I wouldn't say that the Austro-Hungarian Army was an incompetent institution. Rather, I'd say it was used incompetently. That is, the army was very good at some things, capable at others, and poor at most things. Army leadership during the First World War did not calibrate their strategic and operational objectives to the ability of the army to carry them out.

The Austro-Hungarian Army had a lot of disadvantages to deal with before the war, disadvantages that hampered its development in terms of technology, manpower, and doctrine. The constitutional situation in Austria-Hungary, with two separate states joined under one single Monarch, certainly did not help the army with its financial situation. Money was always short for the Austrians, with the result that each year, the full complement of new conscripts could not be recruited, the newest weapons were introduced slowly and piecemeal, training weapons and rounds were always short, and officers' low pay kept it from being a serious career path for most of the middle-class educated sons of the Monarchy. The language problem existed, of course, but the army dealt with that relatively successfully.

Doctrine was for the most part on par with that of the other European powers. Franz Conrad von Hötzendorf, about whom you've heard a great deal if you watch The Great War channel on youtube, was considered a bit of a tactical maverick during his time. Like most contemporary armies, Austrian tactical doctrine in 1914 held that the assault (and offensive, in general) was the only path to victory. High casualties were to be accepted and expected, but could be mitigated by high offensive spirit and elan on the part of the assaulting troops. The doctrine wasn't wrong so much as it was poorly suited for a long war. I've looked at a number of battles that took place on the Russian and Serbian fronts during 1914 and in both cases, Austrian assaults were indeed successful, though with huge casualties. What's interesting is that the specific manner in which casualties were sustained by attacking troops in 1914 were spelled out in the prewar training manuals (from 1903 and 1911). So it wasn't so much that prewar tacticians couldn't conceive of the kind of battlefield that would exist in 1914, with trenches, machine guns, and rapid-fire artillery, it was just that they accepted the likelihood of high casualties so long as the war was short.

Since I specialize in Austria-Hungary's Army, I think there's of course a desire on my part (and the part of other historians specializing in other armies) to focus on the valorous or glorious achievements of their subjects. But as you rightly point out in your question, such splendid victories were few and far between for the Austrians during World War I. In both the Serbian and Russian campaigns of 1914 and early 1915, grave mistakes were made that hampered Austria and the Central Powers for the remainder of the war.

First, the overall strategic overview in 1914 had two main enemies facing Austria: Russia and Serbia. With a relatively small Austrian Army, Hötzendorf decided he'd go on the offensive in both Serbia and Russia. Serbia required swift punishment for its alleged part in the assassination of the Archduke. Plus, a quick punitive offensive against Serbia would greatly enhance Austria's postwar claims to its Balkan sphere of influence. In Russia, Hötzendorf planned an offensive that was to coincide with a simultaneous German offensive. With Austria coming north from Galicia (modern-day Ukraine) and Germany coming south from East Prussia, the combined Central Powers would envelop huge numbers of Russian troops in Poland before Russia could mobilize the rest of its massive army.

But of course there were severe problems facing the Austrians in operational terms on both of these battlefields. First, in Serbia, the terrain favored the defenders to a remarkable degree, with high cornfields, poor roads, and the threat of partisans making communications difficult among Austrian units. Second, the Serbian Army had been fighting since 1912 in the First and Second Balkan Wars and though it entered the First World War with depleted manpower and supply reserves, it had earned an incomparable amount of modern combat experience that proved invaluable in 1914. By contrast, the Austrians hadn’t fought a real war since 1866 and had generally ignored tactical wisdom that might’ve been gained from observing the Boer, Russo-Japanese, and Balkan Wars. In Russia, the whole idea of the joint Austrian and German pincer was nonsense. The Germans had no intention of providing a simultaneous southward pincer attack to join up with the northward attack of the Austrians. The Central Powers’ military communication was constantly hampered by cultural differences and institutional weakness, so Hötzendorf never figured out that no southward attack would come. The number of Austrian troops simply couldn’t countenance two massive invasions. Instead of leaving behind a small holding force in the Balkans to stave off the decidedly less threatening Serbian foe and concentrating her forces in the east, to stave off the Russians, Austria decided to attack both, with the result that there were too few troops in both places to accomplish either objective. Of course, it’s not my place to judge the decisions of the Austrian Army High Command who were operating under layers and layers and layers of cultural, political, and emotional pressure that must have made their decisions make sense at the time.

