Too many experts?


It is an old wisdom that an involuntary expert is often the worst supervisor possible. There are good grounds for this in personality psychology as well.

In-depth expertise – and compulsory interest in one’s domain – does not fit matters such as an overview of business or quick decision-making in an uncertain environment. In this narrow bubble, there is rarely even space for other people.

And the other way around: a good manager tolerates uncertainty and lack of information and is able to take people into account in decisions. A good decision-maker also does not cling too much on details, so they can avoid the “analysis paralysis”.

But what do you get when the management team or Board of a company comprises exclusively of experts in the field? A new study indicates that the result is something between a problem and a disaster.

Too much information?

The matter has not been studied much until recently. The conventional assumption has been that expertise is useful without exceptions. And the more of it there is the better. An extensive longitudinal analysis of U.S. savings banks surprisingly debunked the old perception.

The researchers’ hypothesis was that problems occur in expert-driven management especially when the conditions change rapidly and unpredictably. In such a situation, domain experts can even become a burden.

The study analyzed the performance of 1,307 U.S. banks in 1996–2012. There were almost 10,000 banking years in the data. The sample was therefore large, so the result can also be considered quite reliable.

Skewed management team

There is no risk in a static environment. Yet, immediately when the competition situation tightened and the operating environment became uncertain, differences began to emerge. In such a situation, expert-driven management teams failed more frequently than others.

Reference banks that fared better also had experts in their management. The essential difference was that their backgrounds were more diverse: considerably fewer had expertise in financing.

Does the result apply outside the financing industry? It probably does. After all, the study presented three credible explanations for why a homogeneous expert background is detrimental:

  1. Fixed mind-set is typical of all experts – it makes decision-making stiff and makes it difficult to deviate from routines. In a rapidly changing environment, in particular, strong but narrow experience becomes detrimental: it prevents one from seeing that the old and proven strategy no longer works.
  2. Comfortable self-deception. A homogeneous group easily begins to trust in its own superiority. Between the lines of quite a many management team member, you can read the sentence: ”With the best experts in the domain together, how could this team make a mistake?” And the rest is history.
  3. Excessive unanimity is partly related to the above, but it is not the same thing. Strong merits and superior knowledge of the industry are things that few outsiders dare question. Especially if they are a minority in the management team. This eradicates sensible disagreement from the group.

Limits of knowledge?

You should not completely remove experts from the management team. Yet the intuitive assumption that experts in the domain fare best in a chaotic and uncertain environment turned out to be false.

Actually, the result is pretty obvious. Yet it is surprising in a way: it is exactly in the kind of a messy situation in which we call experts for help, we should look around us more extensively. Merely increasing the amount of knowledge will not help anymore in that situation.

Nassim Taleb talks about the same thing in his excellent book The Black Swan. In a difficult situation, we cling to historical models even tighter, even though it is those very models that led us to problems in the first place. Even though old knowledge no longer works, we increasingly cling to it.

Could the most important property of a good expert be seeing the limits of their own expertise, after all?

Mikael Nederström