Hollingsworth sent out a statement criticising Olympic champion Pearson on the eve of her event for skipping part of a pre-Games camp. Hollingsworth was suspended before being sent home -- a decision the review said was "appropriate".
The review panel, led by former Olympian and coach Chris Wardlaw, found it was "generally acknowledged" that difficult relationships had developed between Hollingsworth and a number of athletes and coaches.
The Englishman's suspension had little impact on the team's performance, it concluded, and in fact there was a "sense of relief" from some at his departure.
Pearson won Australia's only track and field Glasgow gold in the 100 metres hurdles despite the distraction, as Australia finished third in the athletics medal table behind Jamaica and Kenya.
"The panel found that leadership failures, at a range of organisational levels, contributed to the disappointing outcomes and incidents of the Glasgow campaign," the report said.
The report recommended a raft of improvements around communication, stakeholder engagement, coaching, roles and responsibilities and leadership.
It also recommended a thorough search be undertaken before Hollingsworth, who resigned in September, was replaced and that more should be done to bring the personal coaches of athletes into the fold.
The Pearson row blew up after the hurdler decided to miss a training camp with her team mates in Glasgow in favour of racing in London, a decision Hollingsworth said was a bad example to younger athletes.
"The panel believes there should be a high expectation, for performance reasons, that all athletes assemble in camp within an agreed window," said the report.
"However, camp attendance should not be rules bound and compulsory. Discretion for exemption should be part of the ongoing policy."
Athletics Australia welcomed the review and said it would consider the findings along with those of a second probe being conducted by cricket coach John Buchanan at the behest of the Australian Sports Commission (ASC), which will report next year.
"Together the combined recommendations of both reports will provide an important foundation and blueprint for strong decision making on the direction and focus of Athletics Australia for the foreseeable future," Athletics Australia president David Grace said in a news release.
(Reporting by Nick Mulvenney, editing by Peter Rutherford)
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