Over the years, I’ve noticed a trend in business. As a company becomes more successful, the needs change and unless owners stay on top of ensuring the environment is one which allows room to grow, the good ones will move on and the less competent ones will remain. The first thing that comes to mind is the “Peter Principle”.
This theory, first introduced by Canadian sociologist Dr. Lawrence Johnston Peter, is the notion that “in a hierarchy, every employee tends to rise to his or her level of incompetence”. In other words – every employee will be promoted until, inevitably, they reach a position which they can no longer work effectively. This doesn’t necessarily mean the employee’s incompetence is a result of the new position being more difficult. Often, the job requires a different skill set, which the employee may not posses.
When Money Mart first started in 1982, we hired our friends and family in an effort to save money (they were willing to work for a little less) and surround ourselves with people we trusted. We had a great time and kept costs down when we needed to and our franchisees did the same. As the business grew, it became more complicated. What was required in the early days changed when we had 135 outlets Canada-wide. Besides the fact that we were running out of friends and family to take advantage of, we soon learned about the Peter Principle and with that, a valuable lesson. In order to grow the business we needed to hire experienced, educated people who knew more about where we were going and how to get there than we did. For many entrepreneurs, including myself, this concept took some getting used to.
With growth, comes change which is what most of us work so hard for. Now apply the Peter Principle and assume that everyone will reach their level of “incompetence”. In order to grow a business to its full potential, we have to accept this, suck up our pride, and hire those people who haven’t yet reached theirs in order to show us the opportunities we may not know to look for ourselves.
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