Team Management

How to Know If Your Employee Is Really Manager Material

Jeff Haden Inc. columnist and small business management expert 
What makes a good manager_ The Peter Principle explained

When I graduated from college, I got an entry-level job at a new book manufacturing plant.

A number of employees had come from other facilities to help start up the plant. Most of the supervisors were promoted as an incentive to transfer to the new location. Others transferred in as machine operators, hoping the plant’s expansion would create opportunities for them to move into management roles.

And that’s exactly what happened.

For a number of years, whenever a management position opened up, the best (or at least most senior) employee was promoted.

It seemed natural. Experience mattered. It worked.

Until it really didn’t.

So what makes a good manager? Here’s how to identify the employees on your team who are actually manager material.

When the Peter Principle rears its head

But first, you need to understand a phenomenon called the Peter Principle.

The Peter Principle states that employees tend to rise in the hierarchy of a company until they reach the “level of their respective incompetence.”

Success in previous jobs results in a series of promotions until, at some point, the skills from a previous role do not translate to the new role.

In practical terms, that occurs because the employee who gets promoted is the person from the “feeder group” (the precursor job in the established hierarchy) who has the best technical skills.

Or, barring the best skills, the person has the most experience, since experience is often a proxy for skill.

At my plant, the best line operators—the people who stood out for their productivity, quality, and mechanical skills—were promoted into supervisory positions.

The problem was that productivity, quality, and mechanical skills have nothing to do with being a good business leader.

Effective employees ≠ effective manager

Those new managers could all run equipment. They could all pitch in to solve mechanical problems.

But some of them were terrible leaders. They couldn’t manage projects. They couldn’t lead process improvement teams. They struggled to train and develop new employees.

They could do our jobs as well or better than we could… but they couldn’t do their new jobs well at all.

Effective managers ≠ effective employees

On the flip side, many great supervisory candidates never got the opportunity. They were above-average performers on the shop floor. But they weren’t the best.

Yet they would have made outstanding leaders.  

The “Peter Principle” leaders struggled because the only way they knew how to lead was to ask themselves this question:

“How can I make sure every person on the team does things my way?”

Great leaders ask themselves a different question:

“How can I create an environment where each individual on the team can perform at their best?”

Answering that question means knowing each individual as an employee and a person. Answering that question means knowing what motivates each person, knowing how each person works best, and knowing how each person responds to feedback.

Great leaders make every person around them better.

Every person is different, which means every person’s needs are different. Understanding those needs, and then delivering those needs?

That has nothing to do with technical skills.

Why great leaders possess a relatively new skill

Work is very different these days. There’s more complexity, distribution, and information. Individuals and groups rely much more heavily on others to get work done.

That’s why a key skill is the ability to collaborate—to take contributions from other people and, in turn, contribute to the work of other people.

Say hello to network leadership

Increasingly, good managers must also excel at something called network leadership, which means creating an environment where employees can work well with other people.

A prime example of network leadership is when managers help their teams navigate complexity instead of simplifying it.

While it’s tempting to try to simplify tricky business situations, often that’s not the right answer.

The right answer may be to accept that hard situations will arise, especially where customers are concerned, and help employees deal with those situations, either by creating informal teams or by introducing a skilled mentor.

As employees move up the ladder, their jobs become less task-based and more people-based. (That’s why an effective career development plan involves learning new skills, and building relationships with key people, both inside and outside the business.)

It’s not about what you do, but what you help others do, that matters.

But if your model for identifying candidates for promotion favors technical skills and experience, you’ll struggle to identify the people who have the leadership skills and attributes your business really needs.

How to identify potentially great managers

So what should you do differently? Get an early start on identifying employees who have the skills and interest in learning how to be a good manager.

1. Determine the leadership skills a good manager (in a certain role) needs

Depending on the nature of the role, technical skills may be important, but what really matters are the leadership skills required. After all, you can always teach technical skills. And in many cases, leaders don’t need strong technical skills.

Think Steve Jobs actually created the iPod, iPad, or iPhone? Think again. While certainly immersed in the details of the user experience, what Steve did is lead the teams that created those products.

Maybe a particular role requires a great motivator. Or a great project leader. Or a great trainer. Or a great identifier—someone who excels at identifying, recruiting, and developing new talent.

Identify one or two critical, must-have leadership skills. Then…

2. Create opportunities for that employee to display (and develop) those skills

Predicting who will be a great leader is almost impossible.

Observing a great leader in action is easy.

  • Set up a process improvement team for a top candidate to lead. Say you own a bakery: Create a team and assign a leader to improve one aspect of quality, reduce waste in a specific area, or increase overall productivity.
  • Set up a project team for a top candidate to lead. If you own a gym, that could mean structuring a new class, evaluating new equipment, or undertaking a comprehensive customer satisfaction survey.
  • Set up a task force for a top candidate to lead. If you run a tech startup, that could mean leading a team of designers and engineers to develop a new product.

Create leadership opportunities—that have important, business-critical outcomes—and put a management candidate in charge.

Not only will you be able to assess, first-hand, their leadership skills, you’ll also be able to mentor, guide, and develop that person’s leadership skills.

You’ll be able to provide feedback to management hopefuls about the skills they need to develop in order to be a good candidate for a leadership position.

