Flume Training Blog

25Jun2018

The Peter Principle: Great Salesperson, Crap Manager

Picture the scene. Your sales team consists of one superstar, some solid performers and a few that you really need to have a think about. Your superstar loves selling and consistently pulls it out of the bag. The problem is that they’ve been doing the same job for a while and they’re starting to get itchy feet.What to do?

In an effort to retain your superstar, you promote them into a management position. They’re happy. They feel like they’re progressing and stop looking at jobs on LinkedIn.

Fast forward eight months, and things are bad. Your newest manager has changed from a pumped-up superstar into a grumpy handful. They’re pissed off that they’re making less money and they’re failing as a manager. Morale is low and revenues have flatlined.

It’s a classic story many sales team leaders are familiar with, and it’s a concept that has a name: the Peter Principle.

What is the “Peter Principle”?

The “Peter Principle”, laid out in a 1969 book by Dr. Laurence J. Peter, describes the following paradox:

If organizations promote the best people at their current jobs, then organizations will inevitably promote people until they’re no longer good at their jobs.

In other words, businesses manage careers so that everyone “rises to the level of their incompetence”. Sales is a perfect environment to see the Peter Principle in action.

The Harvard Business Review recently examined data on the performance of salespeople and their managers at 214 businesses. They found that sales performance is highly correlated with promotion to management, but sales performance is actually negatively correlated with performance as a sales manager. In other words, businesses tend to promote great sales people into management, even though they become crap managers.

How do I avoid the “Peter Principle” trap?

Dodging the Peter Principle requires businesses to promote a less successful sales person with the right skills instead of the superstar. But how do you do that without losing your superstar? There are two options:

Offer a pay rise, not a promotion

The Harvard Business Review research found that businesses with the strongest pay-for-performance also promoted the best managers. In other words, by rewarding sales performance with increased pay, firms are free to promote the best potential managers. Superstars don’t feel obliged to become managers in order to earn more money.

Create alternative sales career paths

Secondly, promotions aren’t all about pay, so create alternative career ladders for sales superstars that include extra responsibility and prestige. For example, is there an option for an enterprise sales path that allows your superstar to progress whilst continuing to utilise their existing skills?

Incentive pay and dual career ladders will ensure that you keep your sales superstar and you get the best possible management team. Everybody wins.

 

Problems with recruiting and retaining good sales people? We’d love to discuss how we can help.Contact us today to find out more!