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Is The Peter Principle The Culprit In Your Organization?

Many entrepreneurs are very successful in ambitiously finding and sometimes exploiting a keen idea that most people haven’t thought about. Think Amazon, Uber, Airbnb, etc. Their passion, dedication and persistence are what carries them forward. They will bootstrap, scrimp and scrounge in order to get the business going. They will be very focused on their idea, even when many will talk it down.

Yet some business will ultimately fail, and while it may be due to lack of money, wrong hires, bad partners, bad timing, etc.,

There's another reason unbeknownst to them that contributes to their downfall: the Peter Principle.

Loosely translated, it's when companies continue to promote their employees until they inevitably reach their “level of incompetence." They are given more and more responsibilities beyond their capacity to execute.

As the business grows, the owners will rely more and more on those employees until they start to burn out. They will pay them more, incentivizing the employees to work harder and more hours, but not necessarily smarter. Or they will uplevel even more employees to solve the problem, which causes even more confusion.

In many instances, when companies are struggling, especially with growing pains, it's because employees should have never been placed in those positions in the first place or they haven't grown along with the organization.

A classic mistake is to promote a star salesperson to sales manager.

The position simply requires different skills from what the employee currently has.

According to Roy Cammarano, my mentor and the author of Entrepreneurial Transitions: From Entrepreneurial Genius to Visionary Leader, entrepreneurs experiencing high growth tend to lag on infrastructure and rely on the herculean efforts of their people to keep things going.

They even tend to make this same mistake with themselves — they overestimate their competence!

This is the critical juncture where you, the entrepreneur, need to be humble and honest with yourself. Know when you or your employees have reached your levels of incompetence and when it's time to seek help.

It's all about ensuring you have created real leadership, with a clear vision and mission, delegating and empowering employees with transparency, accountability, etc. Be intentional about this with serious planning and execution.

Recognize that your employees may need training and coaching to step up.

Almost every client or potential client I speak with agrees that execution is difficult.

To master being a real leader takes a lot of time and effort. But stay with it, and don't get the urge to jump. Ask your coach to share what milestones and steps to mastery you should be focusing on.

Author Tim Gallwey said it best, based on the well-known Chinese saying, “Give a man a fish, you feed him for a day; teach a man to fish, you feed him for a lifetime; But teach a man to learn, you feed him for a lifetime, and he doesn't have to just eat fish."

Jacob M Engel, CEO and Author of The Prosperous Leader. I help CEOs and their organizations prosper.

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