The Peter Principle in Sales Management: Why Your Best Rep Might Be Your Worst Manager

Laurence J. Peter spent most of his working life as an educator — first a schoolteacher in Vancouver, later an Associate Professor of Education at the University of Southern California.

He’s better known as the author of The Peter Principle, a book that’s sold more than ten million copies. It was inspired by his own experience in education: Peter grew frustrated watching capable teachers and staff get pushed up into administrative jobs (principal, department head) where the skills that made them good teachers didn’t translate — and where they then got stuck.

What Is the Peter Principle?

Today, The Peter Principle is the management concept stating that people in a hierarchy tend to rise to their level of incompetence.

Charming.

The idea that employees are promoted based on their success in a previous job could have been written for sales rather than education.

Why This Applies Directly to Sales

Most sales managers didn’t get the job because someone assessed their ability to manage. They got it because they were exceptional at selling, and selling was pretty much the only metric they were measured against.

Confidence, resilience, persistence under rejection, and the instinct for when to push and when to hold back in a negotiation are the prerequisites of an excellent salesperson.

Not as useful when it comes to reading a room of six different people, having a difficult conversation about underperformance, or coaching someone through a deal they’re about to lose without simply taking it over.

Your Best Sellers Could Make Your Worst Managers

The Peter Principle got a thorough test-drive in 2019, when Alan Benson, Danielle Li and Kelly Shue examined performance data for more than 53,000 salespeople across 214 US firms, published in the Quarterly Journal of Economics.

Their finding: a salesperson who sells twice as much as a colleague is around 15% more likely to be promoted into management.

Unsurprising so far. But the stranger part is what happens after promotion — the better someone’s own sales had been, the worse their team tended to perform once they became a manager. Sales fell by an average of 7.5% when a team was led by a former sales star, relative to what it would have been under a manager with weaker prior sales performance.

In real terms, the better they’d been at selling, the worse they tended to be at helping other people sell.

Why Companies Keep Making This Mistake Anyway

You’d think that would be an easy fix, given how many companies promote their best salesperson into the management slot.

But the research found firms were doing this knowingly — holding their best salespeople to a lower bar for promotion, even though the data said they’d make weaker managers.

Why?

The Peter Principle in Sales Management

Because the promise of promotion is one of the main tools a business has to motivate people to sell hard in the first place. If you only promoted people with genuine management potential, you’d lose some of that incentive.

What Gallup’s Research Reveals About Manager Selection

Gallup, who’ve studied manager performance for decades, found that organisations get this decision wrong 82% of the time — failing to choose the candidate with the right talent for the role.

Gallup breaks manager talent into five specific dimensions:

• Motivating others
• Assertiveness
• Holding people accountable
• Building relationships
• Sound decision-making

Roughly one in ten people have all five to a high degree — very low odds, given the importance of the role and the weight of the promotion.

The Real Cost of a Bad Promotion

When a promotion like this goes wrong, there’s more than one casualty.

Not only do you have a sales manager living out their worst-case scenario at work — beneath them is a team now being led by instinct instead of coaching.

Gallup’s data suggests managers account for something like 70% of the variance in how engaged a team actually is.

Not the product. Not the bonus structure. The manager.

So the cost of getting this one decision wrong doesn’t stop at one uncomfortable performance review — it moves through an entire team’s pipeline, retention and morale, quietly, for months, before anyone traces it back to where it started.

Getting It Right

I have sat uncomfortably in all of these seats.

Great salespeople can make great sales managers, if they’re properly supported.

A sales role is fairly one-dimensional compared to a manager’s. Sales management spans planning, deploying resources, performance management, forecasting and hiring — usually the biggest chunk of the job — alongside selling, managing key accounts, admin, and coaching and developing the team.

Under pressure to hit numbers, a newly promoted sales manager will lean into what they know best — and that won’t augur well for the team in the short, medium, or long term.

Thanks for reading

References

Benson, A., Li, D., & Shue, K. (2019). Promotions and the Peter Principle. Quarterly Journal of Economics, 134(4), 2085–2134.

Gallup: State of the American Manager Report.

Gallup: Managers With High Talent Twice as Likely to Be Engaged.