Client Incompetence: why there will always be a need for consultants

40th Anniversary of the Peter Principle

Inc. magazine has reminded us this month that this is the 40th anniversary of the publication of the Peter Principle. This book laid out the premise that people continue to get promoted until they reach their level of incompetence. At that point, they are stuck and their employers suffer.

In Inc.'s current article, Leigh Buchanan interviewed Robert Sutton, a professor who wrote the introduction to the original book. I was very struck by this comment of Sutton's:

"We can't give incompetence all the credit for what's gone wrong with the economy. But it's clear that the CEO's at financial firms had no idea what they were leading. Do you think they really understood all those complex instruments? The Peter Principle didn't cover what happens when systems are that complex. Everyone is always at his or her level of incompetence because the system is so bad."

Incompetence may actually be gaining ground in business. Complexity in business is increasing and the ever-narrow focus of workers means fewer people know (or have a chance of knowing) what's really going on in their firms.

When I read this article, I thought about the CEOs at other companies and how they aren't understanding their firm, the competitive environment it's in, the debt load they undertook, the effect that prvate equity firms or hedge firms have on their firm, etc. No, CEOs aren't winning competency awards and pity the workers and executives who work for these CEOs.

Consultants, who have the luxury of time (to contemplate) and a broad tableau of industry knowledge may have the advantage. Moreover, consultants don't get sidetracked with pesky things like inventing new products, delighting Wall Street, delivering short-term operational numbers, etc. Those factors make the future for consulting (that's management or strategic consulting NOT systems integration) look really good.

Maybe it's time for someone to write "The Peter Principle: Modernized". We can include all of these great examples from AIG, Satyam, Merrill Lynch, Bear Stearns, and on and on.