The Peter and Dilbert Principles applied to academe

The academic literature has long held that firms typically develop a system of incentives and rules that are meant to encourage employees to maximize their effort, and the firms’ profits. As a result, firms’ employees often rise through the ranks of the hierarchies in their firms through internal promotion, a process that results in the development of an internal labor market. This study explores the process of internal promotion, and its impact on firm behavior, with particular attention to both the Peter Principle and the Dilbert Principle. Both a formal model and a brief application of it to higher education are presented. In the case of the former, data related to U.S. business school deans indicate that more than one-third of all appointments come from internal candidates, with fully 20% of these being made from the rank-and-file professorate, thus supporting the model’s implications concerning the Peter Principle. Additionally, the data also reveal that the tenure of a typical “outside” dean exceeds that of a typical “inside” dean, thus supporting the model’s implications for the Dilbert Principle.