A Freakonomics blog post which covered the Peter Principle (see Question 3) got me thinking. The Peter Principle is explained as follows:
Dr. Peter is one of our favorites. His book The Peter Principle: Why Things Always Go Wrong came out in 1969. He first expressed the principle that bears his name like this: “In a hierarchy, each employee tends to rise to his level of incompetence.” Once an employee reaches his level of incompetence, his superiors will recommend no further promotion, leading to “Peter’s Corollary”: “Every post tends to be occupied by an employee incompetent to execute its duties.”
How do you defeat the Peter Principle in your organization? How about this: as a condition of promotion, any employee agrees that they may decide to (or be asked to) return to their previous job, but keep the pay and benefits package from the higher-level job.
The idea here is to remove the financial disincentive for the employee to admit they aren’t doing well and say “OK, fair enough, this job isn’t for me; let me go back to what I’m good at”. If they are ever promoted again, their original salary or salary scale is used to determine their new pay, so they can’t yoyo up and down, collecting a compensation bump each time. One may want to impose a minimum term in the new job, and/or require management permission and agreement for the step-down. This would mean some lower-level employees cost the company more than others, but it might well be a whole lot cheaper than having the wrong person doing the wrong management job, badly. It could perhaps be seen as the price management agrees to pay for promoting the wrong person in the first place.