away with for the good of the corporation.

Implicit is the assumption that if a manager could not function well in one particular job, he or she couldn’t function well in any job at the same level. Or that if a manager was incompetent and failed in one instance, he or she could not rebound to become a success in another. Both assumptions are in error and therefore not only unfair, but incredibly wasteful in human potential, for history is rife with “incompetents” who were later proved to be great successes.

Rowland Hussey Macy was a Nantucket Quaker. He studied business and then started a retail store. It failed. He started another. It failed too. This happened six times, and he failed with each. Were his stores divisions of a Fortune 500 company practicing The Peter Principle, he would have been discharged after his first attempt as he would have clearly demonstrated his incompetence at retailing, business, and entrepreneurship. However, Macy’s seventh attempt succeeded and Macy died a wealthy man. A hundred and fifty years later, Macy’s still exists and exhibits roughly $30 billion in annual sales and in over 1000 stores. Not too bad a legacy for someone who had clearly risen to his level of incompetence six times before his overwhelming success.

Or consider Winston Churchill. He reached his level of incompetence as First Lord of the Admiralty during World War I, during which he succeeded in convincing the British War Cabinet to undertake the biggest allied disaster of the war, the Dardanelles Campaign including an allied landing at Gallipoli. This resulted in the worst allied defeat in the war, over 200,000 casualties and Churchill's forced resignation. Yet the same man, with much higher responsibilities as Prime Minister during World War II saved England and possibly the world during almost a year that the British stood alone against Hitler and his allies. Moreover, this incompetent is now considered the greatest British political figure of the 20^th century.

There was one element of top management departures that Peter Drucker felt should be encouraged. He felt that top executives, or at least most top executives, should remain in their jobs no more than six years. However, this had nothing to do with incompetence. He just felt that top management had to change to allow for upward mobility and new ideas and new corporate directions. Moreover, this succession and its success was the responsibility of the top executive himself and had to be planned for well ahead to ensure a smooth transition.

Peter’s basic thought that one must first lower the failure rate. To do this, the appointing executive must staff for strength. Consequently Drucker recommended three prime rules for staffing:

2. Choose three or four candidates for the job rather than settling immediately on one

3. Don’t make the selection without discussing the choice with a number of knowledgeable colleagues

A poorly designed job, one in which the requirements have not been thought through may be an impossible job that no one can do. An impossible job means that work intended to be accomplished is accomplished poorly or not at all. In addition, it risks the destruction, or at best, the misallocation of scarce and valuable human resources. To design a job properly, the objectives and requirements of the job must be thought through to decide those few requirements that are really crucial to the job’s performance. That way the executive seeking to fill the position can avoid filling it with a candidate who minimally meets all requirements rather than staffing for strength for the few critical areas of the job that are essential.

One of President Lincoln’s cabinet officers offered the opinion that Lincoln should not think too highly or expect too much of Ulysses S. Grant, who Lincoln had recently promoted to be General-in-Chief of Union forces during the American Civil War, because he drank hard liquor to excess. Lincoln retorted: “Please find out his brand that I may send a case to all my generals.” Grant was Lincoln’s only general who consistently won victories, and he eventually defeated Robert E. Lee and saved the Union. Grant, by the way, was another individual who had failed miserably at various previous appointments in the Army and even as a clerk in a retail store between the Mexican and Civil Wars.

Peter also felt that thinking through the job with an emphasis on the few essential requirements would avoid the danger of structuring a job around a specific individual. He was very much against this. In his opinion this could lead to conformity, favoritism, or both. Moreover, with all the problems that either could cause, a restructuring of a job around an individual would create a chain reaction of everybody’s changing their work and responsibilities to fit in with the new man’s personality and way of doing business, causing immense disruptions to the organization.

The only time that I challenged Peter was on his emphasis on avoiding, or at least minimizing these disruptions. I didn’t argue that a chain reaction of disruptions would occur. My argument was that such disruptions based on designing a job around an individual might be necessary and could actually have positive results. Therefore in thinking through the requirements of the job, one needed to anticipate potential disruptions and weigh them and trade them off against the potential benefits that might ensue.

To support my position, I gave the example of General Pershing’s assumption of command of the American Expeditionary Force during World War I. Despite considerable pressure from America’s French and British allies, Pershing insisted that US forces be employed as a separate entity under himself rather than integrated piecemeal into established allied units.

