Incompetent Managers Cost Businesses Too Much
Canadian business author Laurence Peters proposed in his 1969 book "The Peter Principle : Why Things Always Go Wrong" that employees in hierarchical organizations are promoted to their level of incompetence. There is such pressure in American business to move "upward" that employees continue to win promotions until they reach a level where they simply cannot do the work required of that position.
These employees end up desperately unhappy, struggling to survive and at the same time costing the company money in lost productivity, lowered morale, and less innovation.
Alternatives to Upward
Many people are beginning to question the relentless pressure to move "upward". They want more out of a job than just a paycheck. They are looking for personal satisfaction. This desire for self-fulfillment may provide a means of reducing the tremendous cost to businesses of the Peter Principle, of promoting managers beyond the level where they can succeed.
There are only two alternatives to upward. They are downward and sideways.
Lateral transfers are becoming more common, and more acceptable. Employees are allowed, and in some cases encouraged, to move from one department or division to a related position in another. This can be a good move for the employee who gains a broader base of knowledge and becomes more valuable. They also have an opportunity to explore new areas of the company in search of work that they would enjoy more and, consequently, be better at.
Lateral transfers are also good for the company.
They are one way to retain valued employees. They bring fresh, innovative, and potentially cost-saving ideas into a division, without the full cost associated with a new hire from outside. They also help to more widely disperse the institutional knowledge base.
The concept of downward movement, demotion, is less well accepted and less often used.
That is unfortunate because it holds the promise of even greater benefit for both the company and its employees.
Demotion By Any Other Name
The word "demotion" has a very b negative connotation in any hierarchical organization. The unrelenting pressure to move upward forces people into positions that they don't want and can't handle. A few employees are smart enough to see that they don't want the position they are being offered a promotion into, but most end up accepting the promotion and then finding they don't enjoy it or can't handle it.
For the few who were smart enough to decline an inappropriate promotion, there are constant questions from co-workers: "why didn't you get the promotion?", "why didn't you want the promotion?" and "look what happened when you didn't accept that promotion and they gave it to so-and-so instead." There also are often repeated attempts to promote the person, despite their declining the previous offer, as the person remains apparently qualified.
The real problem lies, however, with those who should have declined the promotion and didn't, either because they didn't realize it was beyond their capabilities or because they wanted the position for another reason, the prestige, for example.
Unhappy Employees Are Not Top Producers
Someone who has been very successful in their job probably enjoys the work. However, their success in the position makes them a candidate for promotion to a new, "higher" position, the duties of which they may not completely understand. Many times, when they accept the promotion, they struggle a little at first as they learn new things, but then they begin to master the new job. Soon they are ready to be promoted again.
Other times, when they accept the position they discover that they are not capable of doing what needs to be done in the new job. They get negative performance feedback for the first time in their career. Their supervisor offers them coaching or additional training. These help some but ultimately are not enough. The employee begins doing some parts of the job, but not necessarily the most important ones.
They make incorrect decisions because they just don't know any better. They stifle the people in their group so that none of them can become a threat. They temporize and procrastinate because they lack confidence. They are unhappy in the job. The company is unhappy with their performance. Yet neither knows what to do to fix the situation.
The solution: easy to see, difficult to do.
The solution is easy to see, but difficult to do. An individual who has been promoted beyond their level of competence is unhappy, is doing a poor job, is costing the company money, and is hindering the development of others. The employee needs to be returned to the level at which they were a great employee. Usually, that is the position, or at least the level, from which they were promoted.
Companies are reluctant to demote people because of the potential liability in doing so. Most managers who would have to do demotions lack the skill and training to do it well. Certainly, they lack the desire to do it.
The employee doesn't want to seek out the demotion, for a variety of reasons. And if the employee is demoted, their ego is bruised and they probably will quit and walk out.
The fact remains that moving the employee downward is the appropriate thing to do. The company gains through increased production and innovation. The employee gains from an increased job satisfaction. So the management challenge is to make the change is such a way that they employee can accept the change.
Employee Resistance Points
Typical employees will resist the inverse promotion for two reasons, ego and money. The successful manager will help them deal with both issues.
The ego issues can be addressed by discussing with the employee the success he or she had in the previous position and how much they enjoyed it.
The manager should stress how valuable the employee was in that position and how valuable the company expects they will be again. The employee should be transferred to a different unit, not just back into the one from which they came, whenever this is possible. They should be given time to think about the change, not just have it sprung on them as it is about to happen.
This will allow them to consider the potential value in the new position and to develop coping strategies.
The money issues should be a non-issue.
Usually, there is enough overlap between the pay scales of the two positions that the employee returned to the lower position would still be within the upper end of the pay scale for that position. However, even if they are outside the pay scale, they should be left at their current higher salary. This will also help somewhat with the ego issues.
Rather than cutting the employee's pay, leave them at that pay level until the pay scale for the lower level increases over time and reaches where they are. Be sure to tell them that that will happen. Inform them that their pay won't be cut, but that they won't get any raises until they are back in line with others in that function. While this may seem like an extra cost for the company, consider the alternative. The employee's resentment over a pay cut, coupled with the ego damage of the demotion, may cause the employee to resign. The cost of finding, hiring and training a replacement will seriously exceed the cost of leaving them at their present salary.
It Won't Work For Everyone
The larger a company is, the more likely it will be able to find a suitable position into which to move someone being inversely promoted.
They will have more divisions and a larger number of positions at the level to which the individual is being moved. A large multi-national conglomerate is more likely to be able to find a suitable supervisor position for a former manager than is an eight person manufacturing company.
In addition, people are not equally likely to accept the change. Some will have more emotional and ego issues than others and be unable to accept the change, even if it is handled considerately and with no change in pay.
Some companies will have union agreements or employment contracts that will prohibit or restrict these kinds of changes.
It Is The Smart Thing to Do
Smart companies and smart employees will take advantage of the potential benefits of an inverse promotion rather than a termination or a resignation.
It saves the company money. It increases the productivity of the entire workforce. It removes barriers to promotion for qualified individuals. And it removes incompetence from the structure. Smart people will recognize the cost savings of not having to look for another job. They will seize the new opportunities to learn. They will enjoy their work again.
Manage This Issue
You have to find and remove those things that hamper your business as it competes. Incompetence is a major handicap. When found, it needs to be removed. However, like all these things, it needs to be done in the most cost-effective manner. In this case, the most cost-effective first step is to plan and then offer an inverse promotion.
For those who don't believe our society will ever accept the concept of demotion by another name, or who are unwilling to wait for this kind of business practice to become more widely accepted, there are other alternatives. Next, we will look at performance management approaches. The article after next, we will look at how to shift the entire hierarchical paradigm.