Ig Nobel Prize Winner: If The Peter Principle is Right, Then Organizations Should Randomly Promote People

The Ig Nobel Prize is given out by a group called Improbable Research, which celebrates "achievements that first make people laugh, and then make them think. The prizes are intended to celebrate the unusual, honor the imaginative — and spur people's interest in science, medicine, and technology."  The 2010 awards were handed out on September 30th, and one one of the doctoral students I work with, Isaac Waisberg, pointed out that one of the prizes was awarded to a simulation that demonstrated -- if the Peter Principle is true -- organizations would be better off promoting employees randomly rather than promoting people until they they reach their level of incompetence.  Isaac knew I was interested in The Peter Principle as I wrote the foreword to the 40th Anniversary edition. Here is a link to the PDF of the article and here is the abstract:

The Peter Principle Revisited: A Computational Study

Authors: Alessandro Pluchino, Andrea Rapisarda, Cesare Garofalo

In the late sixties the Canadian psychologist Laurence J. Peter advanced an apparently paradoxical principle, named since then after him, which can be summarized as follows: {\it 'Every new member in a hierarchical organization climbs the hierarchy until he/she reaches his/her level of maximum incompetence'}. Despite its apparent unreasonableness, such a principle would realistically act in any organization where the mechanism of promotion rewards the best members and where the mechanism at their new level in the hierarchical structure does not depend on the competence they had at the previous level, usually because the tasks of the levels are very different to each other. Here we show, by means of agent based simulations, that if the latter two features actually hold in a given model of an organization with a hierarchical structure, then not only is the Peter principle unavoidable, but also it yields in turn a significant reduction of the global efficiency of the organization. Within a game theory-like approach, we explore different promotion strategies and we find, counterintuitively, that in order to avoid such an effect the best ways for improving the efficiency of a given organization are either to promote each time an agent at random or to promote randomly the best and the worst members in terms of competence.

This is just a simulation, not an empirical test. But the virtues of randomness are also found in an earlier experiment that showed groups that randomly selected leaders performed better than those that were asked to selected a leader from among their peers.  Here is the summary I wrote in Weird Ideas That Work:

Further evidence for the virtues of making random decisions comes from a pair of experiments in Australia by S. Alexander Haslam and his colleagues. Their experiments compared the performance of small problem solving groups (3 to 5 people) that were asked to select their own leaders with groups that were randomly assigned a leader (i.e., a person whose name appeared either first or last in the alphabet).  These experiments involved 91 groups that worked on one of three closely related group decision-making exercises, the “winter survival task,” the “desert survival task,” or the “fallout survival task.”  Each of these small groups of college students developed a strategy for ranking potentially useful items for the particular task,  and their decisions were scored relative to expert ratings.  Both experiments showed that groups that had randomly assigned leaders performed significantly better than those that had selected their own leaders.  Random assignment was shown to be superior to groups that had used either an informal  process where they selected leaders by “whatever means you see fit” or a formal process where each group member completed 10 self-report questions on a leadership skills inventory that had been shown to predict managerial success in prior studies.  Leaders who scored the highest on the inventory were assigned to lead groups that used the formal process. There were no significant differences between groups that used an informal or a formal process.  Both had inferior performance to groups with randomly selected leaders. 

Haslam and his colleagues believe that the process of selecting a leader in these experiments focused attention on differences between group members, which undermined the group’s sense of shared identity and purpose, which in turn, undermined performance.  Instead of thinking about how to solve the problem together, or having a “united we stand, divided we fall” mentality, they thought about differences between them that were unrelated to the task -- like who had more prestige in the group and why.  My interpretation is similar.  I would add that the leaders who are given a mandate to be in charge of a group often – without realizing – start imposing their individual will too strongly, which can stifle the range of ideas that are seriously considered by the group.  The researchers admit that they have suggested only one possible explanation for these findings, and acknowledge that a random process of selecting a leader is probably inferior to a systematic process for groups that do other tasks.  But these findings are intriguing because they force many of us – both practitioners and researchers --  to see an old problem in a new way, they spark the “vu ja de” mentality.  They suggest our assumptions about how to select a leader may, at least at times, be flawed.

I am not arguing that we ought to give-up and start selecting and promoting leaders randomly.  But it is interesting to consider randomness because doing so challenges our assumptions about the rationality of what we do in life  Indeed, speaking of randomness, last year I heard that Nobel Prize winner Daniel Kahneman (he won the real prize, not to Ig) was running a simulation that seemed to show that if the CEOs of Fortune 500 companies were randomly reassigned to different companies, there would be no significant impact on firm performance.  I don't know what happened to that research, or even how accurate that rumor is, all I can find is this WSJ article where he chimes in on the subject.  If anyone knows more, please comment.

