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In the late sixties the Canadian psychologist Laurence J. Peter advanced the apparently paradoxical principle which can be summarized as follows: 'Every new member in a hierarchical organization climbs the hierarchy until he reaches his level of maximum incompetence'. Despite its apparent unreasonableness, such a principle would realistically act in any organization where the way of promotion rewards the best members and where the competence at their new level in the hierarchical structure does not depend on the competence they had at the previous level, usually because the tasks of the levels are very different between each other.
This applet, realized with NetLogo, shows that if the latter two features actually hold in a given model of an organization with a hierarchical structure, then not only the 'Peter principle' is unavoidable, but it yields in turn a significant reduction of the global efficiency of the organization.
The applet consider a prototypical pyramidal organization made by six levels, where each agent is characterized by an 'age', increasing in time, and by a 'degree of competence', which is represented by a colour scale of increasing intensity and which includes all the features characterizing the average performance of the agent in a given position at a given level.
At each time step all the agents with a competence under a given dismissal-threshold or with an age over a given retirement-threshold leave the organization and their positions become empty (yellow). Simultaneously, any empty position at a given level is filled by promoting one member from the level immediately below, going down progressively from the top of the hierarchy until the bottom level has been reached. Finally, empty positions at the bottom level are filled with the recruitment of new members.
The applet provides two possible ways for the transmission of the competence of an agent from one level to the next one: the 'common sense hypothesis', where a member inherits his old competence in his new position with a small random variation ±delta, and the 'Peter hypothesis', where the new competence of every agent is independent from the old one and is assigned randomly. For each one of these two ways exist three different ways for choosing the agent to promote at the next level: the most competent ('The Best' strategy, suggested by the common sense and adopted also in the Peter principle), the less competent ('The Worst' strategy) or one agent at random ('Random' strategy).
In order to evaluate the global performance of the organization was introduced a parameter, called 'global efficiency', calculated step by step by summing the competences of the members level by level, multiplied by a level-dependent factor of responsibility ranging from 0 to 1 and increasing by climbing the hierarchy (such a factor takes into account the weight that the performance of the agents of different levels have on the global efficiency of the organization). The result is normalized to its maximum possible value and to the total number of agents, so that the global efficiency can be expressed in percentage.
The first step for the user is to choose the number of agents (positions) in each one of the six levels through the apposite sliders 'n-level-1', 'n-level-2', ..., then to create the organization with the button '1.CREATE ORGANIZATION' on the left upper corner. The total number of members will appear in the correspondent monitor near the
top of the organization pyramid.
The second step is to fix, by means of the sliders on the left, the retirement-threshold, the dismissal-threshold, and also the mean and the standard deviation of the distribution of competences (even if at the beginning we suggest to leave the values of default). Then it is possible to assign ages and competences to the agents through the button '2.ASSIGN AGE AND COMPETENCE': the agents will assume a red color whose intensity is proportional to the competence; agents with a competence less than the dismissal-threshold will immediately leave empty (yellow) their position.
Before starting the simulation, the user should assign the responsibility values for the efficiency evaluation within the input boxes 'resp1','resp2',... (again we suggest to leave the default values at the beginning) and, finally, choose the mechanism of the competence transmission and the strategy of promotion. The latters are the two main variables of the simulation, since the efficiency of the organization will strictly depend on them.
For the first one the user can choose between 'Peter Hypothesis' and 'Common Sense +-delta' with the slider 'new-competences' (if the choice is 'Common Sense', one has to fix the variation delta of the new competence with the slider 'delta-comp'), while for the second one it is possible to choose among four different strategies, 'The Best', 'The Worst','Random' and 'Alternating'. In the latter case the best and the worst agents are chosen alternatively with a variable proportion, therefore one has to fix the parameter 'p' which expresses the percentage of promotions of the best members with respect to all the promotions.
At this point the simulation can be switched on through the button '3.START SIMULATION': the dynamics will start and the two plots on the left bottom side will show the time evolution of the PDF of competences ('PDF-competence') and of the global efficiency ('Plot-Efficiency'). In the latter plot an horizontal line indicates the initial efficiency, while both the initial and the actual efficiency are reported also in two monitors on the rigth of the organization pyramid, just below the average competence monitor.
A last observation regards the 'Plot-Career' plot, where the behaviour of the average competence per level is calculated step by step for all the agents whose career goes up from the bottom level (reported on the rigth side of the x-axis) towards the one choosen by the slider 'max-level-career' (reported on the left side of the x-axis).
It is interesting to follow the time evolution of the global efficiency considering the six possible combinations among the ways of competence transmission and the promotion strategies. For example, choosing the strategy of promoting the best member Ð as usually done by all the real organizations Ð it can be observed that the asymptotic value of the global efficiency significantly increases with respect to the initial efficiency only if the common sense transmission holds: if, on the contrary, one assumes as valid the Peter hypothesis, a significant decrement of efficiency occurs as intuitively predicted by Peter. Therefore, that of promoting the best member does not result to be an always winning strategy. On the other hand, if one promotes the worst member, the strategy is a winning one combined with the Peter Hypotesis choice, while it is a losing one for the common sense one. The third strategy Ð that of promoting one agent at random Ð gives more similar results in both cases, although the improvement of the initial efficiency is usually limited.
Users can explore what happens choosing the fourth strategy, i.e. alternating the promotion of the best and the worst members. By varying the value of the parameter 'p' through the correspondent slider, the consequent variation in the time evolution of the global efficiency can be studied for both the Peter and the common sense hypothesis of competence transmission.
Furthermore, by means of the 'Plot-Career' it can be quantitatively verified the apparently surprising statement of the Peter principle, i.e. the fact that each member in a hierarchical organization climbs the hierarchy until he reaches the level where his competence is minimal. Actually, it results that no matter the number of level an agent crosses in his career: if one adopts the strategy of promoting the best member and if the Peter hypothesis holds, then all the members will end their career at the level where their competence is minimal or, that is the same, where their incompetence is the greatest one. Therefore PeterÕs intuition is definitively correct: this dangerous mixture yields the rapid decrease of efficiency of any hierarchical organization. The user is invited to explore what happens to this plot choosing the common sense hypothesis and/or using other promotion strategies.
This applet was realized by A.Pluchino, Department of Physics and Astronomy, University of Catania, and it is provided as supplementary information for the paper 'Peter Principle Revisited: a Computational Study' by A.Pluchino, A.Rapisarda and C.Garofalo, Physica A 2009, in press (doi:10.1016/j.physa.2009.09.045)