In the workplace, it is common to seek advice, whether it be what financial program to invest in or even which legal action to pursue. The role of an advisor in these situations is to provide feedback or predictions to help the advice seeker make a sound decision. However, the accuracy of the advice may be distorted when advisors act overconfident and serve their own self-interests.
In the past, there has been an assumption that to mitigate overconfidence, advice seekers should simply encourage accuracy and discourage any overconfidence (e.g., by criticizing an advisor for overly optimistic predictions). However, new research (Van Zant, 2022) demonstrates that this approach might not always be helpful. The research finds that advisors may act overconfidently to portray competence when it serves their own interests, such as in performance-based financial incentives. Thus, it may take more than just criticizing an advisor’s overconfidence to get accurate advice.
THE MOTIVATION TO SELF-PROMOTE
The researcher conducted multiple studies to explore the motives behind advisor overconfidence. In a majority of the studies, an online simulation was created to mirror an advice-giving context. In these studies, participants were given scenarios in which they had to indicate their confidence in a certain prediction, such as future stock prices. The results revealed that participants acted overconfidently in their predictions when they felt it was in their best interests to do so, for example, if they were given a financial incentive. Participants did not seem to be influenced by outside feedback discouraging overconfidence. In addition, the researcher found more overconfidence when participants were told that another person would see their advice, compared to situations where participants were told that their advice would remain private.
Similar results were found in a sample of professionals who gave advice as part of their occupation (e.g., consulting, finance, sales). Participants were asked to describe situations in which they had to convince someone of something they were unsure about. Results indicated that participants portrayed overconfidence when they had an incentive to self-promote, suggesting that advisors’ overconfidence may be contingent upon the rewards that are tied to their confidence, rather than a desire to be accurate or helpful to an advice seeker.
PRACTICAL IMPLICATIONS FOR ORGANIZATIONS
Instead of seeing these findings as a reason to simply distrust advisors, the author offers multiple suggestions for improving the advice-giving process. First, since the tendency for an advisor to portray overconfidence is often tied to the need to appear competent, organizations can create environments where advisors don’t feel like their competence is constantly being criticized. For example, it could be helpful to frame questions about accuracy in terms of the prediction itself rather than the advisor’s abilities. The researcher notes that we could avoid questions such as, “How confident are you?” and instead ask, “How likely is this outcome to occur?” Framing the conversation in this manner may take the pressure off advisors to appear more confident than they really are.
Further, organizations seeking more accurate advice can implement practices that do not solely rely on performance-based incentives. For example, rather than basing promotions on how many clients one can “convince” to take their advice (e.g., investing in a company’s stock), advisors’ compensation could instead be salary-based or focused on customer satisfaction.
Van Zant, A. B. (2022). Strategically overconfident (to a fault): How self-promotion motivates advisor confidence. Journal of Applied Psychology, 107(1), 109–129.