In his 2010 discussion paper Competitive careers as a way to mediocracy Professor of Business Administration, Matthias Kräkel, (presently at the Bonn Graduate School of Economics, Germany), provides a contemporary corollary to the well-known Peter Principle (1969). Which famously states that:

“Individuals are promoted until they reach their level of incompetence.”

Or, put another way,

“Work is accomplished by those employees who have not yet reached their level of incompetence”.

The new paper first defines a ‘Mediocracy’ as – “A society in which
people with little (if any) talent and skill are dominant and highly
influential.” And then gets down to the hardcore algebra. Using
game-theoretic perspectives ;

“We show that in competitive careers based on individual performance the least productive individuals may have the highest probabilities to be promoted to top positions. These individuals have the lowest fall-back positions and, hence, the highest incentives to succeed in career contests. This detrimental incentive effect exists irrespective of whether effort and talent are substitutes or complements in the underlying contest-success function. However, in case of complements the incentive effect may be outweighed by a productivity effect that favors high effort choices by the more talented individuals. Switching from wages-attached-to-jobs to pay-for-performance will work against mediocracy if applied to top jobs, but may be detrimental at lower career levels. The mediocracy problem will be aggravated if high-ability individuals decide to sandbag on lower career levels in order to avoid strong opponents at higher levels.

(The paper was presented at the  German Economic Association of Business Administration, symposium 2010.)