Ideally, people’s confidence in the workplace is well-calibrated to their ability and the situation. If they are under-confident, then they may not take on opportunities that would benefit them in the long-run. If they are overconfident, then they may agree to things they cannot handle.

As a manager, you should pay attention to the confidence displayed by your direct reports. When you think they are being overconfident, it is useful to help them to recognize the reasons why they should temper their enthusiasm. To do that, you first need to be clear about exactly what they are overconfident about.

There are three main sources of overconfidence:

UNDER-APPRECIATION OF THE SITUATION

One of the most significant ways that people display overconfidence is that they are unaware of the many ways that a given situation might lead to bad outcomes. It can be difficult for people to recognize the variety of ways that something can go wrong, even in situations that may seem simple. There are just many factors that are beyond the control of an individual or team. A client may be considering multiple offers that you are not aware of. A competitor may be working on a similar product to one you are developing. The market may take a downturn just as your company is preparing for an IPO.

There will always be a certain number of things that are completely unpredictable, but experienced performers are aware of the likelihood of success even in situations in which they do everything right so that they can be prepared for problems when they arise and so that they can set other people’s expectations appropriately

If you’re working with someone who does not recognize the difficulties that situations can cause, it’s important to increase their awareness of some of the factors that are beyond their control. It is also valuable to teach them how to prepare people they are working with for some of the potential negative outcomes that could arise.

OVER-APPRECIATION OF SKILLS

Some people believe that they are more highly skilled than they actually are. There is a general tendency for people to be a little overconfident, and that can be valuable. Many tasks we perform are self-fulfilling prophecies. So, believing you will succeed at something may increase the amount of effort you put toward it, which can then increase your chances of success.

But, when people are truly miscalibrated about their skill level, that is a problem. One thing that can help is to work with your team members on hypothetical situations so that they get a view of what they still need to learn. There is evidence that poor performers often fail to appreciate the complexity of expert performance, which contributes to their overconfidence. These practice situations can provide people with some evidence of the distance they still need to go to improve their abilities.

When you do these exercises, you should be explicit with your team members about what aspects of their performance they need to improve. At the same time, you want to use this lesson to help them identify what they need to work on rather than to simply undermine their confidence. You want your reports to adopt a growth mindset and believe they can address their weaknesses, even as they recognize how far they need to go to become an expert.

LACK OF RECOGNITION OF OTHER PEOPLE’S SKILLS

A big danger in overconfidence is that it can lead to arrogance. A characteristic of arrogant people is that they value their own opinions, skills, and knowledge over that of other people. If you have a report who fails to recognize other people’s knowledge, skills, and wisdom, then they are likely to come across badly to others in the organization.

It can be helpful to chat with these team members about the your respect for other people in the organization. You may also want to reflect some of their words and actions back to them to help them see how they come across to others when they discount the experience of their colleagues. In addition, you should help your reports to understand how much support they will need from others high up in the organization in order to succeed in the long-run.

More generally, when working with your team, it can be helpful to point out great things that other people in the organization have done. Those discussions reinforce the expertise of colleagues outside the team and can help to temper any tendency that your team members may have to feel superior to others in ways that will hamper their ability to collaborate.