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The findings of recent resource management academic studies have demonstrated a direct relationship between the firms managerial style, the selected promotion strategies and the business performance of organizations.
The Peter principle which was suggested by Laurence J. Peter more than thirty years ago can be implemented for explaining the main underlying causes of poor promotion decisions which have a negative impact upon the overall business performance. The choice of inappropriate promotion strategies can result in promoting employees to positions which they cannot handle.
The upward mobility decisions can be used for not only appraising the employees achievements, but also assigning workers to the positions best corresponding their competence (Fairburn and Malcomson 2001). The first group of aspects related to poor promotion decisions involves the motives for promoting certain employees.
Ferris et al (2002) noted that the main cause is the homosocial reproduction system within which managers give preference to their personal biased opinions and use their political influence for promoting employees instead of evaluating the workers abilities and performance (p. 50).
Mullins (2007) differentiated between the pull (by blood or acquaintance) and push (outstanding performance) promotion strategies, admitting that the latter can be relevant for smaller organizations only.
Though the pull approach which is widely used as the firms dominating promotion policy is often criticized for its irrelevance, the push strategy can also be ineffective because the excellent performance in a certain professional sphere does not mean excellence in managerial field.
Lazear (2004) noted that the pre-promotion ability is a biased estimate of true ability for those who exceed some standard (p. 3). Taking into account the consequences of making certain promotion decisions, companies should define certain promotion policies, paying proper attention to all stages of the decision making process.
The second group of influential factors which explain the poor promotion decisions includes the inconsistencies in the patterns. Due to the fact that the promotion strategies within the companies are underdeveloped and randomly applied, the upward mobility decisions can decrease the overall organizational performance (Gordon 2008).
The difficulties with estimating the employees skills and abilities along with predicting possible outcomes of their promotion complicates the managerial task of making the promotion decisions (Thomas 2003).
A new approach called insider econometrics can be useful for getting to the roots of the problem and establishing the links between the organizational promotion policy and the various parameters of the firms business performance (Ichniowski and Shaw 2003).
The third group of influential factors includes the inappropriate methods of gathering and evaluating the business information. The main stages of the promotion decision making include the formulation of a strategy, search for the candidates, collecting and evaluating the information and developing the implementation plan (Stumpf and London1981).
Using inappropriate methods of gathering and processing the information on the candidates competence aligning or not aligning with the responsibilities of a certain position can result in making poor promotion decisions.
Acknowledging the significance of the upward mobility decisions, human resource management departments need to define a precise promotion policy based on policy of equal opportunities, inform all the employees on it and select measures for implementing these strategies into practice (Armstrong 2003).
Summing up the above-mentioned findings of empirical studies, it can be concluded that an effective promotion policy has to consider not only the negative effects of Peter principle, but also the importance of implementing the promotion strategies as an important means of incentives and rewards.
Taking into account the significance of selecting proper promotion strategies based on the principle of equal opportunities for all employees, the human resource management of our organization has developed a promotion strategy which is known to management and employees of the firm.
This policy emphasizes the employees outstanding performance as the most important aspect of promotion opportunities and determines the prolonged period for making the promotion decisions which is aimed at minimizing the risks of the negative effects of Peter principle.
The regular examinations of the employees competence are used for updating the information on possible promotion candidates and the workers participating in the surveys are aware of it (Halaby 1978). It means that promotion opportunities can become an effective means of motivating the workers for doing their best and improving their performance.
For example, everyone knows that most department managers have been the employees in the same segments before their promotion for their outstanding performance and excellent examination results. However, not all promoted managers have become effective leaders. This fact demonstrates the relevance of Peter principle to the business performance within our organization.
For instance, in department A (the name is substituted due to ethical considerations) the employees have discipline problems caused with the lack of the managers leadership skills. The manager who previously demonstrated excellent performance as an employee remained on friendly terms with the rest of the workers after his promotion to a position of a manager.
It became a significant hurdle for effective work of the department and the situation did not change with the course of time. This evidence proves that the lack of competence and personal abilities in some of department managers not always can be compensated through training and receiving work experience.
