Why The Dunning-Kruger Effect Could Jeopardize Your Corporate Culture

Monday, 26 September 2022

Do you love to watch movies?

Suppose you love to watch movies, especially Indonesian titles. You might remember one particular comedy film a few years ago where Reza Rahadian played a character as a baffling Indonesian business owner (called "Bossman") with his company's operations in Malaysia. He drove all his employees nuts because of his lunatic and selfish behaviors.

The film "My Stupid Boss" is based on a non-fiction novel, meaning it's a true story from the writer's perspective, who's one of Bossman's employees. I believe the public reception was good because, following the first film's success, the producer made its sequel a few years later.

Now imagine a situation that could also happen in real life where a group of employees is currently in an awkward position where an incompetent leader manages them.

Many dramas, fears, and insecurities could happen daily at work.

This week's article will explain why it could happen in many organizations in almost all industries and what top-level business leaders should do to handle and solve the situation correctly before it's too late.

The Problem

A cognitive bias known as illusory superiority, which causes comparatively inexperienced or lack of skills people to overestimate their abilities, was first discovered by academics David Dunning and Justin Kruger in 1999.

The Dunning-Kruger effect explains why some people we work with have an exaggerated view of their abilities and skills.

In recent years, the Dunning-Kruger effect has been used to explain the behavior of incompetent leaders in organizations, where people who are incompetent at a task or a specific leadership role are often unaware of their incompetence. Instead, they overestimate their leadership abilities and believe they are better at the job than they are.

According to studies, a person's emotional intelligence directly correlates with long-term work performance. The more self-aware and capable of managing oneself a person is, the more successful they become.

Conversely, a person who lacks self-awareness and low emotional intelligence is likelier to make career blunders, especially in leadership positions, because they often overestimate their competence.

The Causes

Why do some people suffer from the Dunning-Kruger effect?

It seems to combine their lack of self-awareness and society's definition of success. The problem can be traced back to our school years, where teachers often reward students eager to please with good grades regardless of their knowledge and comprehension of the subjects.

Unfortunately, it brought negative consequences when those students grew up and entered the workforce. They would rather pretend to be intelligent or skilled than take the chance of making mistakes, looking incompetent, and losing face while learning something new because confidence as a professional is so highly valued.

The Dunning-Kruger effect can impact even intelligent people since the intellect is not the same as learning and mastering a specific skill. Many wrongly think their knowledge and abilities in one field may apply to another, which is not always the case in real life.

Even if you are knowledgeable in various areas, nobody is an expert in every field.

The Implications

This effect may significantly impact businesses since it may cause those in positions of responsibility to make bad decisions from time to time.

The Dunning-Kruger Effect could also occasionally leads to business owners making risky choices that they initially thought would pay off but end up costing them money.

In other instances, it may result in managers hiring unqualified new employees or maybe promoting some of their team members without any reasonable consideration to jobs they are not suited for.

The worst-case scenario of the longing Dunning-Kruger effect is the increasing employee turnover ratio because of frustration, subpar performance, ruined corporate culture, and lack of trust.

Eventually, business growth that stagnates or decreases might occur when no action is taken to tackle this effect.

Bottom line: Business owners and leaders must be aware of the Dunning-Kruger effect, which can have disastrous consequences on companies.

The Solutions

As a business owner or a business leader, the good news is that you can get over the Dunning-Kruger effect with some knowledge and full intention to create positive changes with the top-down approach.

Here are some ways you can help your employees and yourself:

1. Make sure you hire the right people for the job, even if they are not the most experienced, as long as they are result-oriented, learners, and humble. It's imperative when it comes to management positions because their people skills will become handy in leading different characters of their team members.

2. Recognize and celebrate the achievements of your team members. It is a great way to help boost their self-esteem and confidence, which improves their performance in the long run, especially if you appreciate achievements due to excellent teamwork and not just individual performance.

3. Ditch the 20/80 rule. If you notice that 20% of your team members are responsible for 80% of the work or result, then you need to figure out why. On the one hand, they are highly productive people, but they will be more susceptible to the Dunning-Kruger effect because they can be overconfident.

4. Consider learning and development as a path ahead. Just keep in mind that nobody is an expert in everything, so it's your responsibility as the business leader to develop your people's potential, including their leadership skills.

5. Teach your leaders to accept advice or constructive feedback from others. Feedback can help us advance or improve, yet many people perceive feedback as a threat, including those leaders who suffer from the Dunning-Kruger effect. Make giving and receiving feedback part of your corporate culture, and people do so without fear that it will backfire.

Of course, the solutions above are complicated if the top leaders also suffer the Dunning-Kruger effect, so make sure you, as the business owner and other top leaders, look yourself in the mirror to evaluate and improve before you try to strengthen others in your organization.