Peter Principle

The Peter Principle is the principle that "In a Hierarchy Every Employee Tends to Rise to His Level of Incompetence." While formulated by Dr. Laurence J. Peter and Raymond Hull in their 1968 book The Peter Principle, a humorous treatise which also introduced the "salutary science of Hierarchiology", "inadvertently founded" by Peter, the principle has real validity. It holds that in a hierarchy, members are promoted so long as they work competently. Sooner or later they are promoted to a position at which they are no longer competent (their "level of incompetence"), and there they remain. Peter's Corollary states that "in time, every post tends to be occupied by an employee who is incompetent to carry out his duties" and adds that "work is accomplished by those employees who have not yet reached their level of incompetence".
Overview
The Peter Principle is a special case of a ubiquitous observation: anything that works will be used in progressively more challenging applications until it fails. This is "The Generalized Peter Principle." It was observed by Dr. William R. Corcoran in his work on Corrective Action Programs at nuclear power plants. He observed it applied to hardware, e.g., vacuum cleaners as aspirators, and administrative devices such as the "Safety Evaluations" used for managing change. There is much temptation to use what has worked before, even when it may exceed its effective scope. Dr. Peter observed this about humans.
In an organizational structure, the Peter Principle's practical application allows assessment of the potential of an employee for a promotion based on performance in the current job, i.e. members of a hierarchical organization eventually are promoted to their highest level of competence, after which further promotion raises them to incompetence. That level is the employee's "level of incompetence" where the employee has no chance of further promotion, thus reaching his or her career's ceiling in an organization.
The employee's incompetence is not necessarily exposed as a result of the higher-ranking position being more difficult — simply, that job is different from the job in which the employee previously excelled, and thus requires different work skills, which the employee usually does not possess. For example, a factory worker's excellence in his job can earn him promotion to manager, at which point the skills that earned him his promotion no longer apply to his job.
Solutions
One way that organizations attempt to avoid this effect is to refrain from promoting a worker until he or she shows the skills and work habits needed to succeed at the next higher job. Thus, a worker is not promoted to managing others if he or she does not already display management abilities. The corollary is that employees who are dedicated to their current jobs will not be promoted for their efforts (like Dilbert Principle), but might, instead, receive a pay increase.
Peter pointed out that a class, or caste (social stratification) system is more efficient at avoiding incompetence. Lower-level competent workers will not be promoted above their level of competence as the higher jobs are reserved for members of a higher class. "The prospect of starting near the top of the pyramid will attract to the hierarchy a group of brilliant [higher class] employees who would never have come there at all if they had been forced to start at the bottom". Thus the hierarchies "are more efficient than those of a classless or equalitarian society".
In a similar vein, some real-life organizations recognize that technical people may be very valuable for their skills, but poor managers, and so provide parallel career paths allowing a good technical person to acquire pay and status reserved for management in most organizations.
Dynamic effects
One complication is that competent employees sometimes pretend to be incompetent. The simplest reasons for this might be avoiding the jealousy of co-workers and to annoy managers. A more complex reason might be avoiding promotion to management, i.e. "Creative Incompetence", which is especially common in businesses such as big box retail store chains where managers' base pays are low and they are not entitled to overtime pay.
It may often happen for cultural reasons, such as a strong identification with the working class leading someone to remain in a working-class job rather than "selling out" or the disdain highly-skilled workers have for management decisions, leading them to avoid management jobs. Companies practicing performance improvement find that employees will deliberately "leave room for improvement" by starting at less than peak effectiveness and reach full productivity later. Employees also deliberately underperform in order to keep quotas and expectations from being set too high.
A second complication is entry-level jobs that are detail oriented and restrictive, thereby favouring detail-oriented workers, yet hinder creative and innovative workers. By definition and necessity, entry-level jobs are the assembly line of an organization, and thus the most creative and innovative employees start in positions of incompetence. The detail-oriented persons are thus promoted over the creative employees. Often these creative employees are incapable of showing their work strengths because of the structured and restrictive assembly line environments, and then are tagged as bad employees.
In reality, creative employees may be more suited to management jobs, but because they are unable to use their strengths in the low-level jobs they hold, they never rise to management, and the innate flexibility and innovation needed for managing is lost to the company. The end result for an organization as a whole is that it will collapse when the incompetents in the ranks outnumber the competent because the organization is no longer able to produce results favorable to its continued existence.
Hierarchiology
Along with the Peter Principle, Dr. Peter also coined "hierarchiology" as the social science concerned with the basic principles of hierarchically organized systems in the human society.
Having formulated the Principle, I discovered that I had inadvertently founded a new science, hierarchiology, the study of hierarchies. The term hierarchy was originally used to describe the system of church government by priests graded into ranks. The contemporary meaning includes any organization whose members or employees are arranged in order of rank, grade or class. Hierarchiology, although a relatively recent discipline, appears to have great applicability to the fields of public and private administration.
Impact on popular culture
Although humorous, Peter's book contains many real-world examples and thought-provoking explanations of human behavior. Similar observations on incompetence can be found in the Dilbert cartoon series (such as The Dilbert Principle), the movie Office Space, and the television show The Office. In particular, the Dilbert Principle seems to be an extension to the Peter Principle. According to the Peter Principle, the subject has been competent at some job in their past. The Dilbert Principle attempts to explain how a person who has never been competent at anything at any point in time can still be promoted into management. Of course, both the Peter Principle and the Dilbert Principle can both be operating in the same organization at the same time.
The generalized "Peter Principle"
The Peter Principle was first introduced by L. Peter in a humoristic book (of the same title) describing the pitfalls of bureaucratic organization. The original principle states that in a hierarchically structured administration, people tend to be promoted up to their "level of incompetence". The principle is based on the observation that in such an organization new employees typically start in the lower ranks, but when they prove to be competent in the task to which they are assigned, they get promoted to a higher rank. This process of climbing up the hierarchical ladder can go on indefinitely, until the employee reaches a position where he or she is no longer competent. At that moment the process typically stops, since the established rules of bureacracies make that it is very difficult to "demote" someone to a lower rank, even if that person would be much better fitted and more happy in that lower position. The net result is that most of the higher levels of a bureaucracy will be filled by incompetent people, who got there because they were quite good at doing a different (and usually, but not always, easier) task than the one they are expected to do.
The evolutionary generalization of the principle is less pessimistic in its implications, since evolution lacks the bureaucratic inertia that pushes and maintains people in an unfit position. But what will certainly remain is that systems confronted by evolutionary problems will quickly tackle the easy ones, but tend to get stuck in the difficult ones. The better (more fit, smarter, more competent, more adaptive) a system is, the more quickly it will solve all the easy problems, but the more difficult the problem will be it finally gets stuck in. Getting stuck here does not mean "being unfit", it just means having reached the limit of one's competence, and thus having great difficulty advancing further. This explains why even the most complex and adaptive species (such as ourselves, humans) are always still "struggling for survival" in their niches as energetically as are the most primitive organisms such as bacteria. If ever a species would get control over all its evolutionary problems, then the "Red Queen Principle" would make sure that new, more complex problems would arise, so that the species would continue to balance on the border of its domain of incompetence. In conclusion, the generalized Peter principle states that in evolution systems tend to develop up to the limit of their adaptive competence.