Disregarding the fact that our human resource management gives preference to the push strategy and focuses on the employees personal achievements within a prolonged period of time for selecting the candidates for promotion, certain mistakes having negative effect upon the firms overall business performance are still possible.
However, it should be noted that the implementation of the pull strategy also takes place within our organization. For example, in department B, a manager is known to be promoted due to close relationship with top managers disregarding the lack of professional competence. The lack of the managers competence and the public opinion of him also reduce the effectiveness of the departments work.
Modern studies on promotion strategies which place the main emphasis upon managing the available intellectual resources for enhancing the organizational adaptability are implemented by the human resource management department of our organization (Boxall and Purcell 2003).
Thus, using the examinations for collecting the information on the current level of competence in the employees and registering their progress achieved within a certain period of time, the companys management can draw the conclusions on the measures which need to be imposed for not only improving the performance of employees in their current positions, but also planning further upward mobile movement within the organization.
The effectiveness of processing the gathered info depends upon the design of the research methods and the evaluation criteria (Armstrong 2000; Wall and Wood 2005). Recognizing the fact that the organizational climate is significant for the firms economic performance, our company provides workers with opportunities for professional and career growth (Gelade and Ivery 2006).
Awareness of the firms promotion policy is an important motivating factor affecting the workers attitudes and performance. The results of the empirical research have shown that there is a direct relationship between the promotion policies, employees knowledge-sharing attitudes and their corresponding commitment which affects the outcomes of their work (Hislop 2003).
Though development of promotion policies is insufficient for improving the overall performance and can even have negative consequences for the firms operations, it is a significant step forward in motivating the employees and aligning their abilities with their responsibilities (Kotey and Slade 2005).
In general, it can be stated that proper measures need to be imposed for decreasing the impact of Peter principle upon the firms performance, defining an effective promotion strategy and selecting the most appropriate methods for collecting and assessing the information on the employees abilities and possible consequences of promoting them.
Reference List
Armstrong, M. (2003). A handbook of human resource management practice. Sterling, VA: Kogan Page Limited.
Armstrong, P. (2001). The costs of activity-based management. Accounting, Organizations and Society, 27(1-2): 99-120.
Boxall, P. and Purcell, J. (2003). Strategic human resource management: Where have we come from and where should we be going? International Journal of Management Reviews, 2(2): 183-2032.
Fairburn, J. and Malcomson, J. (2001). Performance, promotion and the Peter principle. Review of Economic Studies, 68(1): 45-66.
Ferris, G., Buckley, R., and Allen, G. (2002). Promotion systems in organizations. Human Resource Planning, 15(3): 47-68.
Gelade, G. and Ivery, M. (2006). The impact of human resource management and work climate on organizational performance. Personnel Psychology, 56(2): 383- 404.
Gordon, B. (2008). Human resource management: Gaining a competitive advantage. New York: McGraw-Hill/Irwin.
Halaby, C. (1978). Bureaucratic promotion criteria. Administrative Science Quarterly, 23(3): 466-484.
Hislop, D. (2003) Linking human resource management and knowledge management via commitment: A review and research agenda , Employee Relations, 25(2): 182 202.
Ichniowski, C. and Shaw, K. (2003). Beyond incentive pay: Insiders Estimates of the value of complementary human resource management practices. The Journal of Economic Perspectives, 17(1): 155-180.
Kotey, B. and Slade, P. (2005). Formal human resource management practices in small growing firms. Journal of Small Business Management, 43(1): 16-40.
Lazear, E. (2004). The Peter principle: Promotions and declining productivity. Journal of Political Economy, 112: 141-163.
Mullins, L. (2007). Management and organizational behavior. Pearson Education Limited.
Stumpf, S., and London, M. (1981). Management promotions: Individual and organizational factors influencing the decision process. Academy of Managerial Review, 6(4): 539-549.
Thomas, A. (2003). Controversies in management: Issues, debates, answers. Business & Economic. Routledge.
Wall, T., and Wood, S. (2005). The romance of human resource management and business performance, and the case for big science. Human Relations, 58(4): 429-462.
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