The Dunning-Kruger Effect on Organizational Agility

Abstract

Designing organizations to quickly adapt to changing conditions, agility, has become a key dynamic capability for success in the 21st century. The Dunning-Kruger effect suggests that people overestimate their ability and that of the organization because they are ignorant of unknown, unkowns. Said another way, people tend to overestimate their ability because they do not know what they do not know. Conversely, executives tend to underestimate the ability of subordinates in the organization. This research project used the Performance Triangle model and accompanying diagnostic instrument to analyze the difference in perceptions between executives and workers in 374 organizations to identify possible disconnects in important capabilities of organizational agility: success, leadership, systems, culture, people, and resilience, along with 27 underlying individual elements. The results show that executives consistently, and significantly, overestimate the ability of themselves and their organization to adapt a change while underestimating the capabilities of workers. Executives were significantly overconfident in the dimensions of success, culture, people, and resilience. Differences in trust emerged as the single most statistically significant element that drives organizational agility. The authors conclude with a discussion of the managerial implications on how this condition influences the ability of organizations to quickly adapt to changing conditions …agility.

1. Introduction

In 1999, David Dunning and Justin Kruger published their highly influential paper in the Journal of Personality and Social Psychology where they introduced what has become known as the “Dunning-Kruger effect”. The Dunning-Kruger effect describes a bias where people of low ability tend to overestimate their abilities [1]. This mental bias in the minds of people of low ability causes these people to develop an illusion of their own superiority. People are unable to recognize their own lack of ability and overestimate their capabilities. Without sufficient self-awareness, this cognitive bias causes people to be unable to objectively evaluate their own competence or incompetence. Additionally, evaluating the competence or incompetence of others becomes distorted as well. Dunning and Kruger’s paper suggested that people in the bottom three quartiles of performance tend to overestimate their own abilities while people in the top quartile of performance tend to underestimate their own abilities. Essentially, this seemingly common cognitive state says that there is a tendency for poor performers to overestimate their abilities relative to other people and conversely, to a lesser extent, for high performers to underestimate their own abilities. Dunning and Kruger contended that this inherent bias results from an internal illusion by people of low ability and an external misperception in people with high ability. The resulting overconfidence in executives and managers and bias in evaluating the performance of peers or subordinates shapes the critical thinking and decision-making process that affects the performance of an organization.

The concept, interest, and number of researchers or theorists on organizational agility has been growing in recent years. In a volatile, uncertain, complex, and ambiguous (VUCA) 21st Century where rapid change driven by technology, fierce competition, knowledge work, and governmental regulation make the ability of an organization to sense and adapt to a new environment an essential capability for success. According to a 2017 McKinsey Global Survey, organizational agility is defined as the ability to quickly reconfigure strategy, structure, processes, people, and technology toward value-creating and value-protecting opportunities [2]. The McKinsey Survey concluded that designing organizations to be agile is elusive for most organizations. It is important to recognize that organizational agility in this context refers to the ability of an entire organization to make rapid adaptations and changes, not agile software development processes. Agile software development are processes that link departments and functions to accelerate the speed and quality of computer-based software development. Organizational agility describes dynamic capabilities embedded in an organization that allows the organization to make fundamental adjustments to the DNA of all components of the organization without disruptive and largely ineffective change initiatives.

The performance triangle model (PTM) developed by Lukas Michel offers a practical model to help executives identify strengths and weaknesses in many key organizational elements that enable or inhibit organizational agility. The PTM provides a roadmap into key elements of organizational dimensions needed for success in a VUCA world, culture, leadership, and systems [3, 4].

While there is no universally accepted definition of organizational culture, there appears to wide agreement with Edgar Schein’s definition of organizational culture as a set of beliefs, values, and shared assumptions “invented, discovered, or developed by a given group as it learns to cope with its problems of external adaptation and internal integration—that has worked well enough to be considered… the correct way to perceive, think, and feel in relation to those problems” ([5], p. 9). Geert Hofstede observed that organizational culture consists of core values that are often unconscious and rarely discussable [6]. These descriptions and many variants appear throughout the literature on organizational cultures. Many researchers and authors have demonstrated the power of culture on organizational performance using both qualitative and quantitative methods. Twenty-seven elements of primary dimensions of the PTM provide insight into many “unconscious and rarely discussable” components of the culture that can interfere with the flow of knowledge throughout an organization. These interferences or viruses infect the organization and inhibit the ability of the organization to be agile in a VUCA world and achieve superior performance [4].

We view the disconnect between senior executives’ actual ability with their perceived ability along with that of subordinates as one of many possible conditions that inhibit the ability of organizations to adapt and change, quickly. The primary objectives of the study are to provide insight into three questions; (1) is there a difference between the perceptions of executives and workers in the dimensions of the PTM, (2) if yes, do executives demonstrate the Dunning-Kruger effect by overestimating their capabilities, and (3) if they do, what is the effect on the organization’s dynamic capabilities needed for organizational agility.

