LESSONS IN LEADERSHIP AND LIFE
Lately, my CEO friends have become more vocal about their employee complaints. Heads shaking from side to side, they often lament, “Where are the good ones? Maybe we’re just getting too old and have less patience.” Most don’t know what to say and shrug their shoulders.
So, it’s little wonder that when a good employee emerges, they are elevated to superstar status in no time. Ironically, when that happens, we often set them up for failure through promotions and increased responsibilities.
The remedy for this calamity follows the understanding of the adage, “You can’t sow seeds in September and expect a crop in October.” It’s impossible to build a superstar overnight. You must give them that opportunity (thin the seedlings, so they have room to grow strong); nurture them (till the soil); teach (give them plenty of fertilizer); inspire, (give them lots of sunshine), and take good care of them (water). It becomes a long-term commitment on both sides.
PITFALLS TO PROMOTION
Most bosses tend to be like parents when discussing employee development, especially leadership. They have a biological and intellectual need to propagate the leadership to ensure future succession. Often, this propagation is accomplished through promotions to higher levels of responsibility based on superior work performance. The rationale is that some people are so good at their jobs that they will succeed at higher levels of work, especially in leadership activities. This does not always work out according to expectations, however, and may sometimes be detrimental to the entire organizational structure, particularly to the promoted individual and the leader who anticipated great outcomes from their protégé.
As I was building a healthcare clinic early in my leadership career, I decided to change the financial management structure from an “outside” accounting agency to hiring my own CFO. I had no idea what qualifications this position should have (just someone who is good with numbers), so I hastily elevated an outstanding part-time bookkeeper to the position.
Debbie (not her real name) worked for the company for about a year and a half. The “outside” accountant proclaimed that Debbie was great at her job, never made a mistake, and could run circles around calculators and computers.
How could I pass up this future superstar and not promote Debbie to become my CFO? She will become my partner to help grow this clinic and someday will run it, I mused.
I quickly offered her a generous salary with full-time benefits, sent her to a few finance seminars, and gave her as much time as she needed with the consulting accountant. I even planned to send her back to college so she could work on an accounting degree. I was satisfied to see that my “superb leadership skills” were spot-on in creating a top-notch CFO from the ground up. What a great CEO I am. I must have an eye for talent!
Debbie, in the meantime, was on cloud nine. She knew she had made it to the top! After a few weeks, she took a vacation to Hawaii to celebrate her success and get some rest from the new position. When she got back, she said she’d be refreshed and raring to go.
I soon discovered a few cracks in my attempt to build my Taj Mahal of a superstar; I noticed that Debbie was sinking.
My first clue was the way she treated the staff under her. She became bossy, mean, and dumped her work on others. In addition, Debbie could not complete her own work assignments. She was supposed to meet with my board’s finance committee every month. It never happened! She was to have created an inventory system to increase assets, but she never started.
This CFO was supposed to develop an internal finance department supported by payroll clerks, accounts payable clerks, and an accounts receivable clerk. It never got off the ground. In fact, everything I asked her to do just didn’t happen. She had excuses for everything.
Meanwhile, our accounting program was in such dire straits that I soon had to bring the outside accounting agency back to get it on track again. It was obvious that I had put the “cart before the horse.” I had lavished Debbie with praise to secure her loyalty and sense of ownership, but she was simply not capable.
I fired her shortly after discovering she failed to pay the state and federal payroll taxes for two months in a row. It wasn’t that we didn’t have the money to pay for it; she just didn’t do it.
The ultimate kicker was that two years later, the local papers had a front-page article about Debbie’s arrest for defrauding a local business of hundreds of thousands of dollars through cooked-up bookkeeping activities and no internal controls. I dodged a bullet, and I learned an important lesson.
PETER PRINCIPLE AND PROMOTING TO A LEVEL OF INCOMPETENCE
The Peter Principle, written in 1969 by Laurence J. Peter and Raymond Hull,(1) was intended as satire. However, the principle rang so true in hierarchical organizations that it became a popular topic at many corporate meetings.
The principle explains that a person with a high level of competency at a job will eventually be promoted to a higher or more senior level, typically requiring a different skill set. For example, if a promoted individual acquires a new skill and succeeds, then they continue to be promoted until they reach a level at which they can no longer succeed. This phenomenon is called promoting to a level of incompetence.
These individuals may eventually be terminated from their jobs because of their failure to rise to the level of their new position, demoted, or become stuck at this final level, called the final placement or Peter’s plateau in the book. This leads to Peter’s corollary: “In time, every post tends to be occupied by an employee who is incompetent to carry out its duties.”
