Overconfidence in the work place is something we come across as business professionals – particularly in management – as understanding overconfidence can provide great insight into how mistakes are made in a business context, as well as the likely reasons behind them.
Firstly, overconfidence works in conjunction with our decision making. Overconfident managers put less thought into daily decision, as they believe that because they have been successful in choosing the right path in the past, their present decision requires less thought. This seems like a logical approach, however it’s one that is not always holistic. This leads to the first interesting component of overconfidence; that managers who had made a successful decision for a company previously (usually involving generating profit) are likely to apply that same approach or behaviour to future choices, effectively mirroring their last decision. Often they will overlook environmental changes, contextual changes, and changes in circumstances.
Secondly, an interesting lesson can be drawn from the fact that overconfidence is affected by job relevance. To call upon a well-known quote from Confucius; “to know what we know, and that we don’t not know what we do not know, that is true knowledge” suggests that if you have suitable job relevance, you’re more aware of what you don’t know, which is an important component of overconfidence. To be able to understand a subject fully, you must be aware of all components of the subject that you do not know (they always exists), and job relevance helps to reduce overconfidence as does experience.
Having read about overconfidence in the work place, it prompted us to reflect on how we can harness awareness and ensure that there are measures in place to prevent poor decisions caused by overconfidence. Russo and Shoemaker (1992) suggest that “over estimating one’s ability is a regular occurrence in the modern world”, and go on to explain that once an individual has identified they were overconfident in a decision, they need to consider two core elements; feedback and accountability. By doing this, individuals are able to turn experiences in to learning, as this doesn’t just occur naturally.
Lastly it’s important to mention that overconfidence is not always a bad thing. It provides motivational value to many, and if controlled accordingly can be useful to project managers and business leaders alike.