2. Background

2.1 The Dunning-Kruger effect

The Dunning-Kruger effect says that people with low levels of competence will judge themselves to be more competent than they really are, while very competent people tend to underestimate their abilities [1, 7]. Key elements to the Dunning-Kruger effect are the ability of people to be aware of “known unknowns” (concepts, skills, or experiences that a person is aware of, but have not yet been mastered) and “unknown unknowns” (conditions, events, information, knowledge, or circumstances that the individual is not aware of). The ability to recognize that there may be unknown unknowns that are beyond one’s realm of knowledge is referred to as “metacognition”. Metacognition is unique to humans because of the human capacity for self-reflection [8]. The Dunning-Kruger effect implies that many people lack metacognition ability which results in them being unaware of the extent of their own ignorance [9].

A second aspect of the Dunning-Kruger effect is that low achievers with inflated perceptions of their own abilities tend to be less capable of critically evaluating the input from peers and subordinates or objectively evaluating their performance [10]. Huang [8] observed that people in positions of authority may make decisions even though they may be (a) ignorant of the subject matter, (b) not aware of circumstances or important occurrences, or (c) act as if they are experts, when in fact they are not. Clearly, this tendency for people, to ignore their own ignorance and rank their own expertise higher than it really is, particularly for individuals in executive or management positions, can have a significant effect on their organization and the individuals throughout the organization.

Dunning et al. [11] observed that if individual competency is required for someone to recognize incompetence, then people who are truly incompetent will be both incompetent and unaware of their own incompetence or that of others. Consequently, people who would benefit most from understanding the limits of their reasoning are the people who are least likely to do so [12]. Pennycook et al. continued to observe that the degree of miscalculation among incompetent people is key to understanding the causes and effects of biased decision-making and the resulting judgments. This flaw or weakness in logical reasoning creates a gap between actual and perceived abilities that become a strong influence on decisions made by executives and managers.

Franklin [13] reported results from the 2021 Gartner Hybrid Work Employee Survey of 4000 employees in January 2021. The survey explored perceptions in several areas that are key to providing a healthy employee experience when working in a hybrid or remote environment. Results indicated a significant gap between what executives and workers perceive in numerous areas that are important to employee engagement and performance. Table 1 shows the percentage of executives and workers who believe that a specific leadership attribute is positive or good.

Attribute in the survey	Executives	Workers
The company has a culture that promotes a flexible working experience	75	57
The company provides adequate tools for remote work	76	66
Senior leaders act in the employees best interest	69	41
There is a high level of trust when employees are working remotely	70	58
Leaders consider employees when making decisions	75	47
Leaders communicate effectively with employees	71	50
Leaders and workers have a shared sense of purpose	77	59

Table 1.

Results from the 2021 Gartner hybrid work employee survey.

These results illustrate a clear disconnect between the perceptions of executives and workers concerning the working environment and culture. As quoted by Franklin [13], Alexia Cambon (director in the Gartner Human Resources practice) said, “If left unaddressed, this division may lead to a critical failure to build trust and employee buy-in for future work plans.”

The gap between the actual and perceived capabilities of managers and executives shapes how managers interpret information, engage with peers and subordinates, and make decisions that influence organizational strategy and operations. Charles Darwin [14] observed that “Ignorance more frequently begets confidence than does knowledge”. Bertrand Russell [15] commented that “…in the modern world the stupid are cocksure while the intelligent are full of doubt”. Both observations succinctly sum up the Dunning-Kruger effect.

2.2 The performance triangle model

The performance triangle model (PTM) for agile organizational design in a turbulent world emerged from nearly 20 years of observation and research with over 200 organizations worldwide [3, 16]. The PTM provides a workable and practical methodology with tools to help executives design agile organizations that can be successful in the VUCA 21st Century. Agile thinking and strategies must originate in the boardroom and flow from there to the C-suite then throughout the entire organization. Agile principles, beliefs, values and attitudes, center around people and the massive body of tacit knowledge embedded within their minds and experience. Agile principles and capabilities include developing the ability to facilitate change, collaboration through the organizations vertically and horizontally, focus on excellence, engage in interactive dialog and conversation at all levels, self-organization, and continuous improvement as a way of life. Agile management is very different and should not be confused with agile software development methodologies to develop better software, faster and more efficiently. Agile management originated as a bottom-up culture change from those who do the work. On the other hand, comprehensive culture change needs to be led from the very top and adopted by everyone from top to bottom of the organization chart. When one considers that organizational culture exists in the minds of people in their values, beliefs, and shared assumptions, changing the culture is easier said than done.

