Overconfidence at Work

Overconfidence is the state of having too much confidence — confidence beyond levels justified by evidence. One trouble with that definition is that it provides little useful insight: how much is too much? A second trouble is that it exemplifies itself, in that it presumes that levels of confidence can be assigned with, um, confidence. Often we can do no such thing. Situations affected by overconfidence include hiring, making strategic choices, chartering projects, cancelling projects — indeed, most workplace decision making. Despite the vagueness of the concept of overconfidence we can make useful conclusions, if we examine the concept more closely.

That's what Don Moore and Paul Healy did in a 2008 paper — cited in over 800 other works (according to Google Scholar), which is a goodly number for such a short time. [Moore & Healy 2008] The authors note that conflicting results in overconfidence research can be resolved when one realizes that the term overconfidence had been used to denote three different classes of judgment errors. They are:

• Overestimation: assessing as too high one's actual ability, performance, level of control, or chance of success.
• Overplacement: the belief that one is better than others, such as when a majority of people rate themselves "better than average."
• Overprecision: excessive certainty regarding the accuracy of one's beliefs.

These tendencies are not character flaws. Rather, they arise from the state of being human — not in the sense of "to err is human," but, as a direct consequence of human psychology.

What is surprising is how little we do in organizations to protect ourselves and the organization from the effects of overconfidence. Indeed, some of our behaviors and policies actually induce overconfidence. Here are three examples.

Unrealistic assessments of the capabilities of others

A phenomenon known as the Dunning-Kruger Effect causes us to confuse competence and confidence. [Kruger & Dunning 1999] That is, we assess people as more capable when they project confidence, and inversely, less capable when they project uncertainty. This can lead to decision-making errors in hiring, and in evaluating the advice we receive from subordinates, consultants, experts, and the media.

Unrealistic standards of precision

When we Situations affected by overconfidence
include hiring, making strategic choices,
chartering or cancelling projects —
indeed, most workplace decision makingevaluate projected performance for projects or business units, we require alignment between projections and actuals. The standards we apply when we assess performance typically exceed by far any reasonable expectations of the precision of those projections. This behavior encourages those making projections to commit the overprecision error.

Unrealistic risk appetite

Assessments of success in the context of risk, and our ability to mitigate risk, are subject to overestimation errors. By overestimating our chances of success, and our ability to deal with adversity, we repeatedly subject ourselves to higher levels of risk than we realize.

Cognitive biases that contribute to overconfidence in its various forms include, among others, the planning fallacy, optimism bias, illusory superiority, and, of course, the overconfidence effect. Most important, the bias blind spot causes us to be overconfident about the question of whether we ourselves are ever overconfident. We surely are. At least, I think so.  Top    Next Issue

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For an extensive investigation of the role of overconfidence in governmental policies that lead to war, see Dominic D. P. Johnson, Overconfidence and War: The Havoc and Glory of Positive Illusions, Cambridge, Massachusetts: Harvard University Press, 2004. Order from Amazon.com.

More about the Dunning-Kruger Effect

The Paradox of Confidence  [January 7, 2009]

Most of us interpret a confident manner as evidence of competence, and a hesitant manner as evidence of lesser ability. Recent research suggests that confidence and competence are inversely correlated. If so, our assessments of credibility and competence are thrown into question.

How to Reject Expert Opinion: II  [January 4, 2012]

When groups of decision makers confront complex problems, and they receive opinions from recognized experts, those opinions sometimes conflict with the group's own preferences. What tactics do groups use to reject the opinions of people with relevant expertise?

Devious Political Tactics: More from the Field Manual  [August 29, 2012]

Careful observation of workplace politics reveals an assortment of devious tactics that the ruthless use to gain advantage. Here are some of their techniques, with suggestions for effective responses.

Wishful Thinking and Perception: II  [November 4, 2015]

Continuing our exploration of causes of wishful thinking and what we can do about it, here's Part II of a little catalog of ways our preferences and wishes affect our perceptions.

Wishful Significance: II  [December 23, 2015]

When we're beset by seemingly unresolvable problems, we sometimes conclude that "wishful thinking" was the cause. Wishful thinking can result from errors in assessing the significance of our observations. Here's a second group of causes of erroneous assessment of significance.

Cognitive Biases and Influence: I  [July 6, 2016]

The techniques of influence include inadvertent — and not-so-inadvertent — uses of cognitive biases. They are one way we lead each other to accept or decide things that rationality cannot support.

The Paradox of Carefully Chosen Words  [November 16, 2016]

When we take special care in choosing our words, so as to avoid creating misimpressions, something strange often happens: we create a misimpression of ignorance or deceitfulness. Why does this happen?

Risk Acceptance: One Path  [March 3, 2021]

When a project team decides to accept a risk, and when their project eventually experiences that risk, a natural question arises: What were they thinking? Cognitive biases, other psychological phenomena, and organizational dysfunction all can play roles.

Cassandra at Work  [April 13, 2022]

When a team makes a wrong choice, and only a tiny minority advocated for what turned out to have been the right choice, trouble can arise when the error at last becomes evident. Maintaining team cohesion can be a difficult challenge for team leaders.

Embedded Technology Groups and the Dunning-Kruger Effect  [March 12, 2025]

Groups of technical specialists in fields that differ markedly from the main business of the enterprise that hosts them must sometimes deal with wrong-headed decisions made by people who think they know more about the technology than they actually do.

Footnotes

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