You have probably heard some form of the Peter Principle expressed before. At its most cynical, it is usually defined as, “A person will be promoted to their level of incompetence.” While this has often been used somewhat tongue-in-cheek, according to Alex Tabarrok at Marginal Revolution, some researchers set out to test if this was really the case.
Studying more than 40,000 sales people at 131 firms, they found this was largely borne out. It has often been assumed that the skills that made people successful at sales would be transferable to management roles, even though there are metrics that are reliable predictors of managerial effectiveness. In fact, the effectiveness of salespeople under the supervision of an improperly promoted supervisor is often inhibited.
…we find 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.
What is striking, however, is that – among promoted managers – pre-promotion sales performance is actually negatively correlated with managerial quality. A doubling of a manager’s pre-promotion sales corresponds to a 7.5% decline in manager value added; that is, workers assigned to this manager will see their sales increase 7.5% less than workers assigned to the manager who was a weaker salesperson.
What drew my attention to the Marginal Revolution post was the discussion of how to motivate people to perform well without necessarily promoting them to a position which is a mismatch to their strongest skillset. Non-profits often don’t really have the option of providing the increase in pay that would generally accompany a promotion. In many cases, people applying for positions at non-profits are motivated by tangible and intangible factors other than money. (I shouldn’t need to add that this is not a license to normalize paying ridiculously low wages.)
This is good because the first thing the researchers suggest as an alternative to promotion is incentive pay and that may not be a viable option for non-profits. They do caution about totally eliminating promotion as an option since some workers are more motivated by promotion than salary increases. What they do suggest is decoupling job performance in a current position from a set career ladder associated with that position.
So for example, in a non-profit setting you may not look to promote an event coordinator working in the Development Office to assistant director of development if they don’t have the best social skills. Instead, you may want to shift them toward a management or director position in an operational role in recognition of the superior organizational and planning skills they exhibited with events.
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