Updated: Jan 8, 2020
But few do, sadly.
1 The Peter Principle
This was set out in the eponymous book in 1969 by Dr Laurence J Peter and Raymond Hull. It is that people in a hierarchy are promoted to their lowest level of incompetence.
How does this come about? It occurs because managers are typically advanced on the basis of their performance in their current role. From one perspective this is sensible — it is arguably a motivator for people to perform in their current role. But from another, it is not so smart. The skills that one needs in their current role are rarely those required on the next step up the ladder.
The most famous exposition of this is provided by Robert L Katz in his 1974 HBR paper “Skills of an Effective Administrator.” Katz explained that when one is starting out technical skills tend to dominate. However, on the next rung up the ladder, say team leader or department head, the demands on ones interpersonal skills intensify — difficult conversations with those you manage, appraisals, resource negotiations, more exposure to senior management. In addition it is typically at this level that one starts to meet customers.
You see some fabulously inept management in consulting engineering businesses on account of this. And many an academically smart lawyer has faltered on the long road to partnership on account of an inability to network effectively and bring in work. It never occurred to them when they were applying for a law degree course at 18 that this would be a critical skillset ten years later.
Then as you approach the top of an organisation, you require conceptual thinking skills, the ability to work with abstract ideas, create meaning and shape vision. I can think of at least one CEO who was terrific as a divisional director on account of his relational skills but lasted less than six months at the top on account of his shortcomings in this area.
What does this mean for HR management? Firstly, the whole idea of promoting people on the basis of their performance in their current role should be treated with circumspection. More attention should be paid to the abilities they will need on the next level.
Some companies try to address the Peter Principle by an “up or out” rule, which could be restated as “sink or swim”, but this is tantamount to abrogating responsibility for a decent talent management system and will lead to the loss of some people who are highly capable and whom might prefer not to be promoted. Instead they should be retained in their current role on a salary that reflects their value: at one business I worked in, high performing Project Managers (with good technical skills and outstanding people skills) were paid as much as the directors. It was recognised that they were more valuable in their current role than they could be at board level.
Secondly, to state the obvious (but in some corporate environments it needs stating), the person that you are contemplating recruiting for the CEO’s job cannot be deemed competent just because they are a CEO in another business. Maybe they are already occupying their lowest level of incompetence. I once witnessed a business recruit a Regional Director externally when an outstanding internal candidate was available. The internal candidate had worked for the business for many years and had the confidence and respect of his peers. The incoming appointee was fired after a year for fiddling his expenses, but by then the internal candidate was long gone — he had left, disillusioned.
I can hear howls of protest now from HR professionals. It would never happen on their watch. I hope you are right. But the fact remains that some CEOs hop from one disaster to the next, picking up generous settlement agreements en route. It has always reminded me of that It’s a Knockout (anyone remember that?) game where contestants race across a pool while the floats sink behind them.
So, do you ever ask if your high performers want to move up, or is this your working assumption? Are conceptual thinking tests part of your selection process for top management? If a manager lacks certain skills that he will need at the next level, do you differentiate between those that can be acquired by training and those that will require a change of mindset?
2 Snakes in Suits
How prevalent are psychopaths in the corporate world? They’re like the guy in the Texas Chainsaw Massacre, right? They have no empathy, no scruples, they are superficial, grandiose and deceitful. 1 in 10,000, 1 in 1,000?
In researching their 2006 book “Snakes in Suits” organizational psychologist Paul Babiak PhD and professor of psychology Robert D Hare found that among “high potential executives” the figure was 3.5%, so almost 1 in 25 (versus 1% of the general population and 15% of the prison population).
And the social, economic, physical and psychological damage they can wreak is disproportionate.
Setting aside white collar crime, psychopaths use a proven formula to abuse their reports, peers and even their bosses. It is termed ‘ga