Dr. David Dunning is already known for the infamous Dunning-Kruger Effect, a phenomenon that is of core importance to organizational theory: People who are incompetent in a given task tend to overestimate their ability, and tend to be resistant to evidence and feedback about their incompetence.

This inability of the less competent to assess their own ability extends to interpersonal assessments. As Dr. Dunning puts it, “To the extent that you are incompetent, you are a worse judge of incompetence in other people.”

We call this phenomenon Dunning Blindness, and would paraphrase the principle this way: The less competent are generally incapable of recognizing the more competent. Think of it in terms of color vision. If Jay can only see in black and white, he’s not going to be a very good judge of the decorating skills of Bob, who has perfect color vision.

As you can imagine, Dunning Blindness has enormous implications for hiring, placement, and promotion. In fact, it likely accounts for a significant portion of inefficiency within organizations, if not a majority of it.

The problem of Dunning Blindness is compounded by what has been called social comparison bias, the tendency of people to dislike others who are seen to compete with them on some measure. Researchers have shown that Social Comparison Bias directly undermines merit in professional decision-making. (See: “Tainted recommendations : The social comparison bias,” Garcia et al. in Organizational Behavior and Human Decision Processes, Volume 113, Issue 2, November 2010, Pages 97–101)

To summarize the larger problem: Dunning Blindness causes workplace authorities to be incapable of recognizing those who are more competent than themselves and, on occasions when Dunning Blindness is overcome somehow, social comparison bias leads those workplace authorities to suppress rather than promote those who are more competent than them.

This overall dynamic is known colloquially as Tall Poppy Syndrome or, more formally, as negative selection. We call such a business unit, where the supervisors are less competent than their subordinates, cognitively upside-down.

The only reasonable hope for a relatively competent subordinate to rise above a less competent supervisor is to have their talent recognized and poached by a talented supervisor from a different business unit, what we call diagonal promotion.

However, there is a limit to the saving graces of diagonal promotion, a limit inherent in  negative selection itself.

Lateral moves between business units can be driven not only by recognition of suppressed talent but also by social networking among a clique of mutually supportive, but relatively less competent, colleagues. Incompetent supervisors who are incapable of recognizing their more competent subordinates, or who feel threatened by them, might poach similarly incompetent friends to be assistants or deputies, or might recommend these friends as supervisory peers to their own superiors.

Incompetence can thus proliferate itself throughout an organization like a cancer. And, once an organization reaches a certain threshold of cognitive upside-downness, it does not have the personnel resources to save itself.

Most organizations have relatively little personal interaction beyond a few layers of management up or down. There is simply not enough one-on-one exposure for higher-ups to recognize the talents of workers too far below them. Once negative selection fills a layer of management with members of a mutually supportive network driven by suppression of competence, a twin barriers of Dunning Blindness and social comparison bias effectively block the talented from contributing to the health of the organization.

At this point, the brain of the organization short-circuits and—absent rigorous reform efforts by talented strategic leaders or radical intervention from the outside—the organization decays and falls apart.