Show is arguing that firms know they will get worse managers by simply promoting people who've been good at their previous jobs. And yet, for the most part, they continue to do it, even though it hurts their profits. So are companies just making a mistake? A firm having a peter principal problem doesn't necessarily mean that the firm doesn't understand what it's doing or is making a mistake. What we believe is happening is the firm is doing its best to motivate workers, and they fa a trade off.