We are rarely the best judge of our own skills and achievements. Even with the best intentions, we tend to overrate or underrate our abilities.

Deluding ourselves that we are better than we are boosts our confidence and helps us to recover from setbacks. Identifying faults in others, the company or circumstances is easier on the ego than believing any deficiency lies within. The problem with this attitude is that it is rooted in a misguided belief that there is nothing to learn or correct.

At the opposite end of the continuum are people who underplay their abilities and tend to see the fault in themselves rather than in others. They might overcompensate for what they perceive as deficiencies in themselves by working hard, but, stuck in a cycle of negativity, they generally fail to take responsibility for their own development.

Most people’s slightly deluded views of their capabilities are normal, and even helpful in managing the stress of work. People at the extremes, however, can create problems for themselves and their organisations.

Overrating one’s ability is not only prevalent but also encouraged in business, where it is easier to collude with positive delusions than to consider how to give and take constructive feedback.

Nigel Nicholson, professor of organisational behaviour at London Business School, and author of The ‘I’ of Leadership, says: “There is a conspiracy in life to make everyone feel better, and so there are few objective standards of work. Work, then, is to some extent a psychological game, a confidence game. We need to be quite tolerant, and support each other’s slightly delusional states, because that . . . helps us get on and overcome the challenges we face.”

He believes that a lot of positive psychology supports the idea that people will do better if they are made to feel good rather than to see where their performance is failing. “We do it in schools now, where children are routinely told how good they are when they are mediocre by any objective standards,” he says.

According to Prof Nicholson, the more special a person is made to feel by an exhaustive selection process for a job, the more likely they are to have a sense of entitlement as well as an exaggerated view of their skills.

People in positions of power are also protected from bad news to which others are exposed. “I think that this is an issue to do with power and hierarchies — the more powerful you are the more insulated you are,” he says.

People with an apparently inflated ego may, in fact, be protecting themselves from overwhelmingly uncomfortable feelings about themselves which could leave them depressed. Such individuals cannot tolerate psychological complexity; they interpret negative feedback or setbacks as evidence that all they have achieved has been lost.

Often they are good at what they do, although oblivious to their limitations, and can advance to senior management positions. Their bloated confidence may overcompensate for feelings of inadequacy, explaining why they become so defensive when challenged. They survive by surrounding themselves with “yes” people. In the extreme, anyone with opposing views, or who challenges their reality, is at risk of expulsion.

One chief executive of a US-based company describes the pitfalls of this attitude. He took on a partner who demonstrates great talent in his job; but was unwilling to share work, refused offers of help and showed no respect for colleagues.

The CEO describes the insecurity that lies beneath his partner’s image: “What he’s done to build his confidence is build a very strong belief in himself, which is underpinned by success in one part, but also underpinned by ignorance and arrogance, lacking humility and a willingness to consider other possibilities.

“I find it very challenging,” he goes on, “because you are continually being criticised, and your weaknesses are always at the forefront of any conversation as opposed to how you might work together.”

For this CEO, the situation escalated as he continued to work around his partner’s behaviour instead of challenging it. “That almost gives licence for his belief [in himself]to grow, for his behaviour to continue, for him to continue to push,” he says, adding that his partner’s behaviour now risks destabilising the entire team.

At the other end of the spectrum, people who underrate themselves tend to be consumed with their limitations. Although desperate for acknowledgment, they turn compliments around in their minds so that even praise can be dismissed or interpreted negatively, leaving them craving more. Good feedback does not penetrate, which effectively means they and their managers operate in different worlds.

These feelings may stem from a childhood in which they were ignored, becoming convinced, as children often do, that the fault lies in them rather than their parents. This habit of protecting the people you depend on by holding all the faults within yourself plays out later in working life.

This was the case for a senior vice-president of a bank who has not taken a holiday since he began the job two years ago. He fears that if he takes a break his superiors will think he contributes too little — and make him redundant.

As a child of selfish parents he was often forgotten, leaving him with the feeling that there was something wrong with him.

“I get constant affirmation from people that report to me, my colleagues; even my boss said he couldn’t imagine functioning without my help,” he says. “When they say these things, I just don’t believe it about myself. I feel like I’m pulling the wool over their eyes.

“I just got a large retention bonus, so they’re giving me things and I’m still thinking [I’ll be fired] — it’s crazy, it’s just not based in reality.”

It can be frustrating when one’s internal world is more powerful than reality, and destroys desperately sought affirmations. The banker gives an example: “They say I’m such a calming influence, that when people get all flustered I’m very good at looking at the situation realistically. Well, that’s maybe how I come across but I’m thinking, ‘You don’t see what’s going on inside me, where I’m anxious and how I wake up in the middle of the night, where I forgot to do this, or this is going to blow up in my face’.”

For those with serious delusions about their abilities, engaging with reality is a much more constructive conversation than the monologues of the mind.

Dealing with the overconfident

Someone with an extremely overinflated view of their capabilities can impress in the short term but potentially do damage in the long term. Their behaviour needs to be managed early before it becomes self-reinforcing and harms the business.

Jeannie Hodder, an executive coach at London Business School, says it is crucial for managers to offer concrete examples of individuals’ failings and the effects of their behaviour on colleagues and clients, to support what they are saying. If necessary, the message needs to be repeated at follow-up sessions until the manager is convinced it has been heeded. Let him or her know that you are not judging the person but the work. People are more likely to listen to negative feedback when they are not feeling under threat. Pick your moment.

Dealing with the underconfident

The underconfident need to take more responsibility for listening to what others are saying by consciously tuning into reality rather than slipping into their own negative thoughts.

Taking time to understand where feelings of worthlessness originate can help to separate past from present experiences. Help them to recognise their skills by presenting them with concrete evidence of their accomplishments.

The writer is a psychotherapist and this article is based partly on her clinical experience

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