Overconfidence’s Effect in Negotiations is to Negatively Impact Organizations

Confidence Vs Overconfidence

The confident and influential project manager brings together self assurance, authority, empowerment, and a feeling of trust. These qualities lead to success in projects. Professionals exhibiting overconfidence use their subjective confidence while making decisions. They tend to make mistakes since objective accuracy goes to the backburner when working on project proposals and negotiations. Overconfidence's effect on negotiation brings about organizational growth in negative ways.


Overconfidence and Scope Negotiation

The project scope issues always bring headaches to the project teams. We all know that the project managers also do a sales job as a part of project management. Scope negotiation involves discussing various factors such as time, budget, change orders and target. The effective project manager understands how to plan project activities to complete them on time. Overconfidence blocks the broader vision and the managers easily miss out to analyze the scope properly. Wrong assumptions lead to chaotic project scenarios.

Let us take an example of timeline agreements. The overconfident managers naturally think that they can drink a full bottle with one gulp. They blindly agree to complete whatever comes on their way and overcommit without realizing the real-time issues. Initially it may seem like a high level project development. It will be too late to repair the damages when they realize that not even a single project can be completed within the targeted timeframe. Without analyzing the resources and capabilities, overcommitting leads to losing the company value and branding. The overconfidence in scope negotiation leads to customer dissatisfaction and project losses.

Cause Delays in Agreements

The psychologists define anchoring bias as one of the main characteristics of overconfidence. How do people with this bias behave while negotiating? They tend to anchor only on one particular way of thinking or idea and brush off other possibilities. There are minute details overlooked during negotiations. The project managers with overconfidence tend to assume that the customers understand the intricacies and forget to think from all perspectives.

For example, while negotiating the implementation of new projects with the customers, it is important to include the training cost. It is common for the overconfident manager to forget the training cost while negotiating with the customer. They assume that the customer understands these implications. When the manager submits the written agreement to the customers for review and approval, they go mad by looking at the additional cost included in the name of the training cost. This attitude of the project manager will definitely give a negative opinion about the organization. The only option not to dissatisfy the customer here is to provide the training for free of cost. Imagine the loss to the company if the project is too big. This particular characteristic of overconfidence automatically leads to delays in project agreements and business losses.

Underestimate Risks and Overestimate Control over Events

Don A.Moore from Carnegie Mellon University and Paul J.Healy from Ohio State University presented a paper about the trouble with overconfidence. The overestimation of one’s performance, the overplacement of one’s ability over others and the excessive precision in one’s belief are defined as the types of overconfidence in their research. They have also explained the negative relationship between the excessive estimations and overplacement across business activities. How do these characteristics affect project management? The overconfident negotiators underestimate the risks and involve in aggressive business prospects without properly analysing the portfolios. As we discussed in the above sections, when the project managers underestimate risks, they tend to overlook at the key aspects in agreements which can lead to serious business damages.

Underestimating Risk

The professionals with overconfidence also overestimate their control over events. They blindly believe in two things as given below:

  • It is not necessary to consider all the risks while negotiating
  • Come what may after a deal agreement, they can control all the events and circumstances

According to the research conducted by Russo, J. E., Schoemaker, P. J. H., (1992) on the subject of managing overconfidence, it is concluded that overconfidence leads to the availability bias. What does it mean? The overconfident managers cannot think beyond what they see. These project managers consider few instances like their earlier experiences and the predictions while making judgements. It is essential for the managers to understand the different approaches to negotiation.

Leads to Project Losses and Calamity

The project managers with overconfidence give importance to themselves. They focus highly on how well versed they are in negotiations rather on project components. This attitude creates a major problem during negotiations and lead to project calamities. What happens when these professionals are preoccupied with the inflated superior feelings over others?

  1. Jump into wrong conclusions and take inaccurate decisions
  2. Neglect the real and practical situations
  3. Ignore to pay close attention to the most important aspects in projects
  4. Give little or no room for discussions and other’s opinions
  5. Show nil flexibility during negotiations
  6. Dangerously have a high level of judgmental biases
  7. Agree to unrealistic timelines

All the above aspects definitely lead the organizations to business calamity and loss.

How to Address Overconfidence?

The direct approach of discussing and giving feedback to the project managers about their overconfidence is one way of addressing this issue. How can we improve the negotiation skills of the project heads? Conducting sessions on the key negotiation tactics and tools is the best idea to mentor the project managers.


The Trouble with Overconfidence retrieved at https://cbdr.cmu.edu/papers/pdfs/cdr_576.pdf

Managing Overconfidence by Russo, J. E., Schoemaker, P. J. H., (1992) retrieved at https:// forum.johnson.cornell.edu/faculty/russo/Managing%20Overconfidence.pdf

The Art of Negotiation retrieved at https://pmtips.net/art-negotiation-part-1/

Credit Image:

Overconfidence, iamwahid,sxc.hu

Underestimating Risk, DGBurns, sxc.hu