Peter Principle (in Startups)

Is it true?

The Peter principle states that “every employee tends to rise to his level of incompetence”. If someone is good at her job, she’ll be promoted into a job that demands different skills. If she’s good at the new job too, she’ll be promoted again, requiring yet another set of skills. One day, she will arrive at a job for which she is wholly unsuited, and there she will stick. Since when did a manager ever get sacked for anything?

The Peter Principle is satire: it mocks management and it mocks books about management. It is striking, then, that most people take it quite seriously. The Harvard Business Review has published numerous straight-faced responses.

via Tim Harford

Apparently, yes… the Peter Principle may actually be true – although most of us have already experienced this ourselves as we have watched our once happy and competent peers being culturally forced to continue their upward climb on the proverbial ladder to only become less and less useful (and more unhappy).

Many of us have also seen incompetent managers also continue their rise up the same ladder because they have not quite yet reached peak incompetence.

But there’s another example of the Peter Principle that I’ve only been able to experience, first-hand, since I’ve moved out here to the San Francisco / Silicon Valley, and that’s watching successful employees in large institutions and companies leave their roles and become a startup founders.

And then they realize (or sometimes they don’t realize at all) that this is the height of their incompetence and they are not built to run a company at this time (or ever).

This is especially prevalent and common with consultants from “The Big Four” (PwC, Ernst & Young, Deloitte, and KPMG) and “The Big Three” (McKinsey & Company, Boston Consulting Group, Bain & Company) who are rewarded, for whatever reason, with financial backing (i.e. venture capital) and then take that money and proceed to run the company (and their employees) into the ground.

I’ve seen and experienced this first-hand, unfortunately, and some of those experiences were so bad that it’s created a real visceral (allergic) reaction to anyone who’s professional background is from a Big Four (or Three) organization and who’s using that as justification for their ability to competently run a startup organization.

It’s a big unfair, I’ll admit, but promoting oneself to the leader in a startup is essentially next-level Peter Principle in action. In one of my previous places of employment where one of the founders was ex-McKinsey & Co., he blamed everyone except himself for the issues in the company and why it didn’t work, even (and especially) as he was firing folks and trying to close things down.

Pathetic and weak; the man lacked a real backbone.

The only solution that I know of to minimize the founding and building of new startups by folks who are the least qualified and ready to build them is to ensure that these folks (and everyone, for that matter) is getting trustworthy counsel.

In other words, a common theme and issue for folks who have graduated to a level of their highest incompetence is the lack of real, transparent relationships in their lives that consistently provide an honest sounding board of feedback and perspective.

And even in a handful of instances I thought, incorrectly, that I had been hired to provide that outside and objective perspective on why things weren’t working properly, but my advice was deemed too hollow. To be clear, that particular company was already headed to the deadpool and them hiring me was a Hail Mary pass.

I don’t have any issue with folks trying their hand at building a company – I’d be the last person to stop anyone from giving it a go!

But, I always suggest that folks take a real, hard look at their experiences and themselves, namely, and that they get honest feedback from folks that they trust and that they love and respect before they make that type of commitment, especially since there will be a lot more fallout and collateral damage in the lives of those they hire if they go into it naively and blind to their own dysfunction.

Those that suffer the most from The Peter Principle in action are the folks that they end up leading and managing; very rarely does “Peter” experience the downside – from their privileged perspective, everyone else is really at fault, right?

%d bloggers like this: