sales

The alarming findings about the ‘Peter Principle’ and sales managers

Sue Barrett /

Have you ever worked with someone who was really effective in one role but then promoted to other roles, usually in management, and ended having no idea and no real capacity to fulfil that role in a competent manner?

Chances are your answer is ‘yes’.

This is a common occurrence in many organisations where people are continually promoted until they are no longer effective in their roles — they rise to their level of incompetence. This is referred to as the ‘Peter Principle’, which was highlighted by Dr. Laurence J. Peter in 1969.

Basically, the problem arises when the skills that makes someone successful in one role do not translate into another role on the same or next level.

In hierarchical business structures, great performance is often rewarded with a promotion to the next level, often with poor outcomes for many. Instead of looking for the best management capabilities to lead and manage a team, it’s often the best technical performer — be it an engineer, lawyer, scientist or salesperson — who is given the promotion because that is the long standing tradition in many organisations. With that promotion comes movement up the hierarchy, more status, more power, more money, more prestige, and so on. These promotions are usually seen as rewards.

The Peter Principle concept has been at best anecdotal; however, there is now solid research to prove the principle is indeed valid.

What has this got to do with sales and sales management?

Everything it seems. Because the research that proved the Peter Principle came from studying sales people and their transition into sales management.

Recently, in a Harvard Business Review article titled, “Research: Do people really get promoted to their level of incompetence?”, the researchers examined data from 214 firms as it relates to the performance of sales people and their managers.

They found sales the easiest and most ideal setting to test the Peter Principle because it’s easy to identify top performing sales people and sales managers. Accessing a wide range of data they asked the following questions:

  • Do organisations really pass over the best potential managers by promoting the best individual contributor?
  • And if so, how do the organisations manage around the Peter Principle?

What they found was the following:

  • Better sales performance is highly correlated to promotion into management
  • Sales performance is negatively correlated with performance as a sales manager

WHAT?

Yes, when top performing sales people are promoted to management, each higher sales rank they have correlates with a 7.5% decline in sales performance of each of the manager’s sales people following their promotion. This was true whether the sales manager was given their current team or put into a new team.

Yes, you read right: performance got worse when higher performing sales people assumed sales management roles.  

We can confirm this research from our own experience in dealing with thousands and thousands of sales people and sales leaders over the years. We see, all too often, that businesses are often promoting their best sales people into sales management roles even though they make the worst managers.

Adding to this catastrophe is giving sales managers an individual sales quota to manage as well: a hybrid sales/sales manager role. This creates so many conflicts on so many levels that sales results are severely affected.

Coupled with this, we found there is the lack of general business and commercial acumen in too many sales managers, beyond putting together a sales deal. They are sales savvy but not business savvy enough to work in concert with the broader business and its executives.

What’s the alternative?

There are a couple of things to consider.

First, the researchers found those sales people who work in a collaborative setting, often involving large complex deals, were more likely to be successful as managers. In short, collaboration positively predicts managerial quality. We’ve often pointed out that selling is a team sport. We recommend to look for those people who are collaborators and team oriented, not ‘solo’ operators.

Secondly, promote the people with the best managerial and leadership potential to the role of sales manager. Then let managers manage teams and not their own sales quotas. Give them the resources and development needed to be excellent in management. Eliminate ‘player-coach’ roles where possible. Sales managers who play the ‘super salesperson’ role create more problems than they solve.

Thirdly, find alternative ways to reward and recognise top performing sales people instead of a promotion to management. Develop rewards that are designed to reward excellence in one’s role without changing roles. Look at lateral moves, mentoring, and so on.

Some of the best sales managers we have worked with and developed over the years where either the average sales performers whose talent lay in management and leadership, or those who have not come from traditional sales roles. These outliers often came with excellent project management experience, leadership and management capabilities, ability to deal with complexity, sound business acumen, a willingness and ability to keep on learning, and a desire to learn about the complex system of sales.

We have worked with many people who trained as engineers, accountants, and scientists, who took the reins of sales management with the additional qualities described above and were, and still are, outstanding.

The two main things we identified that these outstanding sales leaders have in common is their ability to adopt and facilitate a systems thinking approach to managing a sales team and sales operation, and their capability and firm commitment to leading and managing great sales teams.

Where does this leave those sales managers who are struggling to lead sales teams when they were once star sales performers?

Well they have two choices:

  1. Return to what they love doing best. Selling. Many have and there is no shame in doing so; or
  2. Decide that leading and managing a sales team is more important that personal sales glory. Purposefully educate yourself in the science, craft and skills of leading and managing teams and sales teams especially; develop your business acumen and read widely; become a team player, a collaborator, a genuine coach and work through your people not around them or instead of them; take joy out of seeing other people succeed and thrive.

Remember everybody lives by selling something

NOW READ: The differences between business, sales and marketing strategies

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Sue Barrett

Sue is a selling better strategist and advisor, sales philosopher and speaker, sales trainer and coach, writer and activist. Sue is chief executive of forward thinking sales advisory Barrett and online sales education and resource platform www.salesessentials.com. Barrett develops sales strategies, standards and education that help people and businesses sell better.

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