Building Your First Management Layer: Whom to Promote and How to Support

Why do so many first-time managers fail?

The business has twenty employees, and the owner can no longer lead everyone personally. He promotes the best installer to team leader and the most experienced clerk to head of the back office. Six months later the installer is overloaded because he keeps installing himself, and the back office is in conflict because the new head prefers to correct mistakes herself rather than address them.

This pattern is so common that it has a name. This guide answers one question: Whom should an owner make their first manager, and how do they support that person so the transition succeeds?

To answer it, we first introduce the Peter Principle, then the findings of a large study on promotions and an analysis of new managers' misconceptions. After that we weigh two views and describe an approach in two parts: selection and support.

The thinking model: the Peter Principle

In 1969 the educator Laurence J. Peter and the writer Raymond Hull formulated a pointed thesis: in a hierarchy, every employee tends to rise to their level of incompetence. The mechanism is simple. Whoever is good at their job gets promoted. Whoever is good at the new job gets promoted again. Only someone who is no longer good at a job stays there.

Peter and Hull meant this half satirically. But the core is serious: promotion is based on performance in the previous job, although the new job requires different abilities. A good installer installs well. A good team leader ensures that others install well. Those are two different professions.

An analogy from sports: the best player on a team does not automatically become a good coach. As a player, what counts is what he achieves on the field himself. As a coach, what counts is what the others achieve. Nobody would choose a coach solely by how many goals he scored himself.

Make your best specialist a manager and you often lose both: a good specialist and the chance of a good manager.

What research shows about promotions

For a long time there was hardly any evidence for the Peter Principle. Benson, Li, and Shue (2019) were the first to test it across many companies. They used data from a sales software provider covering 131 US companies from 2005 to 2011. The data included 38,843 sales workers, 1,553 of whom were promoted into management. The authors measured a manager's success by how much they improved their subordinates' sales.

The results support the Peter Principle. The best salespeople were more likely to be promoted but were worse managers. Another characteristic predicted management success better: collaboration experience, measured by the number of colleagues with whom someone had shared credit for sales. But this characteristic played hardly any role in promotions. According to the authors' model calculation, managerial quality would have been 30 percent higher if the companies had promoted solely on expected management performance.

The authors stress that the companies are not necessarily making mistakes. Promotion based on performance is also an incentive for everyone else. Those who know good work leads to promotion make an effort. Another finding is notable: companies whose managers led large teams placed less weight on individual sales and more on collaboration when promoting.

That simply adding another criterion is not enough is shown by a study by Grabner, Künneke, and Moers (2025). A company added an explicit assessment of potential to its appraisals. Afterwards, promoted employees were on average less successful. The reason lay with the supervisors: they did not differentiate enough in their assessments of potential.

The limits: the study by Benson and colleagues looks at sales organizations in the United States, where performance is easy to measure in revenue. In a trades business, the best specialist is harder to identify. But the mechanism is the same.

The misconceptions of new managers

Over many years, Harvard professor Linda Hill has followed how especially high-performing specialists become managers for the first time. In an article for the Harvard Business Review she summarizes the most common misconceptions (Hill 2023). New managers expect their position to give them authority and freedom. In reality they find themselves in a web of expectations from employees, bosses, peers, and customers who often make conflicting demands.

Hill describes a second misconception: the assumption that leading means keeping your own area running smoothly. The job also includes initiating changes, some beyond your own area. And new managers ask their bosses for help too rarely. When they do, often only in a crisis, they are surprised how much understanding they find.

A qualitative study from a completely different setting confirms the pattern. Zhang, Wang, Xing, and colleagues (2025) interviewed 14 new ward managers at a hospital in Beijing. They had been selected for clinical experience, not leadership ability. The interviewees described unclear expectations, conflicts between roles, and a need for outside support.

Two views: the best specialist or the best collaborator?

The first view favors the best specialist. They are respected in the team, understand the work, and can spot mistakes. Especially in small businesses, where the manager keeps working alongside the team, technical strength is indispensable. And the incentive for everyone else is preserved: good work pays off.

The second view favors the best collaborator. Leadership consists in getting others to do good work. Someone who likes working in a team, shares knowledge, and addresses conflicts brings more to that than someone who delivers top performance alone. The data from Benson and colleagues support this view.

I consider the second view the right ground rule, with one qualification. Technical strength is a prerequisite, but not a selection criterion. Someone technically inadequate will not be taken seriously by the team. Among those who are technically sufficient, however, collaboration should decide. So that the incentive is not lost, the business needs a second path upward: a specialist career with more responsibility and pay, but without managing people. How to organize work around roles instead of people is described in the article Roles, Not People.

The Leadership Trial, part 1: selection

An approach that combines selection and support follows from the findings. We call it the Leadership Trial. Its first part checks who is suitable for the job before a promotion is announced.

1. Set the minimum

   Determine what technical performance a manager in the area needs at least to be taken seriously. Anyone below it is out. Anyone above it is not judged by how far above it they are.

2. Observe collaboration

   Who do colleagues ask for advice? Who trains new employees without being asked? Who raises problems instead of solving them alone? Collect examples from the last six months.

3. Clarify the desire to lead

   Ask openly whether someone wants to lead and why. Not every good candidate wants to. Someone who agrees only for the salary will struggle.

4. Give a trial assignment

   Let candidates lead a small project with two or three colleagues for three months, such as introducing a new procedure. Observe how they delegate, follow up, and deal with resistance.

5. Agree on a way back

   Agree before the promotion that both sides will decide after six months whether it fits, and that a return to the specialist role is possible without loss of face.

The Leadership Trial, part 2: the first 100 days

Support decides whether a good choice also succeeds. The first 100 days have three phases.

For the responsibility agreement, the article Handing Over Responsibility Without Losing Control describes a one-page template. In the weekly conversation, the GROW model from the article The Owner as Coach helps: goal, reality, options, will. It ensures that the new manager solves problems themselves instead of dumping them on the owner.

Two things matter more in this period than any method. First, the owner must visibly back the new manager and must not make decisions around them. An owner who keeps assigning tasks directly to the manager's team devalues them. Second, the new manager needs time to learn. Which training makes sense is described in Planning Employee Training.

Which leadership style works in the long run is well researched. The article Leadership Styles Compared summarizes that an order applies for small businesses: first reliable agreements, then meaning and development, and never silent neglect. That is also a good guideline for a new manager's first months.

The next step

• Write down which leadership tasks you want to hand over in the next twelve months and which areas need their own lead.
• Set the technical minimum for each area.
• For two possible candidates, note examples of collaboration from the last six months.
• Think of a trial assignment a candidate could lead with two colleagues in three months.
• Check whether your business offers a path upward without managing people.

Conclusion: whom to promote, and how to support?

The guiding question was whom an owner should make their first manager and how to support them. Research gives a clear direction. The best specialist is not automatically the best manager. In a large study, collaboration experience predicted management success better than individual top performance. Technical strength remains a prerequisite but should no longer tip the balance above a minimum.

Support decides the rest. New managers overestimate their power and ask for help too rarely. An owner who sets the role, limits, and meeting dates from the start relieves them of this misconception. The Peter Principle is not a law of nature. It is the result of a selection that asks about the wrong performance.