Memo To All BizTrekers

In 1969, Laurence J. Peter wrote a seminal and thought-provoking management book titled "The Peter Principle." As a professor at the University of Southern California, he formulated the concept that organizations selected and promoted people based on their performance in their current role rather than on the abilities relevant to the intended role. The book stayed on the New York Times bestseller list for over a year, and it’s still in print today.

The light-hearted book proposes that people only stopped being promoted once they could no longer perform effectively. In effect, they rose to the level of incompetence, and then got stuck there. They hit a career ceiling and their employers, in time, had increasing numbers of incompetent people filling key positions. 

In a nut shell, Peter's solution was to 1) "demote' them back to the level where they were a star performer, or 2) provide them with specialized training, or 3) fill positions based on needs rather than past performance..

Think what you may, it is an interesting concept, with useful application to the world of entrepreneurship. Just like corporate hierarchies, every entrepreneur will rise to the level of their own incompetence. For some, this is early in their journey. For other it comes much later. The difference is marked by the level of skills and know-how possessed by the entrepreneur.

Most budding entrepreneurs launch their business because they have the capacity and skill to do so. However, as the venture grows, they start bumping up against new challenges. They may master some, but eventually, they will encounter a growth ceiling that they don't know how to overcome. In effect, they will grow to their level of incompetence.

So what must be done when that happens? One option is to step aside and sell the business. Another option is to hire someone else who has a different set of skills. Neither of those options appeals to most entrepreneurs until much later in their journey. The third option is to seek specialized training for their areas of weakness. It may be a dent on the ego, but the fruit of success often makes it an easier pill to swallow ... and a wise decision.