Why The Dunning-Kruger Effect Is Ruining Your Business


Do you remember the first time you were promoted to a position that required you to determine the compensation of people underneath you? Or even worse, have you ever worked in a company where someone made the social faux pau of discussing their salary and it led to all sorts of comparisons, complaints, and sore egos? One of the things I learned very early in my work career is that most people think they are worth more money than everyone else they work with. People tend to have a very poor sense of where they really rank in the company hierarchy. This happens because of an idea from psychology known as the Dunning-Kruger effect, and it could be doing serious harm in your company.

The essence of the Dunning-Kruger effect is that "ignorance more frequently begets confidence than knowledge." Studies have shown that the most incompetent individuals are the ones that are most convinced of their competence. At work this translates into lots of incompetent people who think they are superstars. And what is worse is that if you have a manager that doesn't closely supervise work, he or she may judge performance based on outward appearances using information like the confidence with which these incompetent blockheads speak.

An important corollary of this effect is that the most competent people often underestimate their competence. This is a result of how you frame knowledge. The more you know, the more you focus on what you don't know. For instance, people who can name 15 of the 50 state capitals tend to think "I know 15." People who know 45 of the 50 state capitals tend to think "I don't know 5." I've experienced the same thing at work. When I worked as an engineer designing electronics for military applications, one of our best problem solvers was constantly overlooked by management. He was one of the go-to guys, the kind that you pull in when you have a problem that no one can figure out, but our organizational structure was such that the people who controlled your promotions were usually not the people you worked for. As a result, we had to basically start an internal campaign to get him promoted when many of his peers made it to the next level while he was overlooked. All the while, a few engineers who could talk better than they could actually perform were promoted ahead of him.

So how do you minimize the Dunning-Kruger effect at your place of work? Here are a few ideas:
1. Use as many measurable standards of performance as possible. Even idiots have a difficult time refuting concrete performance goals.

2. Encourage dissension and debate. This is tough, because if this is not handled properly, it can build a culture of negativity and risk aversion. Your goal shouldn't be to avoid risk, just to expose and understand it.

3. Show confidence in your best employees, even when they don't have confidence in themselves.

If you have your own first hand experiences with this, or ideas about how to prevent it, feel free to leave them in the comments section. Or write your own post and send me a note so I can link to it.