How do you deal with the Dunning-Kruger effect? http://en.wikipedia.org/wiki/Dunning-Kruger_effect The short version is that people who are good at things generally get that way because they have a strong ability to tell good work from bad. People who are bad at things can't tell the difference, so they a) have a hard time improving, and b) think their low-quality work is pretty swell. Is your culture perhaps unusual…
The most important horn of the effect is dependent upon hiring incompetent people. What makes you think they hire incompetent people? Moreover, this question could also be reduced to a question about their hiring in general.
If it will help everybody, please forget I mentioned Dunning-Kruger in specific. That's the inspiration for the question, not the heart of it.