The Peter Principle says that in a hierarchy, employees tend to be promoted until they reach a position in which they are no longer competent, and there they stay.¹
Where it comes from
Laurence J. Peter, an education professor, and writer Raymond Hull published the idea in 1969 as a satire. The book became a bestseller. Fifty years later, economists Alan Benson, Danielle Li and Kelly Shue tested it with data on sales workers in U.S. firms. Companies tended to promote their best sellers, and those top sellers tended to be weaker managers, measured by the sales of the people they went on to lead.²
Where it goes wrong
The term is often used as a put-down of an individual boss ("he's reached his level"). Peter aimed at the system: promotions typically reward performance in the current job and assume it will carry over into a different one.
Talent Takeaway
Before a promotion, let the candidate try the new job's skills in small doses: lead a project, run a meeting series, coach a new hire. And offer a respected path upward for experts who would rather stay experts.
¹ Peter, L. J., & Hull, R. (1969). The Peter principle. William Morrow.
² Benson, A., Li, D., & Shue, K. (2019). Promotions and the Peter principle. The Quarterly Journal of Economics, 134(4), 2085–2134.
Further reading: Lazear, E. P. (2004). The Peter principle: A theory of decline. Journal of Political Economy, 112(S1), S141–S163.