Promotions and the Peter Principle

  title={Promotions and the Peter Principle},
  author={A. Benson and D. Li and K. Shue},
  journal={Corporate Finance: Governance},
  • A. Benson, D. Li, K. Shue
  • Published 2018
  • Business
  • Corporate Finance: Governance
  • The best worker is not always the best candidate for manager. In these cases, do firms promote the best potential manager or the best worker in her current job? Using microdata on the performance of sales workers at 131 firms, we find evidence consistent with the Peter Principle, which proposes that firms prioritize current job performance in promotion decisions at the expense of other observable characteristics that better predict managerial performance. We estimate that the costs of promoting… CONTINUE READING
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