• Skip to primary navigation
  • Skip to content
  • Skip to primary sidebar

IZA Newsroom

IZA – Institute of Labor Economics

  • Home
  • Archive
  • Press Lounge
  • DE
  • EN
ResearchDecember 5, 2024

Overconfidence undermines leadership effectiveness

Lab experiment reveals the crucial skills that matter more than ambition in management

© IZA, created with Midjourney

A recent IZA discussion paper by Ben Weidmann, Joseph Vecci, Farah Said, David Deming, and Sonia Bhalotra explored the factors that make an effective manager. Using a controlled lab experiment with 555 participants, the researchers assigned managers to three-person teams solving numerical, spatial, and analytical problems in four rounds each. Managers were tasked with delegating responsibilities, monitoring progress, and motivating team members. By randomizing manager assignments, the study isolated the managers’ causal impact on team performance.

Key findings revealed that managerial effectiveness significantly influences team outcomes, with skilled managers doubling the productivity impact compared to individual workers. Effective managers optimized task allocation to align with team members’ strengths, reduced wasted effort, and maintained high motivation levels, resulting in superior team performance.

However, the study identified a critical flaw in self-selection: individuals eager to lead underperformed compared to those randomly appointed. Self-promoted managers tended to overestimate their abilities, particularly their social skills, which undermined their decision-making and team coordination. Conversely, managers with high cognitive and decision-making skills, such as fluid intelligence and economic decision-making proficiency, consistently drove better results.

Comparing methods of appointing managers

This figure illustrates the performance impact of different manager selection mechanisms, comparing self-promotion, random lottery, and skill-based approaches (e.g., fluid intelligence, economic decision-making, emotional perceptiveness, and individual production skills). Skill-based selection, particularly on decision-making and intelligence, yields significantly higher average manager quality, emphasizing the productivity gains of evidence-based selection methods (see page 30 of the paper for a more detailed description of the figure).

The implications for organizations are profound. The researchers recommend prioritizing skills over leadership ambition in managerial selection processes. Skill-based approaches, such as focusing on decision-making capabilities, could elevate team productivity by the equivalent of replacing average workers with top-tier performers. This underscores the importance of redefining leadership criteria to favor demonstrable abilities over confidence or self-promotion tendencies.

Featured Paper:

IZA Discussion Paper No. 17165 How Do You Find a Good Manager? Ben Weidmann, Joseph Vecci, Farah Said, David Deming, Sonia R. Bhalotra

Share this article

Share on X Share on Facebook Share on LinkedIn Share via e-mail
  • experiment
  • managers
  • measurement
  • skills
  • teamwork
  • Ben Weidmann
  • David Deming
  • Farah Said
  • Joseph Vecci
  • Sonia R. Bhalotra
Previous Post
Shuffle
Next Post

Reader Interactions

Primary Sidebar

Recent Posts

  • May 5, 2025

    Brexit’s hidden cost: Higher patient mortality in NHS hospitals
  • April 29, 2025

    How community networks shape elections after a crisis
  • March 27, 2025

    How do future elites view inequality?

Related Content

  • September 5, 2017

    Do managers need more masculine or more feminine skills?
  • November 21, 2014

    The coach matters: Evidence from the Bundesliga
  • June 13, 2018

    New evidence on 'gay glass ceilings' in top management
  • 
  • 
  • Archive
  • 
  • Research
  • 
  • Overconfidence undermines leadership effectiveness

© 2013–2025 Deutsche Post STIFTUNGImprint | Privacy PolicyIZA