10th July 2025
The Paradox of Potential
Past Performance vs. The Peter Principle.
Hiring or promoting an executive is one of the most consequential decisions a leader can make. But behind that decision are two dominant, and conflicting, constructs.
The first is widely held (and difficult to trace in origin): “Past performance is the best predictor of future performance.”
The second is the Peter Principle, introduced by educator Laurence J. Peter in 1969:
“In a hierarchy, every employee tends to rise to their level of incompetence.”
This is the paradox. One belief encourages leaders to elevate high performers. The other warns that doing so inevitably places them in roles they’re unprepared for.
And yet, both are right. And both are flawed.
The Trouble with Past Performance
At face value, it makes sense. If someone has done a brilliant job, why wouldn’t they thrive in a bigger role?
But here’s the catch: performance is context dependent. Being excellent in one role doesn’t guarantee competence in another, especially when the new role demands entirely different capabilities.
For example, an outstanding technical specialist may struggle in a leadership role that requires stakeholder influence, ambiguity navigation, or complex systems thinking. The risk is not just that they’ll underperform, but that the team inherits unclear direction, misaligned priorities, or eroded trust.
This is how organisations unintentionally reward consistency over adaptability, and in doing so, promote individuals into stagnation, overlooking the potential they could unlock with the right stretch or support.
The Peter Principle – when Potential gets stuck
Laurence Peter’s concept is more than just satire. It exposes a pattern we’ve all seen; someone gets promoted repeatedly based on past success, until they land in a role where they’re no longer effective.
At that point, they often remain in place.
In organisations that rely heavily on hierarchies, stepping back is rarely an option. Instead, people stay at the level they’re least suited for, creating friction, disengagement, and cascading cultural impact.
The paradox deepens when performance plateaus but is misread as “tenure” or “loyalty.” These leaders can appear experienced, when in reality, they may have one year of experience repeated ten times.
Unlocking Potential: Variety, Diversity & Intensity
Breaking the paradox requires a shift in how we think about development.
If the goal is to future-proof leadership pipelines, we must move beyond static success and nurture dynamic growth. That means stretching people with:
- Variety: Exposure to different functions, business models, or problems.
- Diversity: Engaging with people from different backgrounds and disciplines.
- Intensity: Assignments that require judgment under pressure or in uncharted territory.
Leaders forged in varied conditions build not just experience, but perspective, resilience, strategic agility, and the potential to thrive in unfamiliar terrain.
What Organisations must do
Instead of choosing between past performance or future potential, challenge both assumptions and expand how you identify and cultivate potential across your pipeline.
Create clear criteria for what success looks like at the next level. Measure not just what a candidate has done, but how they’ve grown. Track their ability to:
- Adapt across contexts
- Learn at speed
- Influence others
- Solve novel problems
- Elevate those around them
Only then can we promote not just competence, but capacity.
Because the real risk isn’t promoting someone too soon. It’s never giving them the right conditions to grow.
Justin Miles
Categories: Uncategorised
