An agent-based model of why incompetence spreads through big organisations

July 7, 2009

Italian research scientists use agent-based modelling to demonstrate the “Peter Principle” or organisational incompetence.

It is a truism amongst disgruntled workers in large organisations that their managers are complete idiots.  This is often justified with reference to the “Peter Principle”, named after the Canadian psychologist Laurence Peter who first observed this phenomena in 1969.  The international aid sector is no exception.

Stated simply, the Peter Principle is:

All new members in a hierarchical organisation climb the hierarchy until they reach their level of maximum incompetence.

A new study by researchers at the Universita di Catania has produced computational evidence explaining why this might be the case.  From the MIT Technology Review article on their paper:

[The researchers] say that common sense tells us that a member who is competent at a given level will also be competent at a higher level of the hierarchy. So it may well seem a good idea to promote such an individual to the next level.

The problem is that common sense often fools us. It’s not so hard to see that a new position in an organization requires different skills, so the competent performance of one task may not correlate well with the ability to perform another task well.

Peter pointed out that in large organizations where these practices are used, it is inevitable that individuals will be promoted until they reach their level of maximum incompetence. The unavoidable result is the runaway spread of incompetence throughout an organization.

The research team has used agent-based modelling to simulate this common practice of promotion. They found that, contrary to intended effect, performance-based promotion leads to, “a significant reduction in the efficiency of an organization, as incompetency spreads through it.”

The best way to counter this effect?  Alternately promote competent and incompetent people or simply promote people randomly (or based on non-competence criteria).

A nice review can be found at the MIT Tech Review and the full text can be found here, “The Peter Principle Revisited: A Computational Study”

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