Promotions and the Peter Principle*
© The Author(s) 2019. The best worker is not always the best candidate for manager. In these cases, do firms promote the best potential manager or the best worker in their current job? Using microdata on the performance of sales workers at 131 firms, we find evidence consistent with the Peter Princi...
| Main Authors: | , , |
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| Other Authors: | |
| Format: | Article |
| Language: | English |
| Published: |
Oxford University Press (OUP)
2022
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| Online Access: | https://hdl.handle.net/1721.1/144198 |
| _version_ | 1826211358571495424 |
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| author | Benson, Alan Li, Danielle Shue, Kelly |
| author2 | Sloan School of Management |
| author_facet | Sloan School of Management Benson, Alan Li, Danielle Shue, Kelly |
| author_sort | Benson, Alan |
| collection | MIT |
| description | © The Author(s) 2019. The best worker is not always the best candidate for manager. In these cases, do firms promote the best potential manager or the best worker in their current job? Using microdata on the performance of sales workers at 131 firms, we find evidence consistent with the Peter Principle, which proposes that firms prioritize current job performance in promotion decisions at the expense of other observable characteristics that better predict managerial performance. We estimate that the costs of promoting workers with lower managerial potential are high, suggesting either that firms are making inefficient promotion decisions or that the benefits of promotion-based incentives are great enough to justify the costs of managerial mismatch. We find that firms manage the costs of the Peter Principle by placing less weight on sales performance in promotion decisions when managerial roles entail greater responsibility and when frontline workers are incentivized by strong pay for performance. |
| first_indexed | 2024-09-23T15:04:38Z |
| format | Article |
| id | mit-1721.1/144198 |
| institution | Massachusetts Institute of Technology |
| language | English |
| last_indexed | 2024-09-23T15:04:38Z |
| publishDate | 2022 |
| publisher | Oxford University Press (OUP) |
| record_format | dspace |
| spelling | mit-1721.1/1441982023-07-31T17:01:57Z Promotions and the Peter Principle* Benson, Alan Li, Danielle Shue, Kelly Sloan School of Management © The Author(s) 2019. The best worker is not always the best candidate for manager. In these cases, do firms promote the best potential manager or the best worker in their current job? Using microdata on the performance of sales workers at 131 firms, we find evidence consistent with the Peter Principle, which proposes that firms prioritize current job performance in promotion decisions at the expense of other observable characteristics that better predict managerial performance. We estimate that the costs of promoting workers with lower managerial potential are high, suggesting either that firms are making inefficient promotion decisions or that the benefits of promotion-based incentives are great enough to justify the costs of managerial mismatch. We find that firms manage the costs of the Peter Principle by placing less weight on sales performance in promotion decisions when managerial roles entail greater responsibility and when frontline workers are incentivized by strong pay for performance. 2022-08-03T16:46:35Z 2022-08-03T16:46:35Z 2019 2022-08-03T16:42:18Z Article http://purl.org/eprint/type/JournalArticle https://hdl.handle.net/1721.1/144198 Benson, Alan, Li, Danielle and Shue, Kelly. 2019. "Promotions and the Peter Principle*." Quarterly Journal of Economics, 134 (4). en 10.1093/QJE/QJZ022 Quarterly Journal of Economics Creative Commons Attribution NonCommercial License 4.0 https://creativecommons.org/licenses/by-nc/4.0/ application/pdf Oxford University Press (OUP) Oxford University Press |
| spellingShingle | Benson, Alan Li, Danielle Shue, Kelly Promotions and the Peter Principle* |
| title | Promotions and the Peter Principle* |
| title_full | Promotions and the Peter Principle* |
| title_fullStr | Promotions and the Peter Principle* |
| title_full_unstemmed | Promotions and the Peter Principle* |
| title_short | Promotions and the Peter Principle* |
| title_sort | promotions and the peter principle |
| url | https://hdl.handle.net/1721.1/144198 |
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