Management Advice: Reverse Peter Principle

This interview offers an excellent perspective to create an operating team of best doers and management vs good to very good doers and poor management, offering a unique service beyond competitors.  Dolgin outlines how to create and compensate the organization.  With so many great doers in today’s labor force, this could be a very effective means to assembling a highly effective organization that can reasonably ask a higher fee, affording to pay its staff well.

Reposted from SNYT 3/3/12 Business section, p2 Corner Office, by Adam Bryant. “How to Practice the Reverse Peter Principle.”

Q. What are some of the most important leadership lessons you’ve learned?

A. I’ve found over time that there is no substitute for experience. Everybody always feels like they’re twice as smart as the person who’s managing them. But there is no magic bullet for experience. There is no substitute. They don’t teach it in school.

My experiences have framed the way I look at management and different management styles for different organizations. There’s no one right management style. Every company is different. There are size differences — big corporations have to deal with issues of scale and leverage. There are different phases in a company’s life, just like with people. And you always have to run a company based on a style of management that allows you to maximize the advantages you have over your competitors.

There are some people who can be productive in only one kind of situation. “They’re the right person for the right job,” as the saying goes. Then there are a lot of people who are more like chameleons, and I put myself in that group. You have to adjust to the situation. I can do that partly because I’m not particularly the best at anything. I’m more of a jack of all trades. Some people are more left-brain or right-brain. I’m pretty comfortable in both creative areas and analytical ones. That’s allowed me to adapt my management style.

Q. What are some other leadership lessons?

A. I’ve really tried to use the Reverse Peter Principle at the YES Network.

Q. Explain that for me.

A. Let’s start with the Peter Principle. Most people start out as doers, and they have a function — they’re a marketing person, a human-resource person, a finance person, a production person. And they get really good at doing that as they gain more experience. The reason they usually get promoted is not because someone innately thought that the person would make a great manager.  They get promoted because they were a great doer. Is the same person going to be a great manager? Sometimes yes, sometimes no. The Peter Principle holds that as people  get promoted again and again, they keep doing less and managing more until they get to a point where they stop getting promoted because they’re not as good at their new job. The Peter Principle says that you end up in the job you’re the worst at.

So, I said, let’s try the Reverse Peter Principle. The company was small enough so that if I found the best doers of every single critical function and convinced them to come to the YES Network to manage less and do more, to create a flat organization where they were going to be the best doers in the world, we would actually be able to create something incredible. That would allow us to compete with the big boys and maximize the business by out-executing them.

 Just change the rules and you could compete with them, because now I could out-execute them because my executors would be the best people at executing, and they would be spending 90 percent of their time executing and not managing.

So when I went out and recruited, I basically told people my theory, and that we were all, including myself, going to go from being a manager to a doer. I was looking for the best people in each particular function.

Q. How did you make sure they were the right fit?

A. Did they have the passion? Did they believe that we could win that way?  Those were some of the questions I asked. Did they think that this was a good idea or a bad idea? Before I even explained this to them, the first question I asked was: When you’re working, what do you love doing? I looked for people who would talk to me about doing, not managing.

I also looked for people who’ve done everything.  They’ve had long careers. And they said: “Frankly, I’m just ready to roll my sleeves up again. I’m tired of spending 90 percent of my day dealing with management, which is usually dealing with people’s problems, not even business problems, and the politics.  If I could just spend my energy on doing this. … ”

So I had to find people who were the best doers, who were willing to give up the management part of it and thought this could work. We wanted it to be more like a start-up environment, except we didn’t have a start-up product.

Q. Were you asking people to take pay cuts?

 A. No. The Reverse Peter Principle actually is a fantastic thing, because I can pay you like a manager to be an executor because I’ve got far fewer people: no layers, and a flat organization. The best doer who has a lot of experience can do more things than five or six or seven new doers. And so we didn’t have to build up a big company. I could pay a small group of people really well, like the big media companies pay them, to be doers.

Q. Then they’d better be great doers.

A. Right. And that leads to a fact of life in business about effort. People making an effort has some benefit for the company. Everybody has to make an effort, right? It’s necessary, because if everybody doesn’t see everybody else working as hard and making as much of an effort, it creates a bad work environment. So everybody has to make an effort.

You’re taught in life, especially in middle school, that effort should be rewarded and that if you’re trying your hardest and it isn’t very good, I can’t punish you for that.  You’re doing the best you can.  How many times do you hear that in big companies —   “I’m going to keep that person, because they’re doing the best they can, and they’re getting better”?

In a small company, with the Reverse Peter Principle, that doesn’t work, because you’ve got to be a great doer. Being better isn’t good enough if it isn’t good.  If it isn’t great, better is not good enough.  You’ve got to be great in the Reverse Peter Principle. “Better,” “getting better,” “never will be great” — that doesn’t work.  As a human being, it’s the hardest thing in the world to get rid of someone who is trying their hardest and is getting better but you just know is never going to be great.

In a big company, you can keep people like that, and you should keep people like that because it sends a good message to the organization that that person’s trying so hard, and that can be leveraged. In a small company run by the Reverse Peter Principle, leverage isn’t your differential advantage.  It’s results.  It’s having the best people as doers, as opposed to spending their time managing up, down, in the middle, politics, and everything else.  So it’s a hard thing to deal with as a human being, to say to somebody, “I understand you’re trying your hardest. I understand you’re getting better, but it’s just not good enough, and you would be better off working over at another company.”

Q. But not everybody always executes perfectly.

A. There have been people who have absolutely failed in this system.  You’ve heard this a million times before: The only way to fail is to not fail, because otherwise you’re not taking risks. You’re not getting better.  You’re just doing the things that you know will work. Now, the difference is that you really want people who learn from their mistakes. There is not much of a benefit for making the same mistake two or three or four times.

Q. What lessons are transferable to other companies?

A. Every company of a certain size has a lesser version of a Steve Jobs in every function.  How do you find those people and make sure that they’re not getting burned out trying to be a doer as well as a manager and a politician? How do you create a kind of skunkworks — a place inside of a big company where you foster innovation, and where you reward doers for that task? You can’t run the whole company that way, but there are lessons to learn that I think could really help.  Sometimes the best people, no matter how many layers up, have to become doers again for mission-critical tasks. Some companies have 20 layers — they call them pyramids for a reason.

I think that at every layer of that pyramid, you’ve got to be able to take some people who are just so extraordinary at what they did before they became managers  — the doer part of their job — and free them up to spend maybe 50 percent of their time doing as opposed to managing. That’s the lesson that you could take to a big company.

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