One of the most uncomfortable conversations I have with business leaders is this:
“Why are we promoting this person?”
The answer is often: “Because they are our best performer.”
And that sounds logical, until you ask a second question:
“Best performer at what?”
This is the heart of the Peter Principle: people are often promoted because they are successful in their current role, even when the capabilities that made them successful are not the capabilities required for the next role.
As a talent consultant, I see this less as a problem of “bad managers” and more as a talent decision-making problem.
And the data makes the case surprisingly well.
The numbers behind the Peter Principle
A landmark study by Alan Benson, Danielle Li and Kelly Shue analysed 38,843 sales employees across 131 companies, including 1,553 people who were promoted into management.
They found something striking:
- Employees who sold more were significantly more likely to be promoted.
- But among those promoted, doubling pre-promotion sales was associated with a 7.5% decline in managerial value added.
- Under a promotion policy designed to select the people most likely to become effective managers, the researchers estimated that managerial quality could have been about 30% higher.
In other words:
The person who was best at doing the job was not necessarily the person best equipped to lead people doing the job.
That distinction is at the heart of good succession planning.
I see five versions of this problem
- Great Seller. Wrong Successor.
“Your best salesperson isn’t automatically your best Sales Head.”
Your top salesperson gets promoted. But instead of building a high-performing team, they continue chasing deals because coaching, delegation and developing people are new skills.
The research found that doubling pre-promotion sales was associated with a 7.5% decline in managerial value added.
The lesson: Don’t confuse individual performance with leadership potential.
- When Expertise Isn’t Enough
“Your best expert may not be your best leader.”
Your top engineer, finance professional or project manager gets promoted and suddenly, technical expertise isn’t enough. The new role demands people leadership, commercial thinking and strategic judgement.
27%–46% of executive transitions are considered failures or disappointments within two years.
The lesson: Don’t promote expertise alone. Promote readiness.
- The “Next in Line” Trap
“Being next in line doesn’t mean being ready.”
The person who has been with you longest, knows the business inside out and has your trust often becomes the obvious successor. But have you tested whether they can handle the complexity of the next role?
McKinsey research suggests 68% of leadership transitions struggle with people, culture and organisational dynamics – not technical capability.
The lesson: Don’t choose your successor on trust alone. Test for readiness.
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The Enterprise Leadership Test
“The bigger the role, the bigger the business lens required.”
Your best Finance, HR, Operations or Technology leader gets promoted to an enterprise role. But success now depends on seeing beyond the function, understanding customers, commercial priorities, people and the bigger business picture.
The lesson: Before choosing the successor, define what the business will need from the role tomorrow.
- Too Important to Replace?
“If everything depends on one person, you don’t have a successor, you have a business risk.”
The leader who knows every client, makes every critical decision and holds the team together may be your strongest asset and your biggest succession risk. When they leave, the business discovers there is no one ready to step in.
Research shows 59% of eventual permanent CEO successors came from inside the company, reinforcing the value of building internal leadership pipelines.
The lesson: A great leader doesn’t just deliver results – they build the people who can deliver them next.
So what should organisations do differently?
This is where I believe succession planning needs to move beyond the traditional 9-box and “ready now/ready later” conversation.
At Ruah Consulting, we start with the business strategy and the future role.
We ask:
What will this role require 2–3 years from now?
Then:
Who has the potential to deliver against those requirements?
And finally:
What needs to happen between now and then to make them genuinely ready?
That could mean:
- Stretch assignments
- Cross-functional exposure
- Strategic projects
- Coaching
- Leadership assessment
- Stakeholder management
- Commercial exposure
- Behavioural shifts
- Mentoring
- Job rotations
The goal isn’t simply to produce a succession chart.
It is to create a leadership pipeline that is actually ready when the business needs it.
The Real Cost of Getting Succession Wrong
A wrong leadership appointment doesn’t just affect one person – it affects the business.
Productivity drops. Decisions slow down. High performers disengage. And the organisation can spend months fixing a problem that better succession planning could have prevented.
McKinsey estimates that the direct cost of a failed senior-executive transition can reach 213% of the executive’s annual salary – before the cost of lost momentum and business impact.
For a business owner, succession planning isn’t just about people. It is business risk management.
The question I would ask every CEO
Don’t ask:
“Who is our best performer?”
Ask:
“Who is most capable of creating the results our business will need next?”
Those may be the same person. But they may not be. And discovering the difference before the promotion is made is considerably cheaper than discovering it afterwards.
That is the role of succession planning at Ruah Consulting.
We help organisations identify critical roles, assess successor potential, understand capability gaps and create focused development journeys so that tomorrow’s leaders are being built today.
Because succession planning shouldn’t be about finding someone to fill a vacancy.
- It should be about protecting the future of the business.
- Your best performer got you here.
- Your best successor will determine where you go next.
— Maria Coelho
Founder, Ruah Consulting