How can the Dunning-Kruger effect be related to FP&A in your organization? In short, the Dunning-Kruger Effect is when someone assess their cognitive ability as greater than it is. So how does this relate to FP&A? Many companies have turned to driver-based forecasting, essentially putting forecasting in the hands of trained finance professionals. Finance professionals are removed from what goes on day-to-day, and as a result, trending models may not pick up on changes in the marketplace of operations that front-line managers may be anticipating.
“If there was ever a process where people would overestimate their skill, it’s forecasting.”