The performance triangle model (PTM) illustrated in Figure 1 is a visual representation of a dynamic system of culture, leadership, and systems that is powered by people who work in a resilient environment that nurtures healthy relationships, collaboration, and a strong sense of purpose where people share their unique and valuable tacit knowledge. Culture is a major component of the dynamic system and cannot be effectively changed without recognizing and addressing key elements of the ENTIRE system. Since the culture resides in the minds and experiences of people, people become the focus of attention because power for the entire PTM system comes from the ability of people to maximize their inherent capabilities to fuel change. However, culture with all its intangibles and people with all their idiosyncrasies and uncertainties make actively creating a people-centric management design very difficult. Senior executives intrinsically know that “people are our most valuable asset” and write that in the corporate mission or vision statement.

Figure 1.

The performance triangle. Source: Adapted from Michel [3].

Figure 2 illustrates the structure of the six primary dimensions and twenty-seven elements that compose the PTM.

Figure 2.

Structure of the performance triangle model.

2.2.1 Success

Success in the PTM is evaluated using the following characteristics with the assumption that if the answer to these five questions is “yes” then the organization is likely to be successful regardless of the type of organization (public, private, governmental, etc.).

• Responsiveness—Is the organization flexible and able to react to changes in the environment?

• Alignment—Is the direction of the organization clear? Does the structure fit the strategy? Is it shared broadly and are employees aligned to support the strategies?

• Capabilities—Does the organization have the competencies and skills needed to deliver on promises?

• Motivation—Are employees throughout the organization inspired to perform above and beyond expectations?

• Cleverness—Are employees empowered to be creative and use their creativity to meet expectations or demands from clients or customers within boundaries that do not stifle creativity?

2.2.2 People

It is commonly recognized that people perform at their highest potential by winning their “inner game” and overcoming self-doubt, fear, bias, limiting concepts or assumptions that distort perceptions, decisions, behaviors, actions, and stress that interfere with, and diminish, performance [17, 18]. Awareness about what is going on around them, choice to choose the best solution, and trust in others help people to focus attention on tasks and problems. Reaching a state of flow, the state where performance and creativity are at a peak, must be a primary objective at all levels of an agile, people-centric, organization [19]. Questions applicable for the people dimensions are the following.

• Focus—Are people allowed to focus their attention and energy on tasks? Are interferences preventing people from focusing their abilities to complete tasks?

• Awareness—Are people aware of forces that influence actions and decisions?

• Trust—Do people trust co-workers and management to be treated fairly and with respect? Is management credible?

• Choice—Are people allowed the freedom to use their own creative ability to solve problems, respond to customers, or to be innovative?

2.2.3 Systems

In the PTM “systems” represent more than just the computer driven information technology driven systems. Systems consist of an institutional framework with rules, routines, and tools that set the stage for rigorous and disciplined leadership. Technology based information systems accumulate, store, process, and provide access to information and facilitate immediate feedback. Human systems in the form of rules, routines, and guidelines of many types provide frameworks that give technology structure and relevance. To support collaboration among people, systems make information available to assist people to find purpose, support the decision-making process, and set boundaries balancing entrepreneurship with efficiency. The diagnostic questions for systems are the following.

• Information—Do decision makers at all levels have access to timely and relevant information to know what is going on inside and outside the organization to make informed decisions?

• Strategy—Do leaders and followers clearly understand the rules of the game and what is needed to achieve strategic and operational objectives?

• Implementation—Do decision makers throughout the organization clearly understand what actions are needed to be successful?

• Beliefs—Do decision makers throughout the organization have a shared ambition to support organizational objectives?

• Boundaries—Do decision makers throughout the organization have a firm understanding of boundaries or limits to their decisions or authority?

2.2.4 Leadership

Effective leaders in agile, people-centric, organizations interact with individuals on a personal level, relate to others to facilitate meaningful collaboration, and establish a supportive work environment based on trust [20]. Successful leadership varies depending on the organization and situation. A leadership style that is successful in one organization may not necessarily be effective if applied in a different organization or situation. However, the need for effective communication skills and interaction with followers are recurring themes in the literature [21, 22]. It becomes essential for effective leaders in an agile organization to develop effective communication and interaction skills that are natural and unique to the leader and organization. Ultimately, what is important is that the individuals in the organization adopt shared vision, collaborate in a culture of trust, and engage multiple personalities, while leaders champion creativity and experimentation. The Performance Triangle diagnostic instrument asks the following question related to leadership.

• Sense making—Do leaders have the capability to sense changes in internal and external environments and interpret meaning?

• Strategy conversion—Do leaders have an understanding of why the organization has established strategic goals and are goals founded on lessons from the past?

• Performance conversion—Do leaders have a clear understanding of whether the organization is on track, what needs to be done to remain on track, and what needs to be done to achieve superior performance?

• Contribution dialog—Do leaders have a clear understanding of what they can do to contribute toward moving the organization forward? Do leaders clearly understand their role?

