Why Companies Reward Bad Leaders, and How to Fix It
By Julian Scaff
Despite the growing chorus from business schools championing servant leadership, inclusive cultures, and empathetic management, many companies, especially in high-pressure sectors like tech and finance, continue to reward the opposite: authoritarian managers with oversized egos and disregard for employee well-being. This contradiction isn’t an accident. It stems from a deep misalignment between institutional ideals and real-world incentives.
Early in my career, I worked as a Research Associate at Claremont Graduate University’s Information Technology Institute. I designed digital archival systems under the leadership of Dr. Tom Horan (author of Digital Places) and worked closely with Dr. William J. Mitchell (author of City of Bits). During my time there, I also became familiar with the work of Peter F. Drucker, founder of CGU’s Drucker School of Management, and often called the grandfather of modern management.
As a young creative, I was an anti-establishment rebel at heart, more of an artist-activist than a designer. A business school and a management guru were the last places I expected to find inspiration or connection. However, I discovered that Peter Drucker’s ethics and philosophy emphasized human-centered management, social responsibility, and the idea that businesses should serve the common good, not just pursue profit, values that resonated with me. Slowly, I was drawn into more of his writings.
However, I also experienced a total disconnect between Drucker’s teachings and my professional experiences. CGU was in many ways a working paradise, with empathetic leaders such as Dr. Horan, and an openness to new ideas. But after I left for jobs in industry, a majority of my managers and bosses relied on top-down authority and rigid hierarchies that prioritized control and compliance over trust, collaboration, and long-term effectiveness. I was often bullied or humiliated by managers in front of coworkers, and being on the autism spectrum made me an easy target due to my social awkwardness and emotional hypersensitivity. I also witnessed many instances of bullying, sexual harassment, and racism directed towards others in the workplace, and how these behaviors created toxic work environments not just for the victims, but for all.
Even today, I wonder why bad management and leadership practices continue to be rewarded and promoted, despite management and leadership experts knowing what constitutes good management and leadership.
Although there is widespread awareness of the importance of inclusive, people-centered leadership, many companies continue to elevate and reward leaders whose behaviors contradict these ideals. This disconnect is not simply a matter of individual failure but a systemic issue, rooted in cultural myths, flawed incentives, and outdated power structures. To understand why toxic leadership persists, we must examine the forces that shape corporate behavior and reward systems, beginning with the obsession that lies at the heart of it all: short-term performance.
The Cult of Short-Termism
Peter F. Drucker once said, “Management is doing things right; leadership is doing the right things.” But in many industries, especially those driven by quarterly earnings and VC-fueled growth, doing the right thing is subordinated to doing the fastest thing. Leaders who hit revenue targets or ship products at breakneck speed are often celebrated, even if their methods leave a trail of burnout, broken teams, and toxic culture. The problem is simple: short-term performance is easy to measure, while long-term organizational health is not.
“Management is doing things right; leadership is doing the right things.”
— Peter F. Drucker
Mythologies of the “Brilliant Jerk”
Survivorship bias plays a central role in rewarding toxic leadership. Industry narratives often glorify figures like Jeff Bezos, Elon Musk, or Mark Zuckerberg, leaders who exhibit volatile or domineering behavior but are also associated with success and/or innovation (usually undeservedly). This reinforces the myth that brilliance justifies bad behavior, that being difficult is a mark of genius. But Drucker also warned, “No institution can possibly survive if it needs geniuses or supermen to manage it.” The obsession with the “great man” model of leadership not only ignores the long trail of failures but also eclipses more sustainable, collaborative approaches to success.
“No institution can possibly survive if it needs geniuses or supermen to manage it.”
— Peter F. Drucker
The Efficiency Trap
Many companies fall into the trap of prioritizing efficiency over effectiveness, doing things quickly and cheaply, rather than doing the right things well. In pursuit of lean operations, rapid scaling, and optimized workflows, organizations often streamline processes, cut headcount, and automate tasks without considering whether those actions actually serve their larger goals or improve outcomes. As Peter Drucker warned, “There is nothing so useless as doing efficiently that which should not be done at all.” Efficiency may boost short-term metrics, but without clarity of purpose or strategic alignment, it can lead to brittle systems, disengaged teams, and missed opportunities for meaningful impact. True effectiveness requires a focus on outcomes, not just outputs, and that demands leadership willing to prioritize people and purpose over speed. (See my essay on this topic, “Stop Counting Beans, Start Making Coffee”).
