Mercedes immediately shot itself in the foot at Zandvoort by staying out too long on slicks when it started raining at the start.
The team underestimated the intensity of the brief shower that shook up the order, as it also caught out other teams including McLaren and Williams.
The strategy error hindered Lewis Hamilton's recovery from 13th on the grid and made George Russell lose a whole minute as he sunk down the order from third on the grid.
"I think we stayed out catastrophically too long. We got it completely wrong," Wolff admitted to Sky Sports F1.
“We will review thoroughly. The situation is never one person or one department. It is the communications between driver, pitwall, strategy, weather and then all of us taking decisions.
"That was absolutely subpar from all of us, and that includes me. It’s good when it hurts. When it stings, it sticks."
The scope of Wolff's disappointment stemmed from the fact that Mercedes actually had a quick car in Zandvoort, throwing away a possible podium for Russell while Hamilton too felt he "had the pace to challenge" eventual winner Max Verstappen, who won his third consecutive Dutch Grand Prix in front of his home fans.
"It’s annoying because the car had really [good] pace. And then, from there on it was just recovering as good as we could.
"We saw at the end on the intermediates George had Max’s pace and Lewis was very strong behind [Ferrari's Carlos] Sainz. We could have been much further ahead."
Nevertheless, Wolff took some encouragement from Mercedes' improved form, even if it couldn't capitalise on it.
“I’d rather have good pace, a fast race car and a mediocre result even if it hurts," he conceded.
"But it’s still bittersweet because the result is just really bad. It could have been, but that doesn’t count in our sport."
Mercedes saw its gap to Aston Martin for second place in the constructors' championship shrink by 11 points, heading into next week's Italian Grand Prix at Monza with a 40-point gap.