In effect, Pershing structured the job around himself; and indeed one of the arguments against his doing this was the disruption of the established ways of “doing business” within the allied command. Moreover, the allies argued that they had the experienced commanders and units, the necessary artillery, aviation, and tank support, and that they lacked only the men. Pershing’s force had none of these, only men. However, the separate organization meant that the fresh American forces were employed as a single fighting force, rather than used to provide additional manpower for the war-weary English and French units. Pershing stuck to his demands, and the French and English found that he was supported by the Secretary of War and President Wilson when they tried to go around him. The organization built around Pershing is credited with a significant contribution toward the allied victory despite the disruption. Having made my argument, Peter did not dispute my theory that sometimes a disruption was justified, which I felt pretty good about.

This, too, was part of Drucker’s character. If your argument made sense, he would listen. However admittedly, it was a rare instance that he would agree with your argument. In most cases, Peter’s own positions were so well thought through that mere practitioners, or even academic researchers could not successfully challenge them. Quite simply, he was right!

However, getting back to Drucker’s main point, thinking through the requirements of the job means developing those basic requirements of the job which a successful executive must have the qualifications to accomplish successfully. If this were done, it would minimize the chance that a selection would be made on less relevant factors.

Years ago during a brief period as an executive recruiter, I learned that the modus operendi was for a recruiter to submit three to five candidates for any position, all of which met the basic requirements which the headhunter had helped the hiring executive to develop. The reason as explained to me by a more experienced executive recruiter was that this was to ensure that “the chemistry is right.” “Sometimes a candidate won’t like his potential boss,” I was told. “Sometimes, a potential boss won’t like the candidate. And yes, there are times when neither one will like each other. However, with three to five candidates, chances are that in at least one case the candidate will like the potential boss, and visa versa. But in all cases the candidate must meeting all the main requirements for the job.”

This proved to be good advice. In one case, I spent considerable time with a hiring executive in developing these “job specifications.” One very important qualification in this instance was geographical experience in the area in which the executive would be operating. This was necessary because of local customs and other technical requirements peculiar to the locality. I then went about my business finding the three to five candidates to present to the hiring executive. While some clients preferred to have candidates submitted and interviewed “piecemeal,” that is, as soon as each was recruited, some didn’t want to start interviewing until all the candidates had been recruited and were ready to go. I preferred the latter, as I thought it would give the client a better feel for the breadth of what was available before he or she made an offer. However, just before I was ready to submit the candidates that I had recruited for this assignment, the client called off the search. “Just luck,” he said, “but some guy happened to hear that we were looking and I interviewed and hired him.”

I wanted to go over the job specifications with him, to which he agreed. Everything looked good until we got to the requirement having to do with geographical experience. My client became evasive. Finally he admitted that the candidate had no experience in the geographical area whatsoever. “But its okay,” he said. “We’ll help him. He is so strong in other areas that he’ll do a great job.”

This was a perfect example of what Drucker was talking about. Here the client himself had stated that prior geographical experience was a major requirement for any candidate, yet he had disregarded this major requirement because the candidate was strong in other, non-essential areas. Did the new hire succeed in this instance? I really don’t know. However, there is no question that his chances of succeeding were significantly reduced, because in what the hiring executive himself had thought through and determined as a major qualification, the candidate lacked.

There is no question that this sort of occurrence is far from uncommon. In the executive recruiting business, there is a saying, “Once a candidate meets face to face with a client, all bets are off.” What this means is that personality and “chemistry” prevail in most cases over experience and accomplishments documented in resumes. There is nothing particularly wrong with these aspects of a candidate being considered. Personality and the ability to fit into different organizations are extremely important. However, this doesn’t change Drucker’s main point. Meeting basic, well thought through job requirements cannot be ignored. We need to think through the requirements of a job and staff for the strengths that are needed. If a candidate doesn’t meet an essential requirement, don’t promote or hire him or her for the job.

This sounds obvious, but it is not. The fact is that many promotions are made with only one or two candidates being considered. The correct way according to Drucker was to consider three or four candidates, all of whom met the minimum qualifications of staffing for strength.

The reason that this wisdom is frequently ignored is that the hiring executive makes assumptions about other candidates’ suitability before considering any candidates qualifications against the prime job requirements.

