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 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.
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