The Peter Principle Revisited -- a Computational Study

In the late sixties the Canadian psychologist Laurence J. Peter advanced the apparently paradoxical principle, named since then after him, which can be summarized as follows: “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 way of promotion rewards the best members and where the competence 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 between 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 the “Peter principle” is unavoidable, but 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, counter intuitively, 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.

Awesome stuff. Peter Principle is more solid than ever.