One of the most stressful aspects of being promoted to management can be the responsibility of determining others' compensation. Why is that? You might call it inflated egos. Psychologists call it the Dunning-Kruger effect, and Business Pundit has a great post on the phenomenon this week. First, a definition of the effect from Business Pundit:
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... 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."Or as British philosopher Bertrand Russell put it: "the trouble with the world is that the stupid are cocksure and the intelligent are full of doubt." How can you minimize this effect? Business Pundit offers some suggestions:
- Use as many measurable standards of performance as possible. Even idiots have a difficult time refuting concrete performance goals.
- 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.
- Show confidence in your best employees, even when they don't have confidence in themselves.