The Peter Principle states that “in a hierarchy, every employee tends to rise to their level of incompetence.” It’s a well-known theory that suggests people get promoted based on their performance in their current role, rather than their ability to handle the next one. Over time, they reach a position they can’t effectively manage. From my years of working for several modular factories along the East Coast, I’ve seen this play out repeatedly. General Managers (GMs) came and went, and it didn’t take long to identify which ones were capable and which ones were, for lack of a better term, simply unfit for the job.

Yet, despite their clear inadequacies, none of these GMs were ever fired. Not even one.

A Revolving Door of General Managers

During my tenure at various modular factories, I worked under eleven General Managers. An almost predictable routine marked their tenures: some were recruited away because they were genuinely skilled, others retired after long service, but many were eventually asked to leave without ever receiving an official termination. Most concerning, though, were those who were clearly terrible at their jobs but somehow managed to linger for far longer than they should have.

I’ve often wondered why none of them were outright fired. Over the years, I’ve formed my own theories, but I still don’t have a definitive answer. The reluctance to dismiss bad General Managers remains a mystery, especially considering the profound impact a GM has on the overall health and culture of a factory. A bad GM can demoralize teams, reduce productivity, and ultimately damage a company’s bottom line. Yet, they continue to be tolerated, excused, or shuffled around until they either quit or retire.

Three GMs Who Stood Out—for the Wrong Reasons

Of the eleven GMs I worked under, three in particular stand out for their glaring incompetence. They weren’t just mediocre at their jobs; they were prime examples of the Peter Principle in action.

The first GM spent most of his time holed up in his office, chain-smoking cigarettes and playing solitaire on his computer. He had little interest in the day-to-day operations of the factory, rarely ventured out onto the production floor, and seemed completely disconnected from the challenges his team faced. He was indifferent to any crisis, big or small, and somehow managed to dodge responsibility for almost every issue that arose under his watch.

The second GM had a daily ritual that, to this day, remains baffling. Every morning, he would spend the first hour in the restroom, leisurely reading the Wall Street Journal. While this might seem like a harmless routine, it was emblematic of his overall approach to leadership: hands-off, disengaged, and unconcerned with the ticking clock of the workday. By the time he emerged, the factory was already in full swing, with production lines operating, challenges arising, and workers needing direction—none of which he seemed inclined to address.

The third GM, perhaps the most perplexing of all, treated his job more like a social club than a leadership position. He spent his days strolling through the offices, popping in and out of his managers’ spaces, telling jokes, and making sarcastic comments about both the owner and the workers on the production line. He rarely, if ever, engaged in meaningful conversations about work, preferring to gossip and mock rather than lead or solve problems.

These men weren’t just incompetent—they were liabilities to the factories they oversaw. And yet, none of them were ever fired.

Why Aren’t Bad GMs Fired?

This brings me to the first question I’ve wrestled with for years: Why is there such reluctance to fire bad General Managers?

One possible explanation is the cost and hassle of replacing a GM. Firing a high-level executive requires not just finding a replacement but also managing the transition period, which can disrupt the factory’s operations. There’s a perception that it’s better to have someone in the position, even if they’re ineffective, than to deal with the upheaval of a firing.

There’s also the issue of pride and loyalty. Many GMs are promoted internally or brought in by the owners or upper management. Admitting that a bad hire or promotion has been made can feel like an admission of failure, and no one likes to admit they were wrong. In other cases, personal relationships between GMs and owners may play a role in shielding them from termination. The GM may be someone the owner knows and trusts, despite their incompetence, making it difficult to sever ties.

Lastly, there’s the Peter Principle itself. If everyone rises to their level of incompetence, then it stands to reason that those in charge of hiring and firing GMs may also be victims of the principle. If the people responsible for overseeing the GM are themselves in over their heads, they may not even recognize the GM’s shortcomings or may be unsure how to address them.

Signs Your GM is a Victim of the Peter Principle

The second question I’ve pondered is this: What are some of the leading indicators that a factory’s GM has fallen victim to the Peter Principle?

One of the most obvious signs is disengagement. A GM who is often absent from the production floor, avoids meetings, or spends more time on personal tasks than work is likely someone who has checked out of their role—or someone who never should have been placed in that role to begin with. Leadership, by its very nature, requires active involvement. A GM who doesn’t engage with their team or the day-to-day operations of the factory is a red flag.

Another indicator is a lack of accountability. A GM who deflects responsibility, blames others for failures, or consistently avoids tough decisions is not fit for the job. Leadership requires taking ownership of both successes and failures, and a GM who cannot do that is likely overwhelmed by the demands of the role.

Finally, ineffective communication is a sure sign of a GM who has risen beyond their capabilities. A good leader should be able to articulate goals, provide clear direction, and foster open communication between departments. When a GM’s primary mode of communication is telling jokes or making snide comments, as in the case of one I worked under, it’s clear they are ill-equipped for the responsibilities of leadership.

Modcoach Note

The Peter Principle is more than just a theory; it’s a reality that plays out in workplaces every day, including modular factories. Allowing incompetent leaders to remain in their positions has real consequences: worker morale suffers, productivity declines, and the factory’s reputation and profitability are at risk.

In the end, it’s the workers, not the GMs, who pay the price. And until companies find the courage to recognize and address incompetence at the highest levels, the cycle will continue, with bad GMs rising to their level of incompetence—and staying there, no matter the cost.

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