I have noticed a lot of youngsters are falling victims to the Peter Principal without even knowing it. It is also true for the companies that hire them.

The Peter Principle is a colloquial principle of hierarchiology, stated as "In a hierarchy every employee tends to rise to his level of incompetence." Formulated by Dr. Laurence J. Peter in his 1968 book The Peter Principle, the principle pertains to the level of < SPAN style="COLOR: windowtext; TEXT-DECORATION: none; text-underline: none">competence of the human resources in a hierarchical organization. The principle explains the upward, downward, and lateral movement of personnel within a hierarchically organized system of ranks. It is also the movement from one hierarchical organization to another.

The Employee:

Normally, for an individual, the years upto the age of 22-25 are the learning years, thereafter, upto say 65 are the earning years. For 99% of the people who join the work force and spend time in the rat race the prospect of retiring without anything to show for it (almost penniless in old age), the years after retirement at say 65 are the yearning years. This is because most of us stopped learning after the learnng years!

A youngster joins an organization at a junior level at a salary for say 100. Career growth for this person means salary growth, his / her resume is all over the place and in a growing economy, he/she bound to get an offer in a short span of time and of course as the focus is income growth, he would jump jobs at as low as even 110 levels.

This does not stop and soon, in a few years, this person is drawing 3-4 times his startup salary in his nth job.

As can be seen from most resume’s and assuming that the resume is complete, we will find many job changes for a person as young as 32 years of age (These youngsters are already home owners and drive big cars as their income can now justify it – or can it over 20 years?).

In the IT industry in particular, most youngsters expect a half-yearly appraisal, a salary hike and on silly reasons as silly as peer comparisons. In an interview they go by the numbers of years of experience! The accelerated rise in Income in most cases does not match the rise in the competence levels and the employee in a short span of time reaches his/her level of “incompetence”. This is a dangerous point to have reached so early in ones career!

What our friend does not realize is that their competence levels did not increase in these years as they were busy jumping jobs, things were changing and as their focus was on a quick rise in income without in most cases a commensurate rise in level of competence, they will soon become un-employable.

In the times when the economy is in a downswing, these people are the first to fall victims of the pink slip!

The Employer:

The industry is also a victim of this principle. They suffer from a very high rates of attrition as most of their employees are busy testing the Peter Principle.

These companies too fuel this in order to find more people to man their workforce and therefore resort to poaching. Salary expenses in these companies rise dramatically in a short span of time and soon they start becoming uncompetitive.

Nothing is stationery, we just witnessed an appreciation of almost 10% in the local currency value, most mid to small organizations with high wage bills and low operating margins are the worst sufferers and are threatened with closure, if not yet, soon.

Already, the senior management and upper middle management in most Indian companies are reaching wage levels that are difficult to sustain in billing rates and even the wage levels in middle and lower levels are reaching the tipping balance!

A meltdown is imminent where there will be a lot of closures simply because the customers who came to these companies because of the cost do not find that the reason enough anymore.

Either they will find other companies in other countries or will pull back the work onshore as their local workforce is now affordable in comparison.

EndGame:

In my view, in a not too distant future, we can expect the Peter Principal catching up with the employees and the employers.

It is akin to the correction in the stock market and will be good for the economy, but while the correction lasts, there will be a lot of bankruptcies and loan defaults and trauma. Maybe there is a second chance, or maybe not – who knows ?

Comments are welcome.