Promoting top performers to managers can improve team productivity

The German business magazine WirtschaftsWoche recently featured the discussion paper “A Bright Side of Peter-Principle Promotions”, in which Robert Dur and his co-authors Kimiyuki Morita and Takeharu Sogo argue that promoting top performers can, under the right conditions, improve team performance.

High expectations can motivate employees

Introduced by Laurence J. Peter in 1969, the Peter Principle argues that employees are promoted based on their performance rather than their managerial skills. Previous studies have shown mixed results on whether this leaves organisations with fewer excellent specialists and more mediocre managers.

Dur's research offers a more nuanced perspective and explains why performance-based promotions might work well for some organisations. The authors show that employees who excelled in their previous role often set higher performance expectations once they become managers. Those expectations can encourage team members to work harder and achieve better results.

‘Our analysis shows that performance-based promotions can be very efficient,’ says Robert Dur. ‘When employees respond strongly to their manager's expectations, organisations may actually benefit from promoting their highest performers.’

When promoting top performers works best

The researchers stress that these benefits are unlikely to apply universally. The positive effects are expected to be strongest in environments where individual effort largely determines team performance, such as sales organisations.

By contrast, in teams where collaboration, coordination and joint decision-making are essential, leadership skills remain a more important determinant of success. 

How expectations and work culture shape outcomes

The authors also note that the height of the manager’s expectations and how strongly employees feel the need to meet those expectations play an important role. Higher expectations can increase the turnover of low-performing employees. If wages are high, this can be quite cost-effective for organisations.

However, if wages are low, the increased turnover is an unwanted consequence and, consequently, the manager’s expectations can be excessively high. ‘There are two sides of the same coin of promoting high-performing employees.’ According to Dur, it can lead to more stress, lower job satisfaction and potentially an increase in employees who decide to leave the organisation.

What this means for an academic setting

Dur notes that the authors’ theory is supported by existing research in academic settings. Generally speaking, schools led by a dean with a stronger scientific profile perform better than schools with a dean who has a more average scientific background. ‘Of course, managerial qualities also matter, but these studies suggest that we should be cautious about relying too much on so-called professional managers,’ Dur says.