People who are good at their jobs routinely get promoted into bigger jobs they’re bad at. We explain why firms keep producing incompetent managers — and why that’s unlikely to change.

• SOURCES:
  • Nick Bloom, professor of economics at Stanford University.
  • Katie Johnson, freelance data and analytics coach.
  • Kelly Shue, professor of finance at the Yale University School of Management.
  • Steve Tadelis, professor of economics at the University of California, Berkeley Haas School of Business.

• RESOURCES:
  • “People Management Skills, Employee Attrition, and Manager Rewards: An Empirical Analysis,” by Mitchell Hoffman and Steven Tadelis (Journal of Political Economy, 2021).
  • “Promotions and the Peter Principle,” by Alan Benson, Danielle Li, and Kelly Shue (The Quarterly Journal of Economics, 2019).
  • “Bosses Matter: The Effects of Managers on Workers’ Performance,” by Kathryn L. Shaw (IZA World of Labor, 2019).
  • “The Value of Bosses,” by Edward P. Lazear, Kathryn L. Shaw, and Christopher T. Stanton (Journal of Labor Economics, 2015).
  • The Peter Principle: Why Things Always Go Wrong, by Laurence J. Peter and Raymond Hull (1969).

• EXTRAS:
  • “The Secret Life of C.E.O.s” series by Freakonomics Radio.
  • “What Does a C.E.O. Actually Do?” by Freakonomics Radio (2018).