This column is part of Globe Careers' Leadership Lab series, where executives and experts share their views and advice about leadership and management. Follow us at @Globe_Careers. Find all Leadership Lab stories at tgam.ca/leadershiplab
One of the most widely held beliefs among management scholars and practitioners is that more confidence leads to greater motivation, better performance and more influence on people. However, contrary to popular belief, more confidence does not lead to more motivation or better performance in most circumstances.
In fact, numerous studies have found that overconfidence can have a rather significant negative effect:
– In a study of 1,000 entrepreneurs, researchers found that overconfidence led to decreased performance in both revenue growth and employment growth.
– A number of studies have found that stocks sold by extremely overconfident investors often did better than the stocks they bought.
– Americans are some of the most confident people with respect to math ability. However, they score near the bottom on international standardized tests.
– In my own research, I find that students who are more confident end up studying less, resulting in poor performance on exams.
So, why does confidence lead to negative results?
First, confidence has a negative impact on planning. This is commonly known as the planning fallacy, which is the tendency for people or organizations to underestimate how long it will take to complete a task and how much it will cost, even if they have completed similar tasks in the past.
For example, since 1960, the Olympics have gone over budget on average by 179 per cent because government officials do not properly plan for all the possible disruptions and problems that can occur when undertaking such a large event. When problems arise, they overspend to fix them.
Secondly, when you are actually engaged in a task, confidence can lead you off track.
People tend to put the most resources toward the goals they think need the most work – the ones they are least confident about – and fewer resources toward goals they believe need the least amount of work – the ones they are most confident about.
Although this can sometimes be useful, often this type of thinking will send you astray. If you are extremely confident that you are good at something, then you will not allocate as much time and effort toward that goal, even if you should.
It's not all negative
While confidence, and certainly overconfidence, has its negative side, there is also a positive spin.
According to my colleague, Rob Kurzban, an associate professor at the University of Pennsylvania, confidence sends an important evolutionary signal to others that you are a valuable, important person and that resources should be given to you.
If you walk into a room exuding confidence and believing everyone will want to meet with you, your prophecy will likely become self-fulfilling. Others are more likely to talk to you, invest in your company, be persuaded by your ideas or want to go on a date with you.
Confidence also has a positive effect when starting new projects.
You need to be confident to choose to set a goal. If you are not overconfident in the beginning stages, you likely will not start, let alone achieve, your goal.
Most entrepreneur-led businesses fail after five years. Most top-tier journals in academia have an acceptance rate below 5 per cent. Most people will never play in the National Hockey League. But if you focused on all the objective data, you would never start a business, send a paper to a journal or lace up your skates.
This has an evolutionary advantage, meaning that individuals who are more confident are better able to obtain more resources. Those who are too risk averse and never try are less likely to succeed.
As Wayne Gretzky famously said, "You miss 100 per cent of the shots you don't take."
A little self-doubt helps
Over all, severe swings in confidence are not good for motivation or performance.
If you are underconfident, you will never choose to do anything. If you are overconfident, you will not allocate the proper amount of resources toward the task.
Having a little self-doubt helps.
Believe that you will succeed, but always be aware that you may not be putting in the necessary amount of effort. As I tell my students, while people can be smarter than you are, if you work harder than they do, you'll likely be more successful.
Justin Weinhardt, PhD, (@OrgPsychologist) is an assistant professor at the University of Calgary's Haskayne School of Business (@haskayneschool). He is an expert in human resources and organizational psychology, and has a particular interest in understanding how motivation and decision-making change over time.