In 1969 a Canadian educator named Laurence J. Peter coined a joke that became a principle: in a hierarchy, people tend to rise to the level at which they are no longer competent. Half a century later the line is still repeated in every office, but almost nobody had measured it.
In 2019 three economists, Alan Benson, Danielle Li and Kelly Shue, published such a measurement in the Quarterly Journal of Economics1.
They chose sales, because it is one of the few jobs where individual performance is recorded precisely every month, and also one where strong performers are routinely moved into management. The data covered 131 companies and 38,843 sales workers, of whom 1,553 were promoted into management during the study period1.
High sales lift one person and lower the team
The first finding is unsurprising: the higher someone's individual sales, the more likely they were to be promoted1,2.
The second is the one worth reading. Pre-promotion sales performance is negatively correlated with the value that person adds as a manager1. In other words, the best sellers were, on average, the less effective managers. In the working paper version, the authors estimated that doubling pre-promotion sales was associated with roughly a 7.5 percent decline in the sales performance of the people that manager went on to supervise.
The damage does not land on the person promoted. It lands on the team behind them.
Why companies keep doing it
The authors do not conclude that companies are foolish. They offer two explanations, and both are reasonable1.
First, firms may be deciding badly: they weight current job performance above the signals that predict managerial success, simply because current performance is easy to measure and managerial talent is not.
Second, it may be a deliberate trade. If promotion is the biggest prize available to a strong seller, that promise keeps the whole sales force pushing. The company accepts a few poorly matched managers in exchange for the motivation of hundreds of other people.
One detail in the study supports the second reading: firms put less weight on sales performance in promotion decisions when the management role carries greater responsibility, and when frontline staff already have strong performance pay1. When there is another way to reward people, companies stop using job titles as the reward.
What this says to companies in Vietnam
In many companies the only route to a meaningfully higher income is to become a manager. The best technician becomes the technical team leader. The best salesperson becomes the regional head. The best teacher becomes head of department. And in many cases the organisation loses an excellent specialist and gains an average manager.
The study does not say never promote strong performers. It says current job performance is a weak signal of managerial capability, so relying on it alone produces a high rate of wrong picks.
What needs adding is evidence about the things managers actually do: coaching newcomers, handling conflict, allocating work, having difficult conversations. All of those can be observed before the appointment, if the organisation deliberately creates the chance.
What to watch before appointing someone
If sales figures do not predict managerial capability, what does? The short answer: behaviour in situations that resemble managing, observed before the appointment.
Four behaviours matter in almost every trade, and all are visible in ordinary work. First, does the person coach new colleagues, or keep their methods to themselves because sharing might cost them sales? Second, when the team has a conflict, do they step in or stay out of it? Third, when given shared work that does not count toward their own target, what quality do they deliver? Fourth, how do they react when someone brings them bad news?
None of these needs a test. They need the person making the appointment to take notes for a few months beforehand, instead of opening the sales report and picking the top line.
