Arthur from the corporate clients section has just been promoted to a management role. He claims to be completely surprised at being named the bank's new head of general lending, Asia. He may be surprised, but nowhere nearly as surprised as I am. Arthur is a good guy, not entirely stupid, relatively friendly and, until recently, quite unassuming. But he's not the kind to whom you would give a management role ... not least because he is considerably more junior than most of his new staff. The main reason I am surprised is that Arthur doesn't appear to have any skills that would be relevant to his new position. He is a solid corporate clients banker, which means he is pretty good at writing account plans and calling treasury staff to set up appointments. But like a lot of corporate clients bankers, he has relatively few people skills, no management skills and no P&L experience - things generally considered essential in a manager. Just to be clear, I didn't want the Head of General Lending job. General lending means revolving credit facilities, letters of credit and other deadly dull vanilla banking products for which big bonuses are considered highly unusual. But it's still pretty painful when a nice but relatively incompetent person who was junior to me last week becomes senior to me this week. So how did it happen - how did someone undeserving get promoted ahead of a star like me? Actually this sort of thing happens all the time in large organisations and there are numerous superficial reasons we can come up with: The 'good mates' theory: Arthur is very good friends with the Asia CEO. They play golf together and their wives are friends, so they see each other outside work quite a bit. Just say that subjective factors always count for a huge part of objective decisions. The 'loyal lieutenant' theory: Arthur, because of his relative incompetence, is never going to be a threat to the Asia CEO himself. So promoting him rather than someone more suitable helps create a protective wall between the Asia CEO and the more competent managers who might actually challenge him for his job. Potential new Asia CEOs (like me) need to be kept at a distance from the current Asia CEO's bosses. Promoting the bright people shows that the current Asia CEO is replaceable; promoting nitwits, on the other hand, cements his importance. The 'cc' theory: Arthur is very good at adding senior people to the cc line of his e-mails. It is a big mistake to underestimate the importance of doing this. When I recently closed a deal for one of his clients, he wrote me a nice e-mail congratulating me and the rest of the team. At the time I didn't think much of the fact that he had cc'd the CEO and a few product heads. But of course I now realise that this e-mail was the first they had heard of the transaction and they heard it from Arthur. This, despite the fact that he had nothing to do with it, other than to set up the very first meeting. When you do something good, or can somehow associate yourself with something good, cc the world. I could go on, but I want to get to the real point. There is a much more fundamental reason for the phenomenon of seemingly undeserved promotions. Arbitrarily promoting people who don't deserve it is a very important tool for maintaining staff morale. I call it the principle of misdirected disappointment. The fact is, most of us are over-confident, and what keeps us going is our belief that we will someday get to the top. A recent US survey found that about 80 per cent of people think they are above average. Now, if every promotion were according to the correct criteria, and the really deserving people got every promotion, then the only thing the unpromoted would have to explain their failure would be their actual lack of ability. We would no longer be able to think that we were more deserving than the guy who got the job and that he got the job only because of problems with the system. We would have to actually accept our limitations and that the guys who got promoted were all simply better than we were. Even if that's the truth, who wants to believe that? Not me, that's for sure. The current system ensures that our disappointment is misdirected. Instead of being disappointed about the fact that we are not much good at banking, or whatever else we are trying to do, our disappointment is directed at what we think are problems with the system - so we soldier on. Not everyone can be the boss, but everyone needs to think that they can. If the world were fair and we all knew where we stood, a huge chunk of the population would lose their motivation to turn up for staff meetings and prepare PowerPoint presentations at 3am. And if that were the case, what would happen to people like me who are really outstanding? Where would we find staff to do our research and get us cups of coffee?