Peter Principle

QUOTE

Abraham Maslow once said…

“You will either step forward into growth or you will step back into safety.”

(American psychologist.)

CONCEPT

Peter Principle

The Peter Principle suggests that in a hierarchical organization, employees are promoted based on their performance in their current role rather than their abilities relevant to the intended role.

Consequently, employees continue to be promoted until they reach a position at which they are no longer competent, resulting in a prevalence of managerial inefficiency.

STORY

Jack of All Trades … Just Kidding?

A true-life illustration of the Peter Principle can be seen in the career trajectory of Ron Johnson during his tenure at J.C. Penney.

Johnson, renowned for his successful stint as the Senior Vice President of Retail Operations at Apple, where he developed the innovative and highly successful Apple Store concept, was recruited by J.C. Penney in November 2011 to revive the aging department store chain.

Upon his appointment as CEO of J.C. Penney, Johnson embarked on a radical transformation of the retailer’s business model. His vision was to eliminate the traditional coupon and discounting strategy and replace it with a model of consistent low prices. He also aimed to revamp the store layout to resemble a collection of branded shops rather than a typical department store—a concept somewhat reflective of the layout of Apple Stores.

However, the skills and strategies that proved successful at Apple did not translate well to J.C. Penney.

Johnson's innovations faced strong resistance from J.C. Penney's existing customer base, who were accustomed to and preferred the traditional couponing and discount models. The abrupt changes alienated longtime customers without attracting enough new ones to compensate for the loss.

His leadership saw J.C. Penney suffering a massive 25% drop in sales in the first year, a loss from which the company struggled to recover.

In April 2013, after a tumultuous and financially disastrous 17 months, Ron Johnson was ousted from his position.

His career at J.C. Penney is a textbook example of the Peter Principle at work. Despite his previous success at Apple—a tech company with a very different business model and target demographic—his promotion to the top executive position at a traditional retail chain did not play to his strengths, ultimately leading to a decline in his and the company's performance.

This story not only illustrates the Peter Principle but also underscores the importance of context and environment in leadership roles, demonstrating that successful management skills in one setting may not necessarily translate to another.