The Peter Principle is often cited as a cynical view on management. Basically, it says that people are promoted until they reach a level of incompetence after which further advancement is not possible. Taken to the logical extreme, at some point everyone will be incompetent - it will only be a matter of time!
The funny thing is, I actually view the Peter Principle as an optimistic view on management. Reality is worse (which is why Scott Adams came up with the Dilbert Principle, but I digress).
I would love to see the Peter Principle at work. In the old days, you had to work your way up from the bottom. For example, at UPS, you might start at the loading docks and if you were successful, you would become a truck driver. Eventually, you might get promoted to management - at first, managing a single warehouse, then a district, then a region, etc. The CEO and senior management have decades of experience from the bottom up.
Successful entrepreneurs (the ones who actually build their companies long after the start-up phase) are the ultimate bottom up guys. I've seen entrepreneurs goto Fry's Electronics to buy parts, crawl under desks to install wires, move furniture, clean up conference rooms,...heck, they might even scrub toilets. They do whatever it takes.
A good friend of mine (and experienced serial entrepreneur) once remarked that "80% of the work at a startup is mundane & inglorious, and exactly the type of work that most people will put off for months in their daily lives (the equivalent of balancing the check book)."
Perhaps making progress one step at a time is not so glorious. These days, young people are in such a hurry to take short cuts that it's hard to find people who actually did demonstrate competence before they were given a chance to take the next step.
How many times have you met a manager who had no clue what their employees did? If companies followed the Peter Principle, at least a former programmer would manage programmers so that they would understand technology and be able to mentor young programmers. If companies followed the Peter Principle, at least a guy managing sales reps would have carried a bag before and would know what it felt like to handle rejection after rejection.
Unfortunately, as we enter yet another bubble (at least in certain sectors of the venture economy), we're seeing people with scopes of responsibilities far beyond even their Peter Principle level of incompetence.
But the problem isn't just caused by MBAs and young whipper snappers looking to skip a few rungs of the ladder as they climb to the top. It's also caused by investors, boards and corporations looking for quick fixes.
In corporate America high profile mercenaries are hired into businesses with obscene compensation (and severance) packages. It seems that even if they destroy value, they can walk away with millions of dollars (hundreds of millions in the case of Bob Nardelli and Home Depot).
The same goes for investors. How many VCs and other money managers are handling large sums of money far beyond what they are capable of managing? It seems that every Joe who has a decent track record with a small pile of money tries to raise much larger funds.
The world might be a better place if the Peter Principle were really true.
At our best companies, we avoid mercenaries who enter from the top. We try to hire smart, young people, challenge them, nurture them, and develop them over many years. It takes great patience, dedication, and commitment (on both sides) but it's well worth it. These people will become the future leaders of our companies.
Even if every hire doesn't work out or even if many of them eventually reach their levels of incompetence, to me, the Peter Principle doesn't seem all that bad. We're never at that theoretical "end point." We're always in transition, striving toward the next goal. If people are actually competent and have the patience to demonstrate competence at every step along the way, we might be much better off.