Have you been promoted into incompetence yet? Hierarchies are all around us and they often work in strange (and not so effective) ways. In the workplace — where many of us are most familiar with hierarchy — a decades-old theory known as the Peter Principle suggests that unfettered promotions within organizations are destined to leave most firms lost and mismanaged over the long run.

The ABCs of the Peter Principle: First coined in the 1960s by University of Southern California Professor Laurence J. Peter, the Peter Principle suggests that at the root of all managerial incompetence is a general tendency among firms to constantly promote high-performing workers into roles they aren’t suited for or unprepared to take on. The logical endpoint to this phenomenon, Peter suggested, is that every single worker at an organization ends up occupying a role they are incompetent at fullfilling. “In any hierarchy an employee tends to rise to his level of incompetence and that’s where he stays,” says Peter in an interview recorded back in 1974 (shoutout to the longevity of the BBC archive: watch, runtime 6:47).

It may have started life as a tongue-in-cheek observation, but the Peter Principle begs a few essential questions managers and workers can benefit from entertaining, including: Who is actually best suited for the specific demands of a new role? And if it ain’t broke, why fix it?

The problem is that being good at one job doesn’t necessarily make you good at the one ‘above’ it: To Peter, who co-authored his 1969 book on the principle along with Raymond Hull, the issue isn’t that incompetence is pervasive among the workforce. It’s that people will continue to move up the ranks as long as they excel at what they do — but then reach a ceiling where they can no longer ascend the professional ladder and even struggle to meet the basic demands of their new role.

Doing a job ≠ managing somebody else doing it: The skills and traits required to expertly fulfill a specific task are not the same as the skills required to effectively manage others (watch, runtime 7:09). On the flipside, some people might rank high in managerial ability even when they have no idea how to do the tasks carried out by the people who work under them.

If you feel a bit too senior right now — it’s (probably) not your fault. Another reason is of course due to inadequate training. Companies can sometimes better prepare recently promoted employees by offering more extensive training, rather than assuming they are naturally fit for the job because they were able to perform well in the past.

There are of course some holes in this model: The Peter Principle paints a very simplistic and perhaps dated picture of businesses and the workforce — which have become much more adaptive and complex in the intervening 50 years. People are more likely to change jobs than they were before and often need a wider skillset to land a job today. Crucially, we are all continuously learning and improving on the job — a point that might have been overlooked by Peter.

Discrimination is notably absent from this theory: For women and minority groups, who have long faced disadvantages when it comes to pay and the prospects of promotion, the Peter Principle can ring awfully hollow.

Something to consider if you run a business: Promotion is not the only reward. Instead of promoting top performers, companies could opt to offer incentives or additional pay for those excelling at their responsibilities. Companies who employ additional pay as their preferred method of reward are also the ones most likely to promote managers who go on to perform the best, according to a 2018 study (pdf) examining the Peter Principle among 214 sales firms.

Or consider dual career ladders: Firms could also follow Microsoft’s lead in creating two distinct promotional mechanisms that decouple responsibility from pay. At Microsoft, programmers can follow a technical career track with increasing tiers of financial reward and prestige, while leaders can follow a distinct yet equally rewarding track specifically designed to recognize managerial performance.