Managers who can accurately gauge their competence also know their limitations while overconfident leaders can overestimate their actual abilities. Understanding the difference can mean business success or failure, according to a new article in the Harvard Business Review.
The article asserts that leaders should rely upon data when evaluating their own abilities and those of others. Pointing to a study of 36,000 businesses that started up in France in the 1990s, the article says that overconfident entrepreneurs underperformed compared with their expectations. Overestimating competence can lead to expensive errors.
“It is easy to picture a CEO, emboldened by past successes in consumer goods, entering the tech industry only to watch the company’s value crash because they underestimated the complexities of software development,” wrote authors Stav Atir and David Dunning.
Read more to learn about the risks of perceiving expertise that doesn’t exist, the value of measuring genuine expertise and methods for recognizing it in others.
