Recently, I had bit of time with family during long weekend of Diwali, we watched bunch of movies like – Fyre – The Greatest Party that never happened, Joy & Glengarry Glen Ross. One question that puzzled me was, with so much data, analysis power and research available, why do we still have incompetent leaders in business world

Leadership is arguably one of the most challenging and crucial roles in any organization. Yet, a common paradox persists across industries: despite abundant talent, many incompetent people still find their way into leadership roles. Studies, real-world examples, and psychological research suggest several reasons why unfit leaders emerge and thrive within organizations. These include cognitive biases, flawed promotion structures, and a misguided emphasis on charisma over competence. Understanding why this happens—and how it can be prevented—can help companies foster a leadership team that genuinely drives success.

1. The Charisma Trap: Mistaking Confidence for Competence

One of the biggest reasons incompetent leaders ascend is the tendency to equate charisma with competence. Charisma can be magnetic; a confident individual can make a strong impression, especially during interviews or high-stakes meetings. However, while charisma often creates an illusion of competence, it doesn’t guarantee the skills necessary for effective leadership.

Research from the Harvard Business Review underscores this point: a study found that extroverted, confident personalities are more likely to be selected for leadership roles, even if they lack the qualifications needed for success. Confidence, while essential, can mask a lack of critical skills like strategic thinking, empathy, and adaptability. For instance, high-profile CEOs like Adam Neumann of WeWork rose quickly due to their visionary charisma, but their leadership proved unsustainable due to lack of financial and operational control, ultimately leading to costly failures.

2. The Peter Principle: Rising to One’s Level of Incompetence

The “Peter Principle,” coined by Dr. Laurence J. Peter, is a classic explanation for the prevalence of incompetent leaders. This principle suggests that people are often promoted based on their success in their current roles, not their ability to handle the new role’s demands. As a result, employees rise through the ranks until they reach a position where they’re no longer competent—typically, the point where technical skills alone don’t suffice, and managerial expertise is required.

Consider an outstanding software developer promoted to a managerial role. Despite excelling in technical tasks, they might struggle with team management, communication, or project delegation, making them less effective in their new position. The Peter Principle illustrates why strong individual contributors can turn out to be weak leaders and suggests that organizations often mistake task-related competence for leadership readiness.

3. Cognitive and Selection Biases: The Problem with Perception

Cognitive biases can severely impact leadership selection. One of the most common biases is the “halo effect,” which occurs when a person’s strength in one area positively influences perceptions of their other abilities. For example, if an employee demonstrates excellent problem-solving skills, decision-makers might assume they would also be good at managing people, even though these skills don’t necessarily correlate.

Another influential bias is the “similarity bias.” Leaders and hiring managers tend to favor candidates who share similar traits or backgrounds, which can result in a homogeneous leadership structure that values certain traits over actual competence. Such biases were partly responsible for Theranos’s rise and fall; Elizabeth Holmes’s charismatic personality and resemblance to Steve Jobs contributed to her rapid ascent. Investors and board members overlooked red flags about the product’s viability, which ultimately led to a billion-dollar disaster.

4. Emphasis on Technical Skills Over Soft Skills

In many industries, technical skills are valued highly, sometimes more so than leadership capabilities. While technical expertise is essential, it doesn’t necessarily translate to effective leadership, which requires strong interpersonal, communication, and strategic skills.

The case of Travis Kalanick, co-founder and former CEO of Uber, is an illustrative example. While Kalanick’s technical and strategic skills helped him grow Uber rapidly, his lack of empathy, ethical judgment, and conflict-resolution skills led to a toxic work culture and multiple controversies, forcing his eventual resignation. Leaders who lack these “soft skills” often create friction within teams, harming employee morale and engagement.

5. The “Yes-Person” Culture and Lack of Accountability

In some organizations, promotions are based on conformity rather than competence. Leaders may favor employees who agree with them and reinforce the status quo, creating an environment where innovative thinking and challenging ideas are discouraged. When accountability measures are weak or nonexistent, underqualified leaders can retain their positions without addressing performance issues.

