Managerial Overconfidence and Self-Assessment Bias
Observational StudyReview
Firm managers in developing countries overestimate the quality of their operational practices, scoring themselves high on performance surveys despite operating under demonstrably poor standards.
Picture this
Imagine a driver who rates themselves an expert driver, yet regularly gets into fender benders and fails basic parallel parking tests because they have never seen what professional driving looks like.
What the evidence says
Prior to consulting interventions, firm managers consistently rated their own management practices as "above average," preventing them from recognizing the need to seek or invest in external managerial improvements.
- Who was studied
- Cross-country double-blind survey of manufacturing firms (BSVR methodology).
- How
- Comparison of self-reported manager performance ratings against objective double-blind external management practice evaluations.
What to do
Utilize objective third-party operational benchmarking audits to evaluate plant management quality rather than relying on self-reported manager appraisals.
From the source
"When asked to evaluate the quality of their own management practices, firm managers typically rate them as above average, suggesting they are unaware of their own deficiencies."
Why Do Firms in Developing Countries Have Low Productivity?