The Peter Principle: How Organisations Set Employees Up to Fail (and How to Fix It)

"We Promote People Until They Fail – And Then We Wonder Why Our Teams Struggle" 

We've all seen it happen over and over; we may have even been there! Someone crushes it at their job, gets promoted, then once the honeymoon period is over…. Boom, their performance slows, motivation dips, and productivity sinks. It's not because they're lazy or unskilled. It’s the Peter Principle in action, and it's causing silent chaos across businesses everywhere. 

The Peter Principle suggests that in many organisations, employees rise to their level of incompetence. They get promoted based on success in one role usually based on their technical abilities, but the new role requires skills they don’t have. Suddenly, high performers become struggling leaders. 

Why We’re Trapped in This Cycle of Failure 

Let’s face it, organisations often reward success with promotion, not skill alignment. It’s an easy trap. You have a great engineer? Make them a manager. A top salesperson? Let’s have them lead the sales department. What could go wrong? Plenty. 

In many cases, companies don't stop to ask, "Is this person ready for this new role?" Let alone ask the individual if they want the promotion. Instead, the assumption is that good performance in one job is the recipe for success in another.  The reality is that each level demands different skills, technical experts suddenly must manage people, strategize for the future, and handle budgets. Without proper support, they’re set up to fail. 

The Human Toll: Stress, so called Imposter Syndrome, and Burnout 

The Peter Principle isn’t just an organisational problem; it’s a personal one. People who find themselves promoted beyond their capabilities often feel overwhelmed out of place and exposed. They experience stress, imposter syndrome, and a growing sense of failure. Not only do they suffer, but so do their teams and colleagues who rely on them for leadership and direction. 

This is where organisations typically fall short. Instead of helping, they tend to ignore the problem or worse punish the individual for not living up to the role. How many times have you seen a once promising employee stagnate or quit because they couldn't adjust to the demands of a new position? We blame the person, but have we considered that the real culprit is the system? 

How Can Organisations Break the Peter Principle Cycle? 

The key to avoiding this trap lies not in completely getting rid of promotions but in rethinking how we promote and support people in new roles. Here’s how organisations can consider stepping up: 

1. Stop Automatically Rewarding Success with Promotion 

Consider ways in which an employee can grow within the organisation that nurtures their technical skills, abilities & desires helping them thrive in their chosen direction, and realise that not everybody wants to climb the corporate ladder,  

2. Assess for Leadership Potential, Not Just Past Performance 

Before a promotion happens assess the individual to make sure they have the skills needed to make the next step.  

3. Provide Robust Training and Support – Really work to understand how you can help to support them bridge the gap 

Throwing someone into a new position without preparation is negligence and more often than not setting the person up for failure. Organisations must invest in leadership development programs, mentoring, and coaching. New managers and leaders need ongoing support, not a one-day course on how to lead.  

4. Make Failure Okay 

Everyone fails at some point. It’s not just the company’s responsibility to SAY it’s OK to say “I need help.” As the saying goes action speaks louder than words, create & foster a culture where honest conversations about struggles are welcome , encouraging people from feeling isolated when they struggle with new responsibilities (take a leaf out of Steven Bartlett’s book where he went as far as creating a role for Head of Failure)  

5. Consider Role Reassignment, Not Just Punishment 

Sometimes, people genuinely aren’t a good fit for their new roles, and that’s okay. Rather than let them struggle, burn out, quietly quit or worse, fire them, companies can explore where else might there be a position for the individual. Perhaps that person would thrive in a different department or return to their previous position. 

The Controversial Fix: Should We Even Promote at All? 

Here’s where things get controversial: maybe we should stop promoting people altogether. Does every organisation need rigid hierarchies? What if success didn’t mean “moving up” but rather becoming the best version of yourself at your current level? 

Many companies have experimented with flat structures, where people lead themselves without being forced into management roles. While it's not a perfect system, it challenges the old-fashioned belief that promotion equals success. 

Do you think we can stop setting people up to fail? Is it possible to rethink how we define success in leadership?