And you’ll be able to have that conversation when your employees will be much more receptive to constructive feedback—not when they’re asking for a raise or disappointed by not being selected for promotion.

3. Promote your best leader—not your “best employee”

Then, when you actually have an opening for a manager role, use what you’ve learned about each candidate. Weigh their experience and technical skills, but most importantly, their leadership skills.

Evaluate how well they manage through influence. How well they crystallize a vision. How well they motivate people to pursue that vision. Evaluate whether they can manage without relying on a job title… but by the permission of the people they lead.

When you do all that, choosing the right candidate will be much easier. Why?

You won’t have to predict how they will perform in the job.

Because in large part, you’ll already know.

Jeff Haden
Jeff Haden Jeff Haden is a writer, speaker, small business management expert, and Inc.’s most popular columnist. He's the author of The Motivation Myth: How High Achievers Really Set Themselves Up to Win.


  • Ivn

    How can someone in the opposite spectrum show their skills more easily?
    At my current job it is seniority and in the long run I just want to be considered for roles of leadership more often because of my skills and not because I have been there longer, I don’t want to be spoon-fed. I want to show that I have earned it.

  • Kris Grauel

    Very good. In the piloting profession this is certainly true, Two pilots may have similar technical expertise, but one may naturally be a better captain than the other. Airlines tend to assume you have good people and managerial skill when they upgrade you to captain. Such is not always the case. To be sure, technical competence is certainly important. But as a captain, it is equally important to have good communication and people skills.

  • Kim

    Good article. These points are true when the environment warrants these principles. Some organizations have toxic cultures and norms that cultivate poor leadership and poor behavior. In that case, even the best leaders may fail.

  • Michael Kelly

    Thanks! I’m honored that you valued my opinion enough to
    offer me a chance to do so. But the reality is I’m not qualified to blog about the subject. While I am a manager at work I don’t have any actual training in management. So anything I write is based mostly my opinion and common sense. Also my company’s owner is a great leader but a horrible manager. I fully intend on using this site as a tool to hopefully help us both be better managers. There’s so much great info here. I feel like I have a pretty good handle on management but still can learn so much more. So again thank you and I look forward to reading more of your articles as it seems our view on the subject are very similar in the few articles I’ve read so far

    • Tahara Ortiz

      Michael Kelly, I can’t express to you enough how impressed I am with your reply…Thank you for your comments contributions to this post…The original article is excellent, and I enjoyed your input as well…

  • Michael Kelly

    Some other keys to good management is versatility. Working with multiple personalities some managers have my way or highway mentality. While it should be cut and dry that they need to follow the system the company has, the way you preach it is huge. With those different personalities you need to understand how each employee ticks and approach each in a way where they will respond positively. Some people don’t respond to things the same as others so where one employee your able to be blunt and directly to the point and takes constructive criticism in a positive way as a opportunity to learn and improve without getting offended. While another employee responds the polar opposite way. They feel like its a personal attack and it can have a very negative effect. So with that type of personality you have to approach things in a way to get your point across more delicately while still being assertive. It’s a balancing act of sorts for sure. The ability to problem solve and to improvise certainly helps. And most important is to be accountable. That means for your and their actions. Most times if the manager has done their job correctly the employees will also. They need to know the you’ll back them up when the might of made a mistake. And while I believe the management is duty bound to the company, running to upper management to report every little mistake or mis step. Taking one for the team goes a very long way. For instance try to resolve the small stuff within the team. A good leader will “jump on the grenade” say somethings like its my fault as much because I didn’t make sure we where on the same page or I didn’t explain it right or clear enough for you to fully understand and so on. Even times where you were perfectly. Clear and concise. With in reason that is as they need to feel some of the burden of responsibly or why would they worry about making mistake if there is no consequences. But… You cant continue take their heat and blame either but an employee will always work harder and with more diligence as to not disappoint you when the believe in you and feel like you’ll looking to protect them as well.

    • Gusto Editors

      Michael, these are great points! Thank you so much for your contribution. We particularly love the point about how a good leader will take accountability, even if it’s not fully their fault. If you’d ever be interested in writing for our blog about team management at small businesses, let us know. 🙂

  • Michael Kelly

    Well put. I often consider a good manager as a great facilitator. And those who have the ability to identify each individuals strength and tasking them to things that suit them with in the system in place. I find that works 2 fold. A. Production should increase. B. And I think as important is the pride and confidence they will feel with a job well done and the pride and confidence that will give them can only improve production and atmosphere which can only positively affect the crew. Attitude is contagious !!!

    • Gusto Editors

      We’re glad you enjoyed reading this, Michael! If you’re interested in reading more about management, we have a whole section dedicated to it. We also recently published an article about effectively managing challenging employees, which you may find interesting:

  • Linda Brown Stover

    I am now retired but was an I t Project Manager and a member of the institute of Certified Professionsl Managers. I taught management classes at the local college. One really important thing that we taught is that too many people stumble into management because they were the best at something that they did. The best administrative assistant, the best teacher, the best computer programmer. It does not mean that they will be the best manager. Unfortunately, sometimes because of longevity, practicality, etc. they are promoting into positions they are not qualified to fill.

    • Omar

      Great article! 100% agree.

  • bill nones

    “Everybody rises to his/her level of incompetence” Peter


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