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A story about the Peter Principle and Pandora's box, and musings on whether we could put Peter in the Box?

I was recently discussing with my son why so many organizations exist where a coaching and nurturing culture has not taken hold in spite of statements to the contrary and where questioning of the status quo is not allowed. You know all these companies that publicly proclaim that their people are their most important assets. You may even be working for one right now. My son's question prompted me to write the following article which is related to soft control issues inside organizations, as compared to the hard, formal internal controls that are normally focussed on by professional auditors and executives. Something tells me that hard controls are focused on more often as they are definable and measurable. It is much more difficult to measure things like loyalty, commitment and reduced incidents in the organization, which are the results of effective soft controls.

To start off my explanation I told him that in organizations the tone is set at the top, and the way senior management reacts to, for example, questions asked by employees, is a fairly good indicator of that tone. If you were constantly subjected to feedback from the boss you are reporting to, claiming that you are wrong and your questions are stupid, you would probably have an organization where challenges to authority and a willingness to suggest change are in short supply. I remember sitting with one of my senior colleagues in the office of the regional MD in Kuwait, who was in the habit of ranting and raving and belittling professional responses and points of view as an initial response to any professional points raised. Such behaviour is a type of bullying, and reinforces the point that he is the boss and the others are stupid workers by his grace. It also creates a barrier to constructive, effective and logical debate on technical matters. By establishing himself as the senior party, a type of father - child dialogue ensues which does not lead to any logical solutions, and pulls the matter into the emotional domain where logic is sadly absent.

I explained to my son that such behaviour is normally a result of a sense of insecurity on the part of the perpetrator of such negative communications, no doubt caused by factors in their past, either family related or environmental. One could, for example, consider the issue of the Napoleon syndrome, which is well recognized as a psychological condition which causes insecurity and severe aberrations in communications. The person who communicates this way may have suffered bullying in the play ground and in later life revisits his psychological pain by inflicting it on others, especially those ostensibly of larger stature and possibly greater intellect.

By setting such an example, others will follow the leader for two reasons. The first is to emulate behaviour which is the best way to ingratiate yourself with the person that has the power to decide your well being and career progress at the organization. Copying is the highest form of flattery.

The second reason is that any attempt to try and introduce a different way of leading is normally met with derision and put downs, no doubt due to the fact that such a different style would upset the equilibrium. I used an example to illustrate this point. At a certain point during a major project I had elected to utilize and develop the skills of someone quite junior in the hierarchy. After working with her for a period of 6 months I had confirmed she had the personality to deliver effective technical presentations. I elected to use her for a major Board presentation at a client for a number of reasons. Firstly, she had worked on and developed the financial models that were to be presented and was intricately familiar with the inputs, formulae and results, and was therefore the most capable of answering any questions. Clearly, in management terms it is important to understand the results of financial models, and a team leader's responsibility is to ensure that a quality system is in place to ensure that the models are accurate and reliable. This does not mean that the Managing Director needs to know each multiplication macro embedded in the model however.

By pushing this junior employee into a position of responsibility and delegating the task to her, keeping in mind the fact that the whole exercise was about transferring knowledge and delegating effectively, I was able to find out her true qualities. In the event she passed with flying colours. The response from the "boss" was predictable and his challenges were related to questions about my competence and ability to "lead" from the front. However, leading in my book is about empowering people to take over my job, as I have no insecurity in doing so, as an active mind will always find a useful purpose to meta-morph in a different direction. It is only when the team falters that the leader needs to step in and deliver.

Other employees of this type of dysfunctional organization learn that it is better to kiss up and kick down, a metaphor which I once read about the management style in certain ethnic cultures, but which I have found is a fairly ubiquitous approach of operating globally.

By setting this type of scene from the top, the executive's insecurities will ultimately spell the underperformance and possible downfall of an organization through application of the Peter Principle. This principle was first coined in 1968 by Dr Laurence J Peter and is defined as follows: "In a Hierarchy Every Employee Tends to Rise to His Level of Incompetence". It means that employees are promoted not on competence, as in such organizations there is an absence of valid and objective performance appraisals. Instead the process of progress within the organization is based on the process of kissing up and emulating the leader, in all his incompetent glory. The Peter Principle is more commonly referred to as "Shit floats to the Top", a process which my father was able to ascertain is a truly biological wonder when taking me around sewerage treatment plants as a youngster. My weekly visits on his rounds of the plant confirmed a more refined version which is that "Bad Shit floats to the Top" as the ordinary stuff tends to sink

After twenty years of professional experience I can confirm the Peter Principle to be a more accurate predictor of organizational development than any other I have studied. The challenge I have, as a parent, is related to educating our youngsters in knowing right from wrong, and then sending them into an extremely dysfunctional world where the ethics and values of life are radically challenged on an on going basis as fairness and equity tend to be absent commodities where the Peter Principle and the reluctance of organizations, be they private or public, to accept questioning of authority and the status quo are present.

I recently read a number of articles in the Financial Times on the risks non executive directors now run as the crisis bites deeper and questions are being asked about the lack of Board oversight to prevent the latest crop of corporate disasters. As Kroll put it in one of their recent reports, each time there is a recession one can be assured that there will be another round of major fraud cases coming to light as liquidity tightens and investigations into the organizational woes are prompted by shareholders and stakeholders. Just consider the recent cases that came to light related to Bernie Madoff and others in the USA. As a response to the malaise there are calls for further regulations to safeguard investors from future recessions caused by inappropriate behavior.

The professional world is currently waiting impatiently for another crop of creative legislation to try and put everything back in Pandora's box, as any new legislation will no doubt spawn a new industry requiring new experts and driving the fear of God into executives, a fear well founded and played on by the professionals for obvious pecuniary reasons. As any child will tell you however, all the bad stuff is well and truly out of the box and has been for over 3000 years or longer if the Greek ancients are to be believed. The reason why it continues to wreak havoc worldwide is that laws and regulations are incomplete and inadequate, containing numerous loopholes, and more often than not in disregard of natural laws, equity and fairness. Bad elements of the universe exploit such loopholes with gay abandon.

Instead of spending time and money on drafting, implementing and exploiting the business opportunities arising from more laws and regulations, maybe it is time to go back to where a reasonable effort could be made with a more effective outcome, at the level where I started this article. Starting with our young, from very small, and consistently inculcating in them the values, ethics and principles of natural laws may in one generation's time result in a much lower incidence of cases as we are currently seeing again. The decision on whether something is ethical or not is not really something that can be taught effectively at university ethics courses or transcribed into do or don't company checklists driven by legislation such as the FCPA and SOX. Questions of ethics and ethical behavior are predicated on a person's conscience and whether the conscience has been nurtured and counseled properly and consistently from an early age. As St Ignatius de Loyola said famously, give me the boy and I will give you the man, holds true today as it did almost 500 years ago. Or as I said to my five year old daughter recently when leaving school, say goodbye to your teacher, thank her for her teachings and look her in the eye when you are talking to her.

Only this will define whether our future generations will come closer to finally putting all these things back in the box and whether Peter will join. Taking a leaf from the story, one can certainly hope so.