• Risk dialog—Do leaders have a clear understanding of the potential risks and the level of risk that the organization can tolerate?

2.2.5 Culture

The culture of the organization creates shared context, enables, or inhibits knowledge exchange, and defines invisible boundaries for collaboration. A vibrant culture establishes shared context as the common ground with a shared agenda, language, mental models, purpose, and relationships [23]. Shared context describes a shared mindset and the behavior of individuals based on shared norms, beliefs, values, and assumptions. Organizational culture becomes the invisible force that, like gravity, shapes all interactions within the universe that the organization exists.

Organizational culture either enables knowledge sharing or is a barrier to sharing even simple pieces of information [24]. Like a virus infecting a living organism, organizational traits like autocratic leadership styles, silos, or lack of trust and respect throughout the organization effectively block knowledge sharing. Unseen or unnoticed viruses make culture an organizational bottleneck that constrains the amount and quality of knowledge sharing limiting the creativity of people, the ability to act, and disrupting flow. Knowledge that is not shared, exchanged, or transferred has no value to an organization. The challenge for any executive is to create a culture that facilitates people working together on tasks that add value to the organization. Effective collaboration requires a shared problem and commitment with people working together with shared ways of doing things. The questions designed to give insight into organizational culture are the following.

• Understanding—Do people share an understanding of where the organization is and where it is going or attempting to go?

• Intent—Do people share a common intent of how to move the organization forward to meet goals and objectives?

• Agenda—Do people share a common agenda on what needs to be done to move the organization toward meeting goals and objectives?

• Aspirations—Do people share a common sense of purpose to meet goals and objectives?

• Norms—Do people share a common set of norms of behavior needed to get ahead within the organization?

2.2.6 Resilience

A high-energy work environment produces intense collaboration, a high sense of purpose and trusting relationships. These features have a stabilizing effect on organizations known as resilience or “robustness” [25, 26]. Organizations reach higher levels of resilience through collaboration [27], purpose, and relationships [28]. The diagnostic questions targeting the sides of the Performance Triangle Model are as follows.

• Relationships—Do co-workers and management have and maintain healthy, trusting, relationships?

• Purpose—Do people share a common higher purpose for the organization and organizational objectives?

• Collaboration—Do people collaborate effectively by sharing knowledge to achieve common goals and objectives?

2.3 Methodology

2.3.1 The diagnostic instrument

Over a 15-year period the authors developed and perfected a proprietary diagnostic instrument with 55 questions that provides executives insight into key dynamic capabilities essential for organizational agility. As shown in Figure 2, 27 elements aggregate into the six primary dimensions that ultimately roll up to a total PTM. Analysis of the summary (top) level and the lower levels give the executive a sense of the organization’s agile capabilities. All questions target the same construct, however questions for executives ask for their perception of the organization and people that they command while questions for workers as for their perception within their immediate work group. This approach provides visibility into differences that may exist in many “unseen and rarely discussed” interferences between executives and workers.

In 2016, raw data from the diagnostic instrument was subjected to independent statistical analysis. The resulting analysis provided strong evidence that the instrument was a good fit to the model with high levels of reliability and validity [29]. Participants answer questions in the diagnostic instrument using a Likert-type scale designed to provide insight into the perceived strength of the questions that are the elemental items in the PTM on a 0 to 100 scale. Higher numbers indicate strong or positive sentiment while lower numbers indicate weaker or negative sentiment. Participants take the diagnostic using an online portal and data is collected, collated, and stored on a secure server in Switzerland. Minitab statistical software was used for the calculations.

2.3.2 The sample

The sample consisted of 2885 participants from 374 organizations. Of the participants, 284 were classified as executives (owner, president, vice-president, or similar title) from 248 organizations while 2601 participants were lower-level workers from 126 organizations. Data was collected between 2016 and 2020 as participants completed the instrument online with data captured and secured on a server in Switzerland. No personal demographic information was collected but demographics of the organizations were captured and are shown in Table 2. Means for executives and workers were calculated for each locus then compared and analyzed for statistical significance.

Industry		Location		Type
Consumer products	35	Africa	5	Cooperative	13
Education	7	Asia	10	Foundation	13
Financial services	76	Australia/New Zealand	11	Private	131
Healthcare	12	Europe	303	Public	171
Infrastructure/construction	16	Latin America	11	Public Administration	46
Manufacturing	38	Middle East	2	Total	374
Pharma/chemicals	21	UK/Ireland	2
Professional services	46	US/Canada	30
Public services	29	Total	374
Natural resources	14
Technology	52	Size	Life cycle
Telecom	11	Very Large	120	Established	263
Tourism	17	Large	78	Growth	26
Total	374	Mid-Size	106	Mature	78
		Small	70	Start-up	7
		Total	374	Total	374

Table 2.