When fighting began in earnest in August 1914, the Austrians paid for Hötzendorf’s decisions. The first invasion of Serbia was turned back after local defeats at Cer Mountain. Initial success in Russia couldn’t be followed up on by exhausted troops and eventually the Russians won crushing victories at Gnila Lipa and Rawa Ruska. By 1914, hundreds of thousands of Austrian troops were listed as ineffectives, with a huge proportion of the prewar officer corps killed, wounded, or taken prisoner. Further campaigns in December 1914 to May 1915 aimed at recapturing the Austrian citadel of Przemysl were probably unnecessary, and spent hundreds of thousands of lives to save the much smaller garrison. In Serbia, an unconscionably horrific river-crossing of the Drina on 8 and 9 September 1914 followed-up the initial invasion and broke the will of many of Austria’s combat infantrymen serving in the Balkans. If you read German, I HIGHLY recommend the war diary of Egon Erwin Kisch, who served in Serbia in 1914. His description of the river-crossing is truly astounding.

Anyway, I want to emphasize here that in my estimation, part of the reason the Austro-Hungarian Army comes off as so incompetent is that it lost to the Russians and Serbians, and only defeated them in spectacular victories with the help of the Germans. I think this comes from a perception that the Russians and Serbians were weak foes and that the “Austrians couldn’t even beat Russia, or Serbia…” I’d caution against such a reading because the Russian and Serbian armies in 1914 and 1915 were quite competent enemies. Especially on the Balkan front, I’d wager that any of Europe’s armies in 1914 would have had a difficult time invading and expelling the experienced combat troops of the Serbian Army from their homeland, given the terrain and excellent Serbian commanders.

So I think the Austrian Army was a remarkable institution that was asked to do even more remarkable things. At the small-unit level, despite supply and technological difficulties, I wouldn’t say the average Austrian rifle platoon was any worse than her foes in Russia or Serbia, at least once they had been exposed to combat. When the Austrians were given a task within their wheelhouse, they were remarkably successful. The Austrians had long been considered Continental experts in mountain warfare and held their own against the Italians in the Alps once that front opened up in 1915.

I’ll have to wait for my colleagues who focus on Germany and the Ottomans to argue whether Austrian struggles fatally weakened the Central Powers, but I dare say the defeats of 1914 and 1915 put the Central Powers behind the 8 Ball, so to speak. German troops increasingly diverted to the East, where they sought victory after the Western Front settled into stasis. They were also needed for the invasion of Romania and the eventual subdual of Serbia in 1916. I suppose I’ll finish by answering briefly that Austria’s Army was a decent instrument wielded by unsure hands. With better leadership, better strategic vision, or less imperialist pressure from within, the army could’ve held its own against Russia, better allowing Germany to focus on the West, where the war was eventually won. But that’s speculation.

I’d be happy to answer in more detail about specific parts of this answer or furnish reading suggestions, of which I have many.

I would not say that the Austro-Hungarian army was vastly more incompetent than most other armies during the first world war. The Austro-Hungarian Army fought on three fronts (Serbia, Russia, Italy) for four years, suffering roughly 80% casualties (4/5 of the men conscripted dead, wounded, sick or captured) during that time.

