How good can bad leaders be? The opportunity costs of leader selection

In many organizational settings, the person emerging as the group leader is not the best person for the job. The leadership literature provides several explanations as to why mediocre or even incompetent leaders exist. However, previous work builds on the premise that choosing a leader with limited skills is always a mistake. In this paper, we take a complementary stance and claim that—in some cases—organizations might select underperforming leaders because it is efficient to do so. Determining the leader within a fixed group of individuals is similar to allocating any other limited resource. Leader selection involves a trade-off, in that the benefit a person generates as a leader has to be contrasted with the opportunity cost that arises because the leader is (at least to some extent) no longer available as a follower. We identify cases in which it is optimal not to select the most competent individual as leader. Finally, we discuss how selection procedures need to be designed so that the most appropriate (but not necessarily the most competent) leader is chosen in a given setting.