If you need a refresher, the Peter Principle basically states that people get promoted until they become too incompetent in their current position to continue advancing. In an article for Fast Company, Baron Schwartz discusses how to prevent such things in your business. He realizes that most people get promoted because they exhibit great talent within their current range of responsibilities. On the face of it, this sounds sensible, except that great talent in one set of responsibilities does not promise any capability in a job involving different or added responsibilities. Instead, employers should try to start grooming employees for duties associated with promotions while these employees are still in their current roles. Doing this has two benefits: The first is that a more accurate idea of whether a person can handle a promotion is gained. The second is that a person will feel less pressure at the possibility of failure and will become more confident about performing the new duty. In this way, a person can both earn a promotion and hit the ground running in the new position.
You can view the full article here: http://www.fastcompany.com/3055025/lessons-learned/why-you-should-think-twice-before-promoting-your-next-employee