Promotions and the Peter Principle

a column by Alan Benson, Danielle Li and Kelly Shu for VOX: CEPR’s Policy Portal

The Peter Principle states that organisations promote people who are good at their jobs until they reach their ‘level of incompetence’, implying that all managers are incompetent.

This column examines data on worker- and manager-level performance for almost 40,000 sales workers across 131 firms and finds evidence that firms systematically promote the best salespeople, even though these workers end up becoming worse managers, and even though there are other observable dimensions of sales worker performance that better predict managerial quality.

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