When a tree grows big enough, some branches will stop functioning, and they become dead wood. Similarly, when a company grows to a certain size, some people will stop contributing positively, and literally, they are also becoming dead wood.
For a company, the problem doesn't stop at the productivity lost from the dead wood employees. Due to the nature of dead wood, they will sap energy and productivity away from those good employees. 'Good employees' in this context refers to productive and contributing people in a company. Eventually the good ones will either feel overloaded or frustrated because of the under-appreciation from the management. In one way or another, they can and will find a better place to work .
What runs parallel with this is Gresham's Law: bad money drives out good.
I am witnessing the exact problem now in my company. The incompetent people are driving out a good engineer. This makes me to rethink my career path...