Demographics of the participating organizations.

2.3.3 Hypotheses

The general hypotheses for this study are that executives will have a more positive perception of their ability and that of the organization than subordinate workers as measured by the PTM diagnostic instrument at the following locus points in the PTM. The specific hypotheses are as follows:

Hypothesis 1. Executives will have a more positive perception of their ability than subordinate workers at the top, summary, level of the PTM.

Hypothesis 2. Executives will have a more positive perception of their ability than subordinate workers at ass 27 individual elements of the PTM.

Hypothesis 3a. Executives will have a more positive perception of their ability than subordinate workers in the success dimensions of the PTM.

Hypothesis 3b. Executives will have a more positive perception of their ability than subordinate workers in the culture dimensions of the PTM.

Hypothesis 3c. Executives will have a more positive perception of their ability than subordinate workers in the leadership dimensions of the PTM.

Hypothesis 3d. Executives will have a more positive perception of their ability than subordinate workers in the systems dimensions of the PTM.

Hypothesis 3e. Executives will have a more positive perception of their ability than subordinate workers in the people dimensions of the PTM.

Hypothesis 3f. Executives will have a more positive perception of their ability than subordinate workers in the resilience dimensions of the PTM.

To test these hypotheses, a series of paired t-tests were run in an order corresponding to the Performance Triangle Model structure in Figure 2. Paired-t test and correlations were conducted for the top, summary, level of the PTM, all 27 elements, and for each of the six dimensions of the PTM.

2.4 Results

The results are presented in the order corresponding to the structure in Figure 2. The following tables display descriptive statistics, paired t-test results, and correlations at the top level of the PTM, all 27 elements, and each primary dimension that make up the Performance Triangle Model. The figures for executives and workers are the mean of all participants in that grouping.

Beginning at the top level shown (Table 3) which sums the means and compares the difference among the six primary dimensions, executives are 3.3 (4.8%) more positive than workers. There is a positive correlation, 0.907, p = 0.002. The paired t-test indicated there is a significant difference between the groups; t = 6.09, p = 0.002. The greatest gaps between the groups were in people (4.3pts, 6.0%) and resilience (5.0pts, 7.0%). This top-level data suggests that executives believe that they and their organizations are positioned to adapt to rapid change much better than the people who do the daily work in the organizations. Hypothesis 1 is accepted.

	Executives	Workers	Var.	Var. %	t	p	Correlation
Top level - Mean	67.5	64.2	3.3	4.8%	6.09	0.002	0.907^**
Standard deviation	2.68	1.11
Success - Mean	68.0	65.5	2.5	3.7%
Culture - Mean	66.9	63.2	3.7	5.5%
Leadership - Mean	64.9	63.4	1.5	2.3%
Systems - Mean	64.2	61.7	2.5	3.9%
People - Mean	70.8	66.5	4.3	6.0%
Resiliance - Mean	70.1	65.1	5.0	7.1%

Table 3.

Analysis of top level dimensions paired t-test and correlation, N = 6.

Note: ^*p < 0.05, ^**p < 0.01, ^***p < 0.001.

The analysis of all 27 individual elements displayed in Table 4 shows that executives are 3.0 (4.5%) points more positive. There is a positive correlation, 0.874, p = 0.000. The paired t-test indicated there is a significant difference between the groups; t = 8.41, p = 0.000. This, more detailed look at the data provides even stronger evidence that executives are not necessarily in tune with the beliefs, values, and perceptions of the people in their organization. An interesting observation here is that trust was flagged as exerting a significantly greater influence on the total than all other elements. Hypothesis 2 is accepted.

	Executives	Workers	Var.	Var. %	t	p	Correlation
All elements - Mean	67.1	64.1	3.0	4.5%	8.41	0.000	0.874^***
Standard deviation	3.93	3.28

Table 4.

Analysis of all elements paired t-test and correlation, N = 27.

Note: ^*p < 0.05, ^**p < 0.01, ^***p < 0.001; Trust was identified as having an unusually large influence.

The success dimension (Table 5) shows a 2.4 (3.6%) point gap between the groups with a positive correlation of, 0.980, p = 0.003, The paired t-text indicated there is a significant difference between the groups, t = .18, p = 0.007. The greatest gap between the two groups are motivation (3.1pts, 4.6%) and cleverness (3.7pts, 5.7%). This result suggests that executives believe that they have created an environment that allows people to use their creative energy to solve problems and innovate and that workers are motivated and engaged. Neither sentiment is shared by workers. Hypothesis 3a is accepted.

	Executives	Workers	Var.	Var. %	t	p	Correlation
Success - Mean	68.0	65.5	2.4	3.6%	5.18	0.007	0.980^**
Standard deviation	1.85	2.81
Responsiveness	69.4	67.0	2.4	3.4%
Alignment	69.9	68.8	1.1	1.6%
Capabilities	67.9	66.1	1.8	2.7%
Motivation	67.5	64.4	3.1	4.6%
Cleverness	65.2	61.4	3.7	5.7%

Table 5.

