The village prospered during his reign as hokage,and survived throughout 3 ninja wars and the fact that he always tried to find the peaceful solution doesn't make him a bad leader at all. Plus, he was never afraid to lay down his life for the village, as shown vs the kyuubi and vs orochimaru Yeah there were things which i thought he could handle differently, but let's look at what we know happened during his reign. then we can say who's the better leader.
2nd ninja war- akatsuki, who were looking for a peaceful solution to the war, were stamped out by hanzo, and guess who, danzo. leading to the strongest criminal organisation of all time.
Orochimaru's case- Hiruzen took an awful lot of time to discover what Orochimaru was up to, but who is responsible for spying and collecting info? Anbu and Root. Who was in root? Orocimaru. and who did he work under? Danzo. Although Hiruzen was soft not to kill Orochimaru, Kakashi felt the same way, as did Jiraiya and Naruto. I wouldn't call them poor leaders.
Kyuubi attack- Hiruzen drove the kyuubi out of konoha. Danzo, along with Kagami, was the only one of konoha 11's team not present.
Uchiha massacre- apart from the question of the uchiha's segregation, which I doubt was caused by Hiruzen, Hiruzen was going for the diplomatic solution instead of Danzou's extermination, which lost Konoha one of it's strongest clans and two of it's most promising shinobi (shisui and itachi)
Crush Konoha plan- Hiruzen laid down his life to kill Orochimaru. Danzo's root didn't fight, plus there was speculation by the raikage that he was in plans with orochimaru to kill off hiruzen
Pain's Invasion- while Tsunade healed and protected everyone to the point of almost killing herself, and then tried to face pain directly, Danzo not only purposefully stayed back so that Pain could kill off her followers (the people he's supposed to lead), but also killed off the toad messenger who was sending for Naruto, the saviour of the village.
5 kage summit- we all saw how quickly he alienated the other kage, compare that to the respect Tsunade commanded in their next meeting. not to mention him running away from Sasuke, and wanting to control the kyuubi by tobi's reckoning.
In short, Hiruzen may have been a bit soft, but he was a great leader, and him avoiding conflict for the most part served konoha well. Danzou's meddling often brought Konoha much more harm than good, and he showed none of the qualities a hokage needs.
where Hiruzen failed is that he lacked the stones not to fire the 'advisors' or just steamroll over them, it seemed they had too much power in decision making, and they were almost always wrong. Tsunade handled them much better.