An Economic Analysis of the Peter and Dilbert Principles

Joao Faria

No 101, Working Paper Series from Finance Discipline Group, UTS Business School, University of Technology, Sydney

Abstract: The paper discusses how the Peter and Dilbert Principles can occur and what are the consequences for a profit maximizing firm. A competence frontier is constructed as a linear combination of the maximum levels of technical and social skills that are difficult to measure and evaluate. The Peter Principle holds when managers are chosen from workers that are in the competence frontier and the Dilbert Principle when they are below the competence frontier. It is shown that the profitability under the Dilbert Principle is less than under the Peter Principle. The introduction of new technologies is one form to avoid the Dilbert Principle.

Keywords: personnel management; incentives; managers (search for similar items in EconPapers)
JEL-codes: D23 L22 M12 (search for similar items in EconPapers)
Date: 2000-01-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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