Analysis of success dimension & elements paired t-test and correlation, N = 5.

Note: ^*p < 0.05, ^**p < 0.01, ^***p < 0.001.

The culture dimension (Table 6) indicated a 3.4 (5.2%) point difference between the groups with a correlation of 0.974, p = .005. The paired t-test shows there is a significant difference between executives and workers, t = 17.51, p = 0.000. The gap between the groups is consistent among the elements with the greatest difference in aspirations (4.2pts, 6.0%) with the smallest difference of 3.2 points (4.8%) for both intent and agenda. These results indicate that executives and workers may not be working in lockstep for the general good of the organization. Hypothesis 3b is accepted.

	Executives	Workers	Var.	Var. %	t	p	Correlation
Culture - Mean	66.7	63.2	3.4	5.2%	17.51	0.000	0.974^**
Standard deviation	1.34	0.99
Understanding	65.4	62.0	3.4	5.2%
Intent	65.9	62.8	3.2	4.8%
Agenda	66.7	63.5	3.2	4.8%
Aspirations	68.9	64.7	4.2	6.0%
Norms	66.5	63.2	3.3	4.9%

Table 6.

Analysis of culture dimension & elements paired t-test and correlation, N = 5.

Note: ^*p < 0.05, ^**p < 0.01, ^***p < 0.001.

The leadership dimension (Table 7) produced the widest range of results for executives (M = 64.9, SD = 5.14) and workers (M = 63.4, SD = 4.05). However, the difference between executives and workers was only 1.5 (5.2%) points. Correlation of leadership dimensions of 0.914, p = 0.030 was significant but t-value, t = 1.51, p = 0.205 was not significant. The mean scores for leadership are close which suggests that executives and workers share similar sentiments. However, the wide range indicated by the standard deviation suggests that leadership varies widely from organization to organization. For the elements of strategy conversation and contribution dialog, workers had a slightly more positive perception than executives. The small gap in these two elements suggests that both executives and workers have a similar understanding of the strategy and what they must do to contribute toward success. The gap between the groups on risk dialog was among the highest of all elements in the PTM diagnostic which suggests that executives believe that they and their workers understand the organization’s tolerance for taking risks. Workers, on the other hand, are unsure of what level of risk taking is acceptable and what is not. Hypothesis 3c is rejected.

	Executives	Workers	Var.	Var. %	t	p	Correlation
Leadership - Mean	64.9	63.4	1.5	2.3%	1.51	0.205	0.914^*
Standard deviation	5.14	4.05
Sense making	70.1	68.7	1.4	2.0%
Strategy conversation	63.1	63.4	−0.3	−0.5%
Performance conversation	59.3	57.9	1.4	2.4%
Contribution dialog	61.5	61.7	−0.2	−0.4%
Risk dialog	70.6	65.5	5.1	7.2%

Table 7.

Analysis of leadership dimension & elements paired t-test and correlation, N = 5.

Note: ^*p < 0.05, ^**p < 0.01, ^***p < 0.001.

Analysis of the data for the systems dimension (Table 8) indicates that there is a 2.5 (3.9%) point (3.9%) difference between executives and workers but the correlation of −0.144, p = 0.818 was not significant. Similarly, results from the paired t-test, t = 2.48, p = 0.68 were also not significant. The mean scores for the systems dimension are the lowest of all six dimensions. This suggests that neither executives nor workers are satisfied with the systems in their organizations. There are wide gaps in strategy (5.0pts, 7.7%) and boundaries (4.4pts, 6.7%) which suggests that leaders believe that rules and boundaries support organizational goals and are clearly understood by workers. The beliefs dimension result indicates that workers are slightly more positive than executives (−0.6pts, −0.9%). The large gaps in strategy and boundaries suggest that there is a disconnect. Executives believe that they have developed systems that adequately support organizational goals and that people know and understand the rules that define the limits of their authority and work. Hypothesis 3d is rejected.

	Executives	Workers	Var.	Var. %	t	p	Correlation
Systems - mean	64.2	61.7	2.5	3.9%	2.48	0.068	−0.144
Standard deviation	0.80	1.98
Information	64.7	63.1	1.5	2.4%
Strategy	64.1	59.1	5.0	7.7%
Implementation	63.3	61.4	1.9	3.0%
Beliefs	63.7	64.2	−0.6	−0.9%
Boundaries	65.3	60.9	4.4	6.7%

Table 8.

Analysis of systems dimension & elements paired t-test and correlation, N = 5.

Note: ^*p < 0.05, ^**p < 0.01, ^***p < 0.001.