In one organization the staffing executive, who had been with the company a year, wanted to appoint a particular manager to a senior position. He sent the recommendation, which had to be approved by his boss, forward. His boss asked to see the resumes of at least two additional candidates for the job. His boss was also curious about a particular aspect of the staffing executive’s choice for this promotion.

The staffing executive used the old ploy of straw candidates. He picked three, rather than two, additional candidates for the position. He thought this would give the impression that he had considered many subordinates for the promotion and would show how superior the candidate really was. He did not think the three additional candidates were anything special. One could say that he selected them for that reason. He sent all four resumes to his boss. In addition to demonstrating questionable integrity, he made two major errors. First, he did not think through all the job requirements. His boss had. In addition, he relied on his personal knowledge and opinion of the candidates without investigating other aspects of their work at the company. That would have been bad enough. However, he even failed to read the resumes he sent forward. He merely attached a strong letter of recommendation for his candidate.

What the staffing executive did not know is that one of the three additional candidates had been with the organization for many years and had a reputation as a young manager with unusual capabilities. However, for the past year he had been on special assignment across the country, so the staffing executive did not know him very well. As it happened, his background and proven experience were particularly suited to the obvious requirements of the job. He was so well-suited, that he, if any candidate, should have been the prime candidate.

This was one reason that the staffing executive’s boss had asked to see the resume’s of additional candidates. If this manager was not even included in consideration, he wanted to find out why. If he was included, but not the candidate selected, he wanted to see if he was missing some important information before he approved the promotion. The staffing executive was fortunate enough not to overlook forwarding his resume. Then he probably would really have been in trouble. However, had he read the resumes, he would have immediately grasped the fact that he was not recommending the best candidate for the position. Of course he may have known something about this candidate not known to others, but he did not.

What his boss saw was that the executive was clearly not recommending the best candidate for the job. In a face-to-face interview with the staffing executive, he soon determined that the he did not know this individual or his backgrounds as well as he should have. He could perhaps be forgiven since this manager had been absent during most of the staffing executive’s time with the organization, it still did not reflect well on his ability as a high level manager. Had he promoted the wrong manager, it might have caused a number of problems in the organization, not to mention not getting the manager most suitable for the job. After a discussion of the requirements and the qualifications of the candidates, both he and the staffing executive agreed that this manager, and not the manager that the staffing executive had earlier recommended should be promoted to the job.

Had the executive I mentioned discussed the appointment with his staff or colleagues, he wouldn’t have embarrassed himself in front of his boss. I want to state emphatically that Peter was not saying that the appointment is a group decision. It is not, and you get to take responsibility for the outcome regardless if those you consult give you erroneous information or possibly a poor recommendation. You are still responsible. However, it makes sense to share your plans and get others’ opinions and ideas whenever it is possible to do so. Even if you decide to promote someone who others don’t recommend, at least you’ll know the pitfalls of your appointment and you’ll learn more about what others think and know regarding the various candidates you are considering.

Once you have made a promotion, your work is not done. You are responsible for what happens next, and there is always “care and feeding” that is involved. New appointments do not automatically hit the ground running. It would be well to prepare the way as much as possible, including with training. Sure you can leave it to the new promotee to work it out by his or herself. If it’s the right selection, the individual will know what areas need to be brought up to snuff. But why wait? There is much that you know already that the new appointee probably does not. Unless letting the individual struggle is part of the training, why do it? You want your new promotee to be successful and make you look good don’t you?

Without doing everything for the promotee, you want to do everything possible to ensure his or her success. As a retired CEO once told a group of recently promoted vice presidents about leading their subordinates: “Don’t you let them fail!”

That managers rise to their level of incompetence is a dangerous myth. If a manager isn’t performing, of course he needs to be relieved. But to fire him from the organization is human sacrifice pure and simple. There may be an equally challenging job available at which he will be successful. Find something or put him in a holding position until you do. Don't waste individuals who have previously done well over long periods of time due to a single failure. In any case, you can minimize these problems by doing due diligence in the ways recommended, that is:

· Think though the requirements of the position and plan on staffing for strength

Do this and you should have an excellent “batting average” of promoting the right person into the right job. Once in the job, it is still your responsibility to getting the person off to the right start. Take these actions and your organization is on the way to being top heavy with the best and most qualified managers.

THIS MONTH'S THOUGHT FOR LEADERS

"The most serious mistakes are not being made as a result of wrong answers. The truly dangerous thing is asking the wrong question."

--- Peter F. Drucker

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