One high-profile example is the fall of General Electric (GE) under CEO Jeffrey Immelt. GE’s management culture became one where employees hesitated to challenge senior leadership. Poor strategic decisions, a lack of accountability, and a preference for loyalty over competence led to GE’s market value plummeting from $600 billion to $60 billion.

A Framework to Foster Competent Leadership

To avoid these pitfalls, organizations must adopt a structured approach to leadership selection and development that focuses on competence over charisma, soft skills as well as technical abilities, and a culture that rewards accountability. Below is a recommended framework:

1. Define Leadership Competencies Based on Role Requirements

Organizations should clearly outline the competencies needed for each leadership role, focusing on both technical and soft skills. While a sales leadership role might prioritize skills in negotiation and relationship-building, a product manager might need strong project management and communication skills. Defining these competencies ensures that each candidate is assessed against relevant, role-specific criteria.

2. Implement Structured and Evidence-Based Hiring Processes

Biases often infiltrate unstructured interviews. Companies can counter this by adopting evidence-based hiring practices, including structured interviews, role-playing scenarios, and competency assessments. Tools like situational judgment tests (SJTs) and behavioral interviews help assess candidates on their potential to handle real-world challenges, not just hypothetical scenarios.

3. Emphasize Leadership Development at All Levels

Promoting someone to a leadership role without adequate training is like expecting a pilot to fly without practice. Leadership development programs, such as rotational training, mentorship, and hands-on management exercises, can prepare high-potential employees for the responsibilities of leadership. Offering these programs at every level of the organization ensures a pipeline of leaders who are better equipped to take on their roles.

4. Use 360-Degree Feedback and Regular Performance Reviews

To maintain accountability, organizations should implement 360-degree feedback systems where employees can evaluate their managers. Regular performance reviews, which consider feedback from peers and subordinates, ensure that leaders are held to a high standard and that issues can be addressed before they become systemic.

5. Foster a Culture of Psychological Safety

Encouraging a culture of open feedback and psychological safety allows employees to express concerns without fear of retribution. By promoting constructive criticism and rewarding innovative ideas, organizations can create an environment where competence and results matter more than mere conformity. Google’s “Project Aristotle” found that teams with psychological safety outperformed others, highlighting the importance of fostering a culture where ideas can flourish and poor performance is constructively addressed.

6. Prioritize Emotional Intelligence (EI) in Leadership Roles

A growing body of research links emotional intelligence (EI) with effective leadership. Leaders with high EI can empathize with employees, navigate stress, and foster a positive team environment. Implementing EI assessments during the hiring process or offering EI development programs can help cultivate leaders who are not only skilled but also compassionate and resilient.

7. Use Data-Driven Metrics to Evaluate Leadership Effectiveness

Companies can implement data-driven metrics to evaluate leadership effectiveness beyond traditional KPIs. Metrics like employee retention rates, team productivity, and engagement scores can provide quantifiable insights into a leader’s impact. By tying these metrics to performance reviews, organizations can ensure that promotions are based on results rather than perceptions.

Conclusion: A Path Forward to Competent Leadership

Incompetent leadership often results from a complex interplay of biases, flawed promotion practices, and insufficient development opportunities. However, with the right framework, organizations can make leadership competence a core value and avoid the costly mistakes that come with unfit leaders.

Companies like Microsoft, under Satya Nadella, have shown the power of empathetic, competence-focused leadership. Nadella transformed Microsoft by fostering a growth mindset and prioritizing empathy and collaboration, resulting in a near-tripling of the company’s market value.

To achieve similar success, organizations must reevaluate their leadership selection practices and foster a culture that values substance over style, accountability over compliance, and empathy over ego. By doing so, they can build a leadership team equipped to drive sustainable growth, innovation, and a positive work environment.