Results from the people dimension (Table 9) reflect the second largest difference between executives and workers with a 4.3 (6.0%) difference with a correlation among the elements of 0.964, p = 0.036. The paired t-test produced a value of t = 5.27, p = 0.013. The greatest gap between executives and workers were in the elements of awareness (5.6pts, 8.0%) and choice (5.2pts, 7.1%). The difference in awareness and choice are second only to collaboration in the resilience dimension. These differences indicate that workers are not aware of what is going on but even if they did, they do not have freedom of choice to respond to a situation. Executives believe that they have adequately made people aware and allow adequate freedom to act. Hypothesis 3e is accepted.

	Executives	Workers	Var.	Var. %	t	p	Correlation
People - Mean	70.8	66.5	4.3	6.0%	5.27	0.013	.964^*
Standard Deviation	5.30	4.30
Focus	63.5	61.5	1.9	3.0%
Awareness	70.5	64.9	5.6	8.0%
Trust	75.8	71.6	4.2	5.5%
Choice	73.2	68.0	5.2	7.1%

Table 9.

Analysis of people dimension & elements paired t-test and correlation, N = 4.

Note: ^*p < 0.05, ^**p < 0.01, ^***p < 0.001.

The greatest difference between executives and workers (Table 10) at 5.0 (7.1%) points is in the resilience dimension. Correlation of 0.996, p = .054 was just outside the threshold for significance at 0.054 but is close enough to be considered significant considering results in the other dimensions. The paired t-test yielded a value of t = 6.19, p = 0.025. These results are primarily driven by the difference between executives and workers in collaboration 6.4 (9.6%) points and purpose 5.0 (7.0%) points which are the greatest among all elements and must be carefully considered. The results suggest that executives feel that employees share a common purpose and have healthy relationships that promote effective collaboration. This sentiment is not shared by workers. Hypothesis 3f is accepted.

	Executives	Workers	Var.	Var. %	t	p	Correlation
Resiliance - Mean	70.1	65.1	5.0	7.1%	6.19	0.025	0.996^*
Standard Deviation	2.95	4.32
Collaboration	66.8	60.4	6.4	9.6%
Purpose	71.0	66.0	5.0	7.0%
Relationships	72.5	68.9	3.6	5.0%

Table 10.

Analysis of resilience dimension & elements paired t-test and correlation, N = 3.

Note: ^*p < 0.05, ^**p < 0.01, ^***p < 0.001.

Results of the statistical analysis confirm that, with a few exceptions, executives significantly overestimate the agile capabilities of their organizations compared to the perceptions of workers. Executives have a more positive perception of the many unseen and rarely discussed elements that may interfere with performance and organizational agility.

2.5 Conclusions and managerial implications

2.5.1 Conclusions

The Performance Triangle diagnostic instrument provides deep insight into many “unseen, and rarely discussed” dynamic capabilities that exist in organizations, but which executives are typically unaware. Through time, interferences and perceived differences in what executives think they know and what workers perceive creep into organizations. These interferences infect all functions and operations throughout organizations to inhibit the flow of knowledge and shape the decision-making process at all levels. Clearly, the results indicate that executives have a much more positive perception of the ability of their organization’s agile capabilities than the workers. Significant differences between the groups at all levels and dimensions except for leadership and systems suggest that executives may have a distorted view of their own abilities and those of the organization under their command.

The dimensions of the PTM with the largest gaps between what executives perceive and what workers perceive are in the people and resilience dimensions. This is an important finding because virtually every organizational mission statement contains some wording stating that “employees are our greatest asset”. The study suggests that workers do not share this sentiment and do not feel that executives back up the lofty words with significant action. Looking at these results another way, executives believe that they are doing a good job of developing their “greatest asset” but that employees feel very differently. Organizational resilience (purpose, relationships, collaboration) is almost entirely dependent on the people (focus, awareness, trust, choice) to be effective since resilience requires people to work closely together in harmony and coordination. The gap between executives and workers in trust when looking at all 27 elements was singled out as being particularly influential. This is an important finding since trust has been identified in many studies as a powerful, if not the single most powerful, force that enables or hinders tacit knowledge sharing which is an essential dynamic capability in today’s VUCA knowledge economy. Simply put, as traditionally trained managers and executives implement processes, procedures, and structure for control they are creating interferences with unintended consequences. Rigid controls cause workers to be unaware of what is going on around them, limit workers ability to make choices to solve unanticipated problems and interferes with their ability to focus their unique talents on value adding tasks that matter. All these unintended consequences contribute to a lack of trust among the workers and, more importantly, with managers and executives creating an environment where workers and the organization as a whole fail to maximize their potential.

