The Peter Principle is a concept in management theory that suggests individuals are promoted based on their performance in their current role, rather than their ability to perform in the new position. This often leads to employees being promoted to a level of incompetence, where they can no longer effectively fulfill their job responsibilities. As a result, organizations may find that many employees occupy positions where they are not fully capable, leading to decreased efficiency and productivity. The principle highlights the importance of assessing an individual's skills and potential for a new role, rather than solely relying on past performance in their current position.