it is said when there are too many people involved in trying to do the same thing, so that the final result will not be good.

Cambridge Dictionary

To my knowledge, It is a proverb that alludes to many persons involved in an activity such as making a soup and each one adds something to it as they like which finally tastes awful or becomes useless.

In India, people used to say "A snake won't die if much people gathered to kill it" in some contexts similar to it. 

It's used to express situations whereby having too many people involved does not help.

For instance; if someone is trying to figure out their own personal opinion on a certain situation, having everyone else's opinions might not help!

The Mythical Man-Month, by Fred Brooks, is famous among computer programmers. He states "Brooks' Law: Adding manpower to a late software project makes it later." This is because the added people--the extra cooks--spoil the broth. Instead of moving the project forward, they get in the way, using up peoples' time learning the complicated details of the project.

For any proverb, there is always a proverb with an opposite meaning. "Too many cooks spoil the broth" is a proverb, but so is "Many hands make light work."