Management derailment is another way to describe the Peter Principle’s main conclusion: Employees tend to rise to their levels of incompetence. People who do well at their jobs, and who are sometimes on the fast track, often are promoted to positions in which they no longer excel. The Peter Principle implies that executives are aware of their shortcomings and mask them by getting a huge desk or by blaming others. But with management derailment, executives might not even be aware they are doing a bad job.

Bad Managers

Bad managers -- typically defined as leaders with poor judgment, who have troubled relationships and who don’t learn from their mistakes -- characterize management derailment. When management derailment occurs, a company inevitably loses money and is left with employees who have low morale and who have endured stress from being subjected to having a bad boss, according to research conducted by Hogan Assessment Systems, a business consulting service. Hogan found that management derailment is a major problem, with two-thirds of managers being “insufferable” and with half failing.

Emotional Reasons

Derailed managers, people who don’t live up to their potential, are likely to be intelligent, but they fail nonetheless. Managers can fail at their position from emotional or business reasons. Some common emotional reasons are insensitivity, arrogance and inflexibility. An inability to handle stress is common to many derailed managers. Successful executives, by comparison, handle stress with composure. They focus on getting the problem solved while maintaining a good working relationship.

Business Reasons

Business reasons that can cause management derailment include not staffing properly, lacking the proper skill set, being unable to think strategically, being too dependent on a mentor and micromanaging employees -- doing the job instead of managing it. Many derailed managers don’t have confidence in their staff and therefore don’t assign the right work to the right people. Managers who are trained for the position instead of being thrown into the job in a sink-or-swim environment have a better chance of being a successful manager.

How to Prevent It

Managers who believe their performance is better than it is are the ones most likely to be derailed. Self-aware managers who can see their flaws have the greatest chance for success. After gaining self-awareness, managers need to be willing and able to improve the management style. Methods that can work are to have employees rate and give feedback to the manager and to ask for suggestions from staff.