Many Entrepreneurs Suffer From the Peter Principle

Most people think that the Peter Principle (employee rises to his level of incompetence) only applies to large organizations. Let me assure you that it is also alive and well within start-ups. There I see founders and managers who are stalled transplants from large organizations, and technologists trying to run the business.

Forty years ago, in a satiric book named The Peter Principle, Dr. Laurence J. Peter first defined this phenomenon. The principle asserts 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, and there they remain, unless they start or join a start-up to get the next level.

In all environments, the move to incompetence often occurs when competent technical people try to step into management or executive positions, for which they have no aptitude, interest or training. How many technologists have tried to run start-ups and failed?

So what are the keys to avoiding this problem for yourself, and recognizing the signs and requirements in your own team, before the "level of incompetence" paralyzes your start-up:

1. Focus on communication skills. The ability to communicate effectively and often to your team and to the outside world becomes more and more critical as you move up the role ladder. Practice and training are critical. If communication to others is not your forte, then stick to a highly focused non-management role.

2. Look for ability to direct, as well as act. Many people have trouble directing the task and not doing it themselves. Both are hard work, and both are valuable. Executives get paid for what they know, not for what they can do with their hands -- for managing the job and not actually doing it.

3. Comfortable with a spectrum of responsibilities. As a manager, there will be many new responsibilities, most of which are a little fuzzy. A tech promoted to manager must change his mindset from one of focusing on a problem and solving it, to multitasking a broad range of responsibilities, and keeping them all moving.

4. Demonstrates high-level competencies. You need "portable" competencies -- those that you can take with you to any level of the corporate ladder, and which you can tap into in a managerial capacity. For example: be solutions-oriented, able to balance both sides of an issue, and be a quick study.

5. Provide mentoring and formal management training. If you are seriously looking at shifting someone to a management role, make it top priority to get them formal training, not only on business management itself, but especially on people management and interaction skills. Talent and good intentions are not sufficient.

6. Assess passion and current position. A management position is not for everyone, and a specialist career may be much more exciting. Great technical gurus get paid very well, and have visible top positions like Chief Technical Officer (CTO) for prestige and respect. You can still be the founder, and bring in a CEO to run the business.

Another important point is to recognize and deal immediately with occurrences of the Peter Principle. If you are the CEO, and you tolerate ineffective people in important positions, they will suck the life out of your start-up. The good people will fade away, and only the bad will remain.

The Peter Principle is something that we all have to deal with, in our own career, and with other team members. In a small start-up, everyone has to carry a maximum load for survival, and everyone sees the non-performers. If you are the last to see the problem, or the last to react, maybe it's time to look in the mirror.

 

Follow Marty Zwilling on Twitter: www.twitter.com/StartupPro

Comments

[rst2536]

06:59 PM on 01/06/2012

THE CAPITALIST BUSINESS LEADER

What makes the greatest business leader
Is that s/he’ll give the old heave ho
To any who try to impede her;
Or, if they have, s/he calls a pro.
Has read her Marx on exploitation
And knows her net’s expropriation
Of workers’ surplus who produce
A thing that’s valued for its use.
And so s/he screws as much production
From workers any way s/he can
Until s/he needs a new game plan.
In which case s/he goes with construction
Of new machines which s/he’ll confess
Won’t take a break and could care less.

Please see more at http://poemsonaffairsofstate.blogspot.com/

[David Danio Jr]

06:45 PM on 01/04/2012

It's is time to reinvent that principle. If workers, though work hard to obtain that expensive position, must perform something to compensate the company he is serving for spending much money to preserve him. Otherwise, if an employee is unproductive though still suited to the position, must step down and give way to more productive and capable employee. Let's not preserve unproductive asset to destroy its entity. http://smarter-idea.blogspot.com/

[Lagardera]

06:38 PM on 01/04/2012

It's an excelent article. Thanks Marty Zwilling !

[Scholastica8]

06:01 PM on 01/04/2012

One problem is that all too often people who know what they are good at and what they like to do and prefer to continue doing that are told again and again that they have low self-esteem or lack the courage to try something new. They are made to feel bad about themselves and made to feel that their true talents are less than valuable.

Everything goes against the old adage: To thine own self be true.

[Scholastica8]

08:02 AM on 01/09/2012

I don't consider myself a pessimist.... I consider myself a realist... yet you'd be surprised at how many people consider "realistic" to be "pessimistic." I'm really good at spotting pitfalls or weak spots in writing (particularly continuity errors in fiction and lack of clarity in non-fiction).... I'm also really good at spotting weaknesses in business plans. I'm not good with numbers (I have mild discalculia, which is like dyslexia with numbers), but I am good with the finance as long as I can avoid actually working with the numbers themselves.

I totally agree about the undercapitalization. Entrepreneurs are, for the most part, extreme optimists and risk takers. I consider many to be of the same ilk as gamblers. I don't mean professional gambers. I grew up around them. They are different, they are excellent at what they do.... and they know when to quit... and can walk away. The amateur gambler can't quit... they are eternal optismists.

I have a friend who is a serial entrepreneur. She always says, "Can't succeed if you don't try. Nothing to lose." On the other hand I do see losses... I loss of savings.... debt... loss of income from working at a regular job. Now may be the time when people lack jobs, but they also lack spending money.