Edward P. Lazear attempts to discredit the principle by indicating that people typically get promoted because they have met the standards to do the job; therefore, they should be capable and are promoted to higher positions.(2) Lazear explains that some can meet the expectations of the new job once they are in, while others cannot and fail. Lazear argues that this is a function of mere statistics, rather than criteria.
Many companies have built in a sort of performance regression for promoted positions. Once individuals are promoted, the company expects a lower performance to avoid complete failure. Thus, the promotion criterion and the position’s standards (job expectations) are inflated to offset the Peter principle. The more important the transitory component is (for instance, going from a support clerk to the manager of a unit) relative to total variation in ability (the skill set differences between a clerk and manager), the larger the amount that the standard is inflated (the job description of the manager becomes more in-depth than it really should be to get the potential manager as close to the job requirements as possible).
Applied to other situations, this same logic explains why movie sequels are considered worse than the original film and why second visits to restaurants seem less rewarding than the first. The expectations for the movie sequel are greater (the standards are inflated): “I can’t wait until the sequel comes out. It’ll be as good as the original.” Often, the sequel fails to live up to those expectations because the expectations were too inflated.
A well-known study(3) reviewed the performance of 53,035 sales employees at 214 American companies from 2005 to 2011. During this time, 1,531 of those sales reps were promoted to become sales managers. The data revealed that the best salespeople were more likely to be promoted but were also more likely to perform poorly as managers.
“Consistent with the Peter principle, we find that promotion decisions place more weight on current performance than would be justified if firms only tried to promote the best potential managers,” the researchers concluded.
They continued, “The most productive worker is not always the best candidate for manager, and yet firms are significantly more likely to promote top frontline sales workers into managerial positions. As a result, the performance of a new manager’s subordinates declines relatively more after the managerial position is filled by someone who was a strong salesperson prior to promotion.”
In this case, each company relied too heavily on sales as a criterion for promotion, paying twice for the mistake. Removing a high-performing sales associate from the line potentially upsets client relationships and jeopardizes those accounts’ revenue. The team, newly under her direction, is at greater risk of underperforming as she struggles in a role that demands quite different abilities. “These findings underscore the possibility that promoting based on lower-level job skills rather than managerial skills can be extremely costly,” the professors opined.
Alan Benson, one of the co-authors of the research, was surprised. “I expected that the best salespeople would become merely good managers: Some skills translate to management, and others don’t,” he said. “To see the best salespeople becoming the worst sales managers was surprising.”
The researchers can’t say how often companies stumble into the Peter principle and how often they embrace it. Some firms may promote great salespeople “to encourage workers to exert effort in their current job roles and to maintain norms of fairness,” they speculated. Counting sales is easily compared to “other, more subjective or fungible employee characteristics in promotion decisions.” This new information, Benson said, “suggests firms were willing to lower the bar to promote the best salespeople.”
BUILDING A SUPERSTAR EMPLOYEE
After many years of making mistakes — and I still make a lot of them — the best advice I can give about promoting good workers and developing superstar employees is to look for these essential characteristics first:
Understands expectations. What does the promoted employee expect? This is why job descriptions are so critical; they are like contracts and must be used as guides, evaluation criteria, and accountability guides for job performance. The job description becomes the roadmap for everyone’s success.
Once the expectations are all on the table, you must invest in training and educating the promoted employee for as long as it takes — within reason, of course. Supporting the promoted individual through educational seminars and one-on-one training is advantageous for boosting their confidence in the new positions. Progressively increasing their responsibilities also sends a message of trust and confidence in their abilities.Demonstrates good thinking abilities. Critical/abstract thinking and problem-solving skills are especially important.
Has formal and experiential education.
Has an open mind. The promoted employee must be open to other ideas and ways of doing things.
Demonstrates good communication skills. This includes active listening.
Exhibits high emotional intelligence. This includes the ability to recognize and manage their own emotions as well as recognize and manage the feelings of others.
Superstar employees are real. After all, you must be one to have risen to the top of your organization. If you discover it in yourself, then you will find it in others.
REFERENCES
Peters L, Hull R. The Peter Principle. New York: William Morrow and Company;1969.
Lazear EP. The Peter Principle: A Theory of Decline. J Political Econ. 2004;112(S1):S141–163. https://doi.org/10.1086/379943
Benson A, Li D, Shue K. Promotions and the Peter Principle. Quarterly J Econ. 2019;134(4):2085–2134. https://doi.org/10.1093/qje/qjz022