There is a law called Peter Principle stating that In a Hierarchy Every Employee Tends to Rise to His Level of Incompetence. Basically this should hold true in an organization which promotes the most competent people, and in which good competence of an individual at one organizational level does not imply good competence at the next level. For example, a good designer or an engineer might not be a good manager or a group leader, and vice versa.
There is a pre-print by Pluchino et al. in which the Peter Principle was tested using an agent based model. However, they neglected the motivational aspects imposed by compensation strategy at the revenue generating level (e.g. engineers and designers). To fix this shortcome, I constructed an alternative agents based simulator for simulating hierarchical organizations with the agent motivation coupled to agent salary and competence. The simulator lets you choose between promotional and compensational strategies, click the image below to enter:
- competence increase by experience at variable learning rates,
- motivation adjustment due to consistency between salary and competence,
- recruitment, and
- individual quitting at low motivation at a rate dependent on the external job-market efficiency.
Interesting conclusions can be drawn. For example, the competence at the revenue generating level (Designers) is dominated by salary raising strategy, and revenue is actually wasted when the most competent individuals are promoted upwards along the organization. On the other hand, salary strategies does not affect the managerial levels.
You may as well draw your own conclusions. Ahem.