The statistically significant difference between executives and workers perceptions in the dimensions of success and culture help explain one reason why so many change initiatives fail to deliver on expectations or fail completely. Clearly, executives feel that they and their organization have all the needed capabilities to be successful while workers do not share this sentiment. The culture of an organization acts like the glue that binds all parts of the organization and enables or inhibits the flow of critical information throughout. Peter Drucker is reputed to have said that “culture eats strategy for breakfast”. The results of the study tend to reinforce this observation because it will be difficult indeed for strategic or change initiatives to be successful if executives believe that the organization has all the essential capabilities needed for success while employees do not. Combined with a lack of shared understanding of where the organization is going, shared intent, a common agenda, a common sense of purpose, and shared norms of behavior even the best strategic plan or change initiative will have a difficult time successfully achieving its objectives. Such initiatives may be unintentionally or sometimes intentionally sabotaged by unseen and rarely discussed interferences within the culture.

The positive variance between the perceptions of executives and workers in the dimensions of leadership and systems were not statistically significant. This finding was revealing particularly with three elements (strategy conversation, contribution dialog, and beliefs) where workers perceptions were slightly more positive than executives. We surmise that since leadership and systems dimensions are means of control almost entirely determined by executives, they are difficult for workers to assess. In organizations with classically trained executives and managers, workers have little or no input into these dimensions therefore they can only assess leadership and systems in the context of their individual situation or how they affect everyday interactions. Hence, workers have limited comparisons on which to base perceptions resulting in an overestimation of the company’s infrastructure. In addition, we posit that executives may tend to be more critical about leadership and systems since much is mandated by senior management in response to outside pressures, governmental regulations, or societal demands. Executives may be more critical of the elements in these dimensions because they may have limited freedom to act with processes or procedures over which they may have little or no control.

Our findings tend to support the assertions of the Dunning-Kruger effect in a practical setting. Executives consistently overestimate their abilities and those of their organization which will influence the decision-making process and how executives handle people when initiating and managing change initiatives. One possible explanation is that executives are not aware of “unknown unknowns” within their organization or the environment that shape agile capabilities. The Dunning-Kruger effect as applied to organizational agility and change could, at least partially, explain the low success rate of change initiatives that is common knowledge. In this scenario, executives might dream up and initiate well intentioned change programs that are doomed to fail because they are unaware or ignore the underlying weaknesses or interferences that exist in the organization. For executives, ignorance, or unawareness, overestimating and misjudging their own capabilities and that of the organization is a recipe for failure. Recognition and acknowledgement of this inherent bias must be the first step in designing agile organizations.

2.5.2 Limitations

The study has limitations that should be considered when evaluating the results, primarily in the demographics of the participating organizations. 81% of the sample organizations are in Europe so expanded participation by organizations in other parts of the world like Africa, Asia, or the Middle East might yield different results. Additionally, 53% are very large or large companies and 91% were in established or mature stages in their life cycle. Smaller organizations in start-up or early growth phases might yield different results. Additionally, we did not capture demographic information from participants such as gender, national origin, age, etc. so further research in these areas is needed.

2.5.3 Managerial implications

Developing organizational agility begins in the boardroom and C-suite. These findings suggest that strengthening the self-reflection capability of executives to raise awareness for the “unknown unknowns” in their organization could improve decision making relative to agile initiatives. Employment of diagnostic information might help provide transparency and insight into unseen elements that interfere with agile capabilities. If the dynamic capabilities needed for organizational agility are embedded deeply within the capabilities of people, then increasing the awareness of executives for the “unseen, and rarely discussed” gaps in key elements might assist executives to intervene quickly and effectively.

Acknowledging the executive bias typified by the Dunning-Kruger effect, paired with diagnostic insights into the dimensions of organizational agility, can help executives bridge the natural metacognition gap and increase the effectiveness and accelerate the process of designing agile organizations. In the VUCA 21st century business environment accelerating the speed and effectiveness of the decision-making process is a vital dynamic capability for success.

For consultants, advisors, and coaches of executives on agile capabilities, the findings demonstrate that diagnostic insights are a powerful way to align executives around an initiative where they lack the experience and where bias prevents effective implementation of agile initiatives. The use of validated diagnostic tools to counter-balance managerial intuition and bias is worthwhile to identify gaps between executive and worker perceptions. Realizing and acknowledging the difference in perception between executives and workers may lead executives to identify better intervention points and ultimately more flexible, agile, and successful organizations. We, therefore, suggest that improving the probabilities of successful change initiatives in the VUCA 21st century requires development of agile capabilities and that executives must recognize their own bias and objectively assess the dynamic capabilities within their organizations. Peter Drucker is reputed to have said “The greatest danger in times of turbulence is not the turbulence; it is to act with yesterday’s logic”. Our study suggests that successful executives in today’s turbulent environment must recognize their inherent limitations to challenge and reject yesterday’s logic to create agile and adaptive organizations that maximize all the capabilities within their organizations with people being the centerpiece and most important asset.