March 01 2019 0comment

Overconfidence: Why a “can do” attitude can be bad for business.

Overconfidence: Why a “can do” attitude can be bad for business.

Confidence is entirely human.

It has been well documented that most managers predict significant improvements in performance and revenue every year regardless of their track record. They also tend to underestimate the time and cost to complete projects, and overestimate the success of business initiatives.

The type of confidence we’re talking about here is cognitive confidence – the habitual way people evaluate and trust in the accuracy of their decisions. Some people are naturally certain, positive and assured when it comes to their view of their abilities, whilst others are hesitant, unsure and doubtful.

The problem is that some people have cognitive confidence in spades, but don’t have the ability to back it up! They’re overconfident, and the bottom line is that their optimistic, ‘can do’ attitude is actually bad for business.

That’s because their high cognitive confidence “short-cuts” the mental checking processes that are important to good judgment. They run the risk of jumping into decisions without exploring all the available options and possibilities, and without recognizing the inherent risks in their thinking and actions. They may confidently lead a team in the wrong direction, without accepting advice or asking for input. Their mistakes may lead to costly errors of judgement.

The business world is awash with horror stories attributable to overconfident decision making. One of the most famous may well be the Lehmann Brothers firm borrowing hugely just before the housing bubble burst, leading to the GFC in 2008.

Organization looking to avoid their own ‘Lehmann Brothers’ moment, need to ensure that the confident staff who impress with their optimistic, can do attitude, aren’t actually overconfident decision makers. That requires the appropriate evaluation tools, like those made available by ebilities, which can help career counsellors and LHD specialists identify “Overconfident Types” so they can work with them to improve their approach to decision making.

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