The Psychology of Leadership Incompetence

Leadership isn’t just about strategy and charisma — it’s about psychology. And when things go wrong at the top, it’s rarely due to a lack of intelligence. More often, leadership failures are rooted in fear, ego, misjudged perception, or unchallenged assumptions.

Inspired by Norman Dixon’s 'On The Psychology of Military Incompetence,' this blog dives into the psychological patterns behind poor leadership decisions — and what could have been done differently.

This isn’t about blame. It’s about equipping modern leaders to spot these patterns in themselves and others, and lead with more awareness, discipline, and resilience when the pressure hits.

1. Why Smart Leaders Still Make Bad Decisions

Leadership incompetence often has less to do with IQ — and more to do with what’s left unchecked:
- Ego over curiosity
- Avoidance of uncomfortable truth
- Rigid thinking in fluid environments
- Overidentifying with past success
- Suppressing dissent to maintain control

These psychological patterns aren't obvious at first. But when unaddressed, they form the perfect storm for poor judgment — especially in high-pressure, high-visibility roles.

2. Case Study: Blockbuster's Downfall

Blockbuster had multiple chances to acquire Netflix in the early 2000s — and didn’t. The mistake wasn’t just bad business acumen. It was a psychological blind spot: overconfidence in an outdated model and an unwillingness to see beyond their current success.

The psychology at play:
- Status quo bias: Leaders assumed what worked before would keep working.
- Overconfidence: Dismissed innovation as a passing fad.
- Loss aversion: Feared pivoting and disrupting internal systems.

What could have changed?
- Curiosity over defensiveness
- Inviting challenger voices into the boardroom
- Testing small bets instead of betting it all on one model

3. Case Study: Boeing’s 737 MAX Crisis

In the rush to compete with Airbus, Boeing made critical decisions that contributed to the 737 MAX crashes. Leadership underestimated software issues and pushed timelines — compromising safety and transparency.

The psychology at play:
- Groupthink: Suppression of dissent to meet deadlines
- Short-term bias: Prioritized competition and market share over long-term safety
- Moral disengagement: Rationalized risky decisions to protect the company’s image

What could have changed?
- Slowing down to assess risks
- Encouraging whistleblower protection systems and ethical escalation techniques
- Prioritizing long-term trust over short-term wins

4. How to Spot These Patterns in Yourself

You don’t need to lead a billion-dollar company to fall into the same traps. Here are signs to watch for:
❗ You stop seeking feedback
❗ You assume 'what worked then' will always work now, for me
❗ You feel threatened by differing opinions
❗ You ignore red flags to keep the pace

When I’m coaching leaders I’ll often ask:
- Where are you protecting comfort over progress?
- When’s the last time you changed your mind publicly?
- When someone challenges your thinking — do you welcome it?

5. Tools to Stay Grounded in Reality

✅ Pre-mortem sessions: What could go wrong — and how would we respond?
✅ Feedback loops: Regularly ask team, board, and stakeholders: “What are we not seeing?”
✅ Time buffers: When urgency rises, build in time to pause, think, and reflect
✅ Accountability allies: Surround yourself with people who don’t just support you — they challenge you

Good leadership isn’t about knowing everything. It’s about building systems and awareness to lead through uncertainty without losing your judgment.

Final Thoughts

Leadership failure is rarely about incompetence on paper. It’s often about unacknowledged psychological patterns playing out under pressure.

The good news? These patterns can be recognized — and replaced.

The more you study poor leadership, the more prepared you become to embody great leadership. Not because you're flawless — but because you're aware, adaptable, and courageous enough to question your own thinking.

Learn from what failed. Build what lasts. And lead like a Mogul.

At Mogul Performance, we coach leaders not just to survive changing environments, but to lead through them powerfully. If you’re ready to build that edge, schedule a call here.