Power and over-confident decision-making. (2011)

“In 2009, British Petroleum (BP) executives confidently down-played potential risks associated with their Gulf of Mexico oil rig, assuring regulators that it was virtually impossible for a major accident to occur

Fast, N.J., Department of Management and Organization, Marshall School of Business, University of Southern California, United States
Sivanathan, N., Department of Organisational Behaviour, London Business School, UK
Mayer, N.D., Department of Psychology, University of Illinois, Chicago, United States
Galinsky, A.D., Department of Management and Organizations, Kellogg School of Management, Northwestern University, United States

Organizational Behavior and Human Decision Processes 117(2): 249-260.

In 2009, British Petroleum (BP) executives confidently down-played potential risks associated with their Gulf of Mexico oil rig, assuring regulators that it was virtually impossible for a major accident to occur ….  Months later, it exploded, killing 11 workers and resulting in a massive oil leak.

In 2000, AOL’s CEO, Steve Case, orchestrated a $350 billion deal with Time Warner, the largest merger in history at that time. In spite of his assuredness that the new arrangement would lead to sustained profit and growth, the deal squandered $54 billion in shareholder value in the first quarter alone

As was the case in these two stories, the decisions made by power holders across a multitude of arenas – including businesses, government, religious institutions, and nonprofit organizations – are often marred with overconfidence.

The authors conducted five experiments demonstrating that experiencing power leads to overconfident decision-making. They found power produced overconfident decisions that generated monetary losses for the powerful. Their findings also highlight the central role that the sense of power plays in producing these decision-making tendencies.

Read the article here:  Power and over-confident decision-making

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