P.S. The reference for the experiment is Haslam, S. A, C. McGarty, R. A. Eggins,  B. E. Morrison, & K. J. Reynolds, “Inspecting the Emperor’s Clothes: Evidence that Randomly Selected Leaders can Enhance Group Performance”,  Group Dynamics: Theory, Process and Research 2 (1998): 168-18

P.P.S. For another post on randomness, check out this one about decision-making among the Nasakpai Indians.

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Comments

[IesoAneba]

This was an interesting perspective on leadership. I wonder if the findings hold true over time (forgive me if the answer is in the full research report - I didn't read it). The reality that few organizations have promotional ladders that make sense, in terms of skill needed that would have been developed on a lower rung, makes it feels as if people are doomed from the start.

While I was reading this, I was reminded of Stoics who believed individuals should stop when they reached their ‘peak of wisdom’ or the top of their field. Consider the athlete or singer who retires at their prime when they’re on top versus the athlete who no longer is a champion or the singer who becomes a has-been because they stayed in the profession too long.

There’s also the problem that people will naturally use strategies that worked well for them in their previous position, which resulted in the promotion, and take little time to focus on strengthening weak areas because it’s difficult and uncomfortable. People will do what they do best and that may not be such an asset in the new position.

The Peter Principle makes a case for people stopping when they’ve accomplished all they can at their corporation. The difficulty for the athlete, singer, corporate exec, is knowing when. It’s a crap shoot (I guess you’d be better off playing Craps).

[Christian Fey]

It is interesting that the random rule seems to produce better leaders. I would comment though, that the lack of a focused promotion would take employees who have potentially no leadership ambitions and "throw them to the fishes" as it were. This, in my experience, forces those individuals to take very special care so as to not screw everything up. To the contrary, by choosing employees who are looking to become promoted, many have hit what they see as a wall in their career and once promoted tend to see themselves as in a position where they can be a bit more cavalier due to their prior involvement in the organization. This would lead them to likely be less motivated to avoid mistakes and potentially even begin the new job lazily. I'm curious if this analysis holds or even has some bearing on the study put forth above, but it would be an interesting sideline.

[Eric]

Using the Peter Principle as justification for randomly promoting people seems to make the assumption that people will be incompetent in the role after the very first promotion. In reality it may take many promotions and associated competence at each level before reaching the level of incompetence defined by Peter. Throughout that time, presumably, the individual has been making demonstrable contribution to the organization.

Perhaps a person should only be promoted if they demonstrate the abilities necessary to be promoted to two levels. This would short-circuit the Peter Principle by keeping a person in a role of competence unless they could show competence at the next level.

[Brandon Meek]

Interesting topic and excellent analysis of the scenario. However, there are many assumptions built into this situation in regard to a parity of competence of the members within the group that a "leader" is chosen from, among other things.

I think this simulation speaks more to the topic of group/team psychology as it relates to responding to an authority figure more than anything else, which may be supported by the fact that teams in this simulation worked better when a "leader" was selected at random. There isn't any competition and each person's probably of being the leader of the group was the same. Therefore, there isn't any indication of worth between individuals, and all members are essentially still peers within the team.

While I agree that the Peter Principle exists, I think we have to be careful in making the leap from this article and the author's assessment to a point where we heavily discount the value and role of true leadership within an organization. The fact that you can interchange leaders that have the competence and requisite skills to be a leader doesn't indicate that any random individual can successfully be a leader.

[Anon]

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[Eddie Colbeth]

Thanks for the thought provoking article! I've heard of the peter principle but didn't know what it was. I'm reading Steven Johnson's new book, Where Good Ideas Come From and talks about the how adding noise/randomness to the system accelerates creativity. Perhaps there is an echo of that here?

[Bill Bennett]

The ancient Greeks in Athens elected leaders by random, literally drawing names written on shards of pottery out of a large urn.

A ruler would be in charge for a year. If they did a good job, the city gave them a farm, if they did a bad job, they were executed.

I wonder if modern companies would run better with a similar system?

[Peter Evans-Greenwood]

Now that's a great collection of references. I remember reading the Peter Principle article in New Scientist a couple of months ago.

This topic is one of those things we shouldn't find unusual, but we do. I expect it's because people have a lot of trouble distingushing between "necessary" and "sufficent".

In most companies, the particular CEO is sufficent for the company to succeed, but they are not necessary. We could swap in anyone with similar skills and have the same result. The same could be said for randomly picking a leader in a team: we need a leader, but there's nothing particularly special about the leader we need so we might as pick someone at random. It's like picking a nail from the box when you're putting up a picture.

The problem is that we all like to think that we're necessary: that we were invaluable in delivering the required outcome. The reality is otherwise. (Arguments about Steve Jobs aside.)