The Peter Principle Revisited: A Computational Study

To my friends working in the public as well as the private sector, in 1968, Lawrence J. Peter, PhD., educator and heirarchiologist, determined that "In a hierarchy every employee tends to rise to his level of incompetence."  Commonly known as the “The Peter Principle,” all of us have no doubt witnessed Professor Peter’s now famous axiom... first-hand and in all its glory.

See: “The Peter Principle, Why Things Go Wrong,” pg. 13: http://oldweb.ct.infn.it/cactus/the_peter_principle.pdf.

Earlier this year during the 2010 20th First Annual Ig Nobel Prize Ceremony (yes, that's right), Profs. Alessandro Pluchino, Andrea Rapisarda, and Cesare Garofalo of the University of Catania, Italy, received the 2010 Ig-Nobel Prize for Management for "demonstrating mathematically that organizations would become more efficient if they promoted people at random."
See: http://improbable.com/ig/2010/.

Abstract:

In the late sixties the Canadian psychologist Laurence J. Peter advanced an apparently paradoxical principle, named since then after him, which can be summarized as follows: ‘Every new member in a hierarchical organization climbs the hierarchy until he/she reaches his/her level of maximum incompetence’. Despite its apparent unreasonableness, such a principle would realistically act in any organization where the mechanism of promotion rewards the best members and where the competence at their new level in the hierarchical structure does not depend on the competence they had at the previous level, usually because the tasks of the levels are very different to each other. Here we show, by means of agent based simulations, that if the latter two features actually hold in a given model of an organization with a hierarchical structure, then not only is the Peter principle unavoidable, but also it yields in turn a significant reduction of the global efficiency of the organization. Within a game theory-like approach, we explore different promotion strategies and we find, counterintuitively, that in order to avoid such an effect the best ways for improving the efficiency of a given organization are either to promote each time an agent at random or to promote randomly the best and the worst members in terms of competence.

See: “The Peter Principle Revisited: A Computational Study,” Alessandro Pluchino, Andrea Rapisarda, and Cesare Garofalo, Physica A, vol. 389, no. 3, February 2010, pp. 467-72; http://oldweb.ct.infn.it/cactus/peter_principle_sup_material.html.