This will always happen with closed allocation, no matter how much it is tweaked. It's an inherent property of closed allocation systems that the definition of work is driven by managerial status assertions rather than the needs of the business, which can only be assessed, at the lower levels, organically.
Closed allocation doesn't invariably destroy a company, and it's only in software that open allocation is obviously superior. (An open-allocation nuclear plant may not be the best idea.) Most industrial efforts can tolerate the inefficiencies that come with closed allocation. Software often can't, because software efforts tend to be binary in outcome (most lose, a few are big winners) and closed allocation generally creates enough needless complexity to cripple the company before it really succeeds.