The Peter Principle

Most of us who started our commercial careers have at some stage worked for medium to large corporations. Some of us made an effort to climb the corporate ladder to what was deemed success. We worked hard, made sure that our bosses could see that we were trying and we gained results accordingly.?

The promotions started to roll in and we were encouraged with new titles, bonuses and salary increases. We were really starting to move up through the ranks and life was good. We would celebrate with our colleagues on a Friday night after work and the weekends were a blur of parties, conferences and good times. We were on the way. We were becoming successful.

What started out as a way to make money so that we could fund a good lifestyle became an obsession with success, looking the part and buying the bling and material stuff like cars and apartments and trinkets to show that we were there. Along the way was attrition amongst our colleagues. Some just did not make it. They either stayed in their job or left to find a different culture or salary base. Some were even promoted to their own level of incompetence. They rose to a level in the company where they could not handle their responsibilities. This is called the Peter Principle. So-called because it was highlighted by Lawrence J. Peter in his book, The Peter Principle.

Most of us were aware of this phenomenon and watched with trepidation as the wrongly promoted one would eventually crash out of the company and become a pariah in the industry.

That is corporate, but what about small to medium business? Does the Peter Principle apply here?

I believe that it does and I also believe that it is one of the major causes of the failure rate in small business. The major causes of failure in small business are:

·??????Under-capitalisation – not having enough cash to ride out the storm of the first few years

·??????Under researched – not doing enough homework on whether people are going to buy what they intend to sell

·??????Low EQ – the inability to understand and communicate with people in a meaningful way

·??????Lack of management skill sets - they didn’t know how to run a business

Each one of these could be connected to The Peter Principle. Was it a mistake to go into business in the first place? Should a carpenter automatically become a builder? Should a GP become a specialist? Should a coder become an IT entrepreneur?

Many people who enter small business will have reached their own level of incompetence before they start. What chance do they have? Zero, zilch, nada!! They become the statistics we watch with horror every year. We won’t even discuss the collateral damage that happens when the failure becomes complete.

So, what is the solution?

Before you get a degree in anything, you need to learn a lot of stuff. It can take years to become a doctor or architect or a plumber and even though you may forget a lot of the stuff you learned (like school), you have to understand and implement the fundamentals of your chosen profession to be competent at it. And so it should be with business. Anyone who wants to start their own business should be ‘schooled’ in at least the fundamentals of commerce. I also do not believe that Governments should be creating this. They don’t understand commerce like successful business people do.

There are mentor programs for people who are already in business, but what about the poor suckers who are considering developing their own business. Where do they go to receive advice from?

Here’s one suggestion. There are literally thousands of retired business people who could maybe devote a few hours a week to helping those who want to start their own enterprise. They could charge for this service or take equity in the business for on-going mentorship. The retirees would probably love it and the failure rate would slow dramatically.

What do you think?

The author of this article has been in small and medium sized business for 38 years owning 7 successful businesses and starting 6 of them from scratch. He has written a book about the fundamentals of business called The 3 Secrets of Business Success.

www.3secretsofbusiness.com