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If The Peter Principle Is Right, We Should Randomly Promote People

Ig Nobel Prize Winning Research

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.

I don't believe 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 the 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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