Once can compare other armies mistakes and problems - such as the Russians attempting to attack both Germany and Austria-Hungary in August 1914, despite not having the men nor the logistics for it, the Romanians attempting to both advance against Austria-Hungary in Transylvania and defend against German and Bulgarian attacks from the west or the south, despite not having the resources for it. The French attacking into prepared positions, or the British advancing over the mud at Somme, the Germans expending themselves at Verdun, the Italian 12 offensives across the Isonzo river, the Russian attacks to relieve Verdun in 1916 that broke their army, and so on.

The problems in the Austro-Hungarian army were complex and multiple.

First of all, Austria-Hungary was poorer than Germany, France and Britain, and spent about the same as a percentage of GDP (3,5% for Austria-Hungary, 3,2% mean for the six great powers), but only 12% of their state budget went to the military (with 29,9% being the mean for the six great powers).

The reason for this was that budgets had to pass both the Austrian and the Hungarian parliament. The Hungarian nobility, which controlled about 90% of the seats in the Hungarian parliament (due to property requirements for franchise and scaled number of votes on amount of land or property owned) used the budget as a tool to force concessions out of Vienna, and increasing the military expenditure was thus difficult. It became even more difficult becaude the Hungarians would often require defence contracts to be split between the Hungarian and Austrian parts of the Empire - which caused problems since the industry in the Hungarian part was underdeveloped and often unable to meet the demands of the army.

The Hungarian parliament also shuffeled resources to the Hungarian Home Guard, the Honved, that was under Hungarian control, rather than the common Imperial and Royal Army - making the parts of the army from the Kingdom of Hungary even weaker and less well funded.

With less money, the Austro-Hungarian army was smaller compared to its population than other great powers. However, more critically, it was also behind on modernisation in equipment. The other great powers had modernised their light field artillery - the French with their famous 75mm mle 1897, the British with the 18pdr, the Germans with the 7,7 FK96 n.A. and the Russians with the 76,2mm M1902. Austria-Hungary still used bronze-barreled stiff recoil guns such as the 9 FK75/96 (a modernised 87mm gun from 1875) and the 8 FK99 (which aslo lacked the modern recoil system of other countries' guns). The 8 FK05/08 and the famous 10 FH14 were modern guns, but would not be introduced in numbers until 1915. The Austro-Hungarian guns had shorter range, lower rate of fire and had to be re-positioned after firing instead of being able to fire again on the same target as other grand powers' guns.

The Austro-Hungarian army thus entered war with obselete artillery equipment, and suffered the triple disasters of facing the main brunt of the Russian offensive (with their well-equipped pre-war army), trying to relieve the fortress of Przemysl and Przemysl surrendering. All countries suffered horrendous casualties during the opening stages of the first world war, but the Austro-Hungarians (and to some extent the Russians) were the only ones suffering armies lost entirely. Thus, when never artillery equipment became available to the Austro-Hungarian army, the well-trained artillerymen and forward observers lay dead in Galizia or had surrendered at Przemysl. The army never really recovered from that and losing the multilingual pre-war officer and NCO stock that had helped hold the army and its many languages together.

So, the bottom line is:

1. The Austro-Hungarian army was smaller and under-funded compared to the armies of other grand powers.

2. This meant that their equipment going into the war, especially artillery, which proved absolutely critical, was obselete and they suffered.

3. Austria-Hungary was not as industrialised as western powers (Germany, France, Great Britain) and thus had more problems supplying their army with new equipment durign the war.

4. Austria-Hungary had to fight on 2-4 fronts during most of the war, bearing the brunt of the well-equipped Russian pre-war army's offensive.

5. This led to the Austro-Hungarians suffering a giant disaster at Przemysl, leading up to it and trying to relieve it, which gutted a lot of their pre-war strength and removing not only the field strength of their armies, but also the cadre from which to rebuild units.

Sources:

The Cambridge Economic History of Modern Europe: Volume 2, 1870 to the Present by Stephen Broadberry, Kevin H. O'Rourke

he Austro-Hungarian Forces in World War I (1): 1914–16 (Men-at-Arms)