“There is nothing so useless as doing efficiently that which should not be done at all.”
— Peter F. Drucker
Structural Incentives Breed Dysfunction
The architecture of incentives in tech and finance often privileges individual heroics over collective well-being. In finance, the “eat what you kill” compensation model rewards ruthlessness. In tech, slogans like “move fast and break things” have morphed into moral licenses for undermining culture and trust. Bonuses, promotions, and stock options typically track hard metrics, output, profit, growth, not employee engagement, psychological safety, or team cohesion. Layoffs may offer short-term financial relief, but research shows they often damage morale, productivity, and institutional knowledge, ultimately hurting a company’s performance for years afterward. As long as the scoreboard ignores human cost, companies will continue to promote those who break spirits along with barriers.
Power, Fear, and Silence
Command-and-control leaders thrive in environments that suppress dissent. In organizations where fear governs behavior, toxic managers can operate with impunity, their results shielding them from criticism. Employees may stay silent or even protect harmful leaders out of fear of retaliation, further reinforcing the cycle. Drucker famously said, “Rank does not confer privilege or give power. It imposes responsibility.” Yet in practice, power often immunizes managers from accountability.
“Rank does not confer privilege or give power. It imposes responsibility.”
— Peter F. Drucker
Culture Metrics Are Treated as Optional
Many organizations advertise values such as inclusion and well-being, yet fail to operationalize these values effectively. Revenue is reported quarterly; trust is not. Culture becomes the responsibility of HR, who are often pressured to shield high-performing leaders from scrutiny. Until companies begin to measure and reward cultural health with the same rigor they apply to profits, values will remain branding exercises, not behavioral expectations. This, by the way, also applies to environmental sustainability initiatives in companies, which typically receive no priority when it comes time to report quarterly profits because they are not measured or valued.
The Peter Principle in Action
A significant portion of bad leadership stems not from malice but from misplacement. Creative and technical professionals, such as designers and engineers, are often promoted into management for their excellence in their craft, rather than their aptitude for leadership. They ascend to roles where they are ill-equipped to lead, coach, or support others. Laurence J. Peter’s eponymous principle warned that “In a hierarchy, every employee tends to rise to their level of incompetence.” Leadership training is often absent or inadequate, and many companies assume that technical brilliance will somehow translate into people skills. It rarely does.
“In a hierarchy, every employee tends to rise to their level of incompetence.”
— Lawrence J. Peter
Business Schools vs. Business Realities
While MBA programs and leadership academies typically teach inclusive, emotionally intelligent, and servant-style leadership, the environments their graduates enter are often hostile to those very principles. This “cultural lag” results in idealistic young leaders adapting to toxic norms rather than transforming them. The deeper issue is that business education rarely challenges the structural incentives that reward bad leadership; it teaches values, but graduates must operate in systems where those values are often punished.
The Way Forward: Systemic Redesign
To bridge the gap between leadership ideals and corporate realities, companies must go beyond rhetoric. They must:
- Link leadership incentives to cultural health: Retention, team engagement, and psychological safety should be KPIs, not just fluff.
- Implement upward feedback loops: 360 reviews and anonymous surveys can reveal patterns of toxic behavior early.
- Redefine what leadership strength means: Traits like empathy, humility, and the ability to listen should be seen as strengths, not soft skills.
- Invest in leadership development at every level: Management is not an upgrade from craft, it’s a distinct discipline that must be taught and practiced.
As Drucker said, “The task of leadership is to create an alignment of strengths… making the system’s weaknesses irrelevant.” That alignment cannot happen if the system continues to reward harm in the name of hustle. Leadership must evolve, not just in theory, but in structure, in culture, and in incentives.
“The task of leadership is to create an alignment of strengths… making the system’s weaknesses irrelevant.”
— Peter F. Drucker
Until that evolution happens, companies will continue to promote the very behaviors that erode their long-term potential. The cost isn’t just morale, it’s innovation, resilience, and humanity itself.
Sources:
Drucker, Peter F. The Essential Drucker: The Best Sixty Years of Peter Drucker’s Essential Writings on Management. New York: HarperBusiness, 2008.
Drucker, Peter F. The Effective Executive: The Definitive Guide to Getting the Right Things Done. New York: HarperBusiness, 2006.
Peter, Laurence J., and Raymond Hull. The Peter Principle: Why Things Always Go Wrong. London: Profile Books, 2019.
