Toxic leadership rarely starts with bad intention

Toxic leadership rarely begins with malicious intent. In most cases, it starts with a promotion that made perfect sense at the time.

Organizations often assume that leadership failure is a problem of character: arrogance, narcissism, or abuse of power. While such traits exist, research shows that a large share of toxic leadership emerges much more quietly, through well‑intended promotion decisions that place people in roles they are not equipped for. This is where toxic leadership and the Peter Principle meet.

The Peter Principle is no longer a joke, it is empirical

The Peter Principle proposes that people are promoted based on competence in their current role until they reach a level where they are no longer competent.

For decades, it was treated as satire. That changed with large‑scale empirical research. A landmark study by Benson, Li, and Shue examined promotion decisions across more than 130 firms and found strong evidence that companies systematically promote high individual performers, even when other observable traits predict poor managerial performance.

In other words: Firms know managerial work requires different skills, yet they still promote based on performance in non‑managerial roles. This is not ignorance. It is a trade‑off.

Why companies keep doing it (even when they know better)

Research suggests three structural reasons organizations continue promoting this way:

1. Incentive preservation

Promotions reward performance and sustain motivation in lower ranks. Promoting only “management‑ready” people risks undermining "effort" incentives.

2. Information asymmetry

Managerial potential is harder to observe and measure than individual contribution. Performance metrics are visible, leadership capability is often inferred.

3. Internal legitimacy

Internal promotions signal fairness and opportunity. Ironically, external hires often perform worse initially, are paid more, and leave sooner than internal promotions.

The result is a rational system producing predictable leadership risk.

When Mismatch Turns Toxic

Most promoted leaders do not become incompetent overnight. But sustained role mismatch creates pressure and under these conditions, research shows that leaders begin relying on control behaviors, defensiveness, and emotional volatility, not because they are “bad people,” but because they lack the skills and support to cope.

This is how toxic leadership often emerges unintentionally. Studies on toxic and abusive supervision consistently link destructive leadership behaviors to:

• emotional exhaustion

• silence and withdrawal

• reduced psychological safety

Importantly, most toxic leadership is not loud or dramatic. It manifests in mundane behaviors:

• impatience instead of coaching

• sarcasm instead of feedback

• unpredictability instead of consistency

• blame instead of accountability

These behaviors corrode teams slowly, not instantly.

Toxic leadership hurts even when performance looks fine

Literature is quite clear on the fact that toxic leadership can coexist with short‑term performance. Fear, pressure, and compliance can maintain output for a while. But longitudinal studies show that performance collapses as:

• talent drains

• innovation stalls

• learning shuts down

• trust erodes

Einarsen et al. demonstrate that destructive leadership is strongly associated with long‑term organizational decline, even when early results appear acceptable.

This explains why toxic leaders often remain undetected until damage is irreversible.

The cost of doing nothing

Organizations frequently tolerate toxic leadership because:

• the leader “delivers results”

• replacement feels risky

• intervention is uncomfortable

Research consistently shows that this tolerance is costly. Toxic leadership is one of the strongest predictors of attrition, burnout, and counterproductive work behaviors.

Retention data often reveals the truth long before performance data does.

Mitigating the Peter Principle without killing internal promotion

The solution is not to stop promoting from within. Research comparing internal and external hiring shows that internal promotions outperform external hires in the long run... if supported properly.

Mitigation strategies include early coaching and feedback after promotion as well as allowing for graceful step‑backs without stigma.

Conclusion: Toxic Leadership Is Often a System Failure

Toxic leadership is rarely about evil intent. More often, it is the predictable outcome of a promotion systems that reward performance without building leadership capability.

Organizations are not blind to the Peter Principle. They accept it because the short‑term benefits feel necessary, and the long‑term costs feel abstract... until they aren’t.

Preventing toxic leadership requires shifting the question from: “Who deserves promotion?” to “Who is ready and how do we help them succeed once promoted?”

Sources:

Benson, A., Li, D., & Shue, K. (2019). Promotions and the Peter Principle. The Quarterly Journal of Economics, 134(4), 2085–2134.

Rajguru, P., Churchill, I. R., & Graham, G. (2025).The Peter Principle Revisited: An Agent‑Based Model of Promotions, Efficiency, and Mitigation Policies.

Bidwell, M. (2011). Paying More to Get Less: The Effects of External Hiring versus Internal Mobility. Administrative Science Quarterly, 56(3), 369–407.DOI:

Einarsen, S., Aasland, M. S., & Skogstad, A. (2007).Destructive Leadership Behaviour: A Definition and Conceptual Model.The Leadership Quarterly, 18(3), 207–216.

Tepper, B. J. (2000).Consequences of Abusive Supervision. Academy of Management Journal, 43(2), 178–190.