Many entrepreneurs and business leaders perceive their knowledge to be more accurate than it really is. They miss to figure out that they overestimate their ability and take decisions that backfires them at a huge cost.
Over-confidence plays a vital role in the decision-making process. People tend to be biased toward overconfidence while taking any decision. People tend to forget that being confident is one thing and being overconfident is quite another dimension which brings a lot of effects with it. A little bit of overconfidence can be helpful, but larger amounts of overconfidence can lead in making bad decisions.
Overestimation of Ability
Many businesses are likely to underestimate the possibility of occurrence of unfavourable results in their decision. Many entrepreneurs take the reason of failing while starting a new venture or a business failing to earn profit being the competition but do not realize that their overconfidence is shown in preventing unfavourable things to happen. Researchers say that it is overconfidence of the entrepreneurs where they overestimate their ability to make a correct decision mostly in launching a new business or developing existing business.
Ignorance Isn’t Always a Bliss
Usually, when a business or an individual have been successful in past activities tend to increase their confidence regardless of that confidence being justified or not. At this level of confidence, an individual discards the facts and information and rely more on its past experience and overestimate its ability to deal which does not necessarily results in success. When an entrepreneur or a business leader tend to be overconfident then it follows their own information ignoring the risk associated with the decisions. So forth, the business faces downfall and losses.
Overconfidence leads to mistakes and generally miss the opportunity while taking decisions. In business being overconfidence means that managers or leader start ignoring the warning sign and tend to make wrong decisions. They tend to ignore the possibility of being wrong. We often observe that in many companies the expertise at some point tends to take wrong decision undergoing overconfidence. For instance: a professor thinks that he/she can better run the university than the administrators and ignores the facts and information provided by the administrators.
Power to Unconscious Belief
A level of confidence tends to work effectively until it turns out becoming a conscious belief. Overconfidence generates the place for lack of information due to underestimating ability. Generally, in business, managers pot down the data that is warranted and so forth overestimate the probability of risk that comes due to the abundance of data.
Overconfidence managers stop gathering and processing information regarding an issue rather follow their ability to deal with it. They generally tend to seek that information that supports a position and disregards the contradictory information that needs to be considered as an important element in taking any decision. This shows that overconfidence leads to reduce the tendency of analyzing the data and effects of an issue or a situation.
Overconfidence in managers, entrepreneurs, business leaders, higher executive while taking a decision is likely to discard the examination of alternative ideas and solutions and rather follow their own insight and overestimate their ability to deal the problem. In business, when executives or managers build a thinking that they have the ability to overcome the difficulties then there the probability of failure start increasing.
By: Cajol Jha