Do bad supervisors and employees eventually drive out good ones?

Most students of economics have heard of Gresham's law, which says "bad money drives out good." When you have "good" money (say, a silver coin) and "bad" money, with less intrinsic value, like a zinc coin, then even if the bad money has the same face value, the good money will slowly disappear, as people save it privately.  

Commenter YD at Ace's place believes a similar principle applies to institutions: that when an organization installs a  bad or incompetent person as head of a team or division, eventually good employees leave.

There would seem to be two reasons for this:  One is in-group preference.  The bad person in charge of a business team, for example, will bring in more bad or incompetent people because they agree with his style (or pretend to). These hires will eventually spill over into other divisions and repeat the process.

Eventually a majority of the employees are like the first bad one, and the organization starts to fail.

The second reason is that good, hard-working employees soon realize what's happening, see the likely outcome and choose to leave rather than suffer through the finger-pointing when the wheels start coming off.

In other words, good people find the new work environment unbearable.  They look around and see that slackers and ass-kissers get promoted, while those who work hard go unrecognized.

Think about it: If you're a hard worker and competent, would you want to work for an outfit that promotes slackers and yes-men?

This appears to happen almost invariably as an organization grows and ages.  Take the FBI, DOJ, NIH,  CDC or FDA, for example.  All have degraded over the years-- and alarmingly, the rate of decay seems to be accelerating.  The FBI and DOJ in particular have devolved into gestapo-like organizations that routinely trash the Constitution, with the full approval of the Porridgebrain regime.

Of course even in an organization run by "bad" people, a few good employees remain, but they learn early on not to blow the whistle.

Interesting theory.

Source.