medium · GMAT Verbal

Passage: The 'Peter Principle' is a satirical but influential observation in management theory which states that in a hierarchy, every employee tends to rise to his or her level of incompetence. The logic is straightforward: an employee who performs well in their current role is promoted to a higher position requiring a different set of skills. If they continue to perform well, they are promoted again. This process continues until the individual reaches a position for which they lack the necessary aptitude or skills. At this point, the employee is no longer promoted, and thus they remain in that position indefinitely. The organizational consequence is that many leadership roles are eventually occupied by individuals who were excellent at their previous, lower-level tasks but are ill-suited for their current responsibilities. To combat this, some organizations have implemented 'dual-career ladders,' particularly in technical fields. This system allows high-performing individual contributors—such as senior engineers or researchers—to receive raises and prestige comparable to management roles without having to transition into administrative or leadership positions for which they may be poorly suited. This preserves technical excellence while ensuring that management roles are filled by those with an actual aptitude for leadership.

Which of the following best summarizes the author's primary conclusion regarding the 'Peter Principle'?

  1. Most employees who reach their level of incompetence eventually regain their skills through administrative training and experience.
  2. The implementation of dual-career ladders is the only way to ensure that technical excellence is maintained in a corporate environment.
  3. Promotion-based hierarchies are inherently flawed and should be replaced by systems that eliminate all levels of management.
  4. Traditional promotion systems can inadvertently populate leadership ranks with incompetent individuals, but alternative structures can help mitigate this effect.
  5. High-performing individual contributors should never be promoted to management roles because they inherently lack leadership aptitude.

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