Competence-based confidence for business leaders is more important than ever. 

“While the fearful will agonize over decisions and always make the safe choice, the confident will take the information that they have and take action. That is the definition of leadership.’’
Francisco DAO

Is confidence a trait that can help leaders increase company performance?

We recently discovered this article stating that business leaders’ confidence is not only an indicator of the company’s performance, but it is also positively correlated with global economic prosperity. The data was interpreted from the PwC Global CEO survey, indicating that, over the years, there was a correlation between the level of confidence and global economic prosperity.

“Data from the PwC Global CEO survey indicates over the years a correlation between CEO’s confidence and global economic prosperity.”

According to the article, the change of expectations in CEOs can influence revenue growth and even overall GDP. Confident CEOs are inclined to be more optimistic about overall economic growth, compared to the non-confident respondents. Also, they express different threat concerns. Briefly, confident CEOs are more inclined to think about long-term, strategic, and big-picture threats, while their non-confident counterparts are focused on short-term threats.

With this global positive impact, how can we make sure that our leaders – whether we speak about CEOs, executives, or informal leaders – master confidence?

The fine line between confidence and arrogance

Confident leaders are perceived as competent by their teams. But confidence does not necessarily correlate with competence. It depends on the type of confidence we expose to others:

• If we tend to rely on external confidence, the one that we show to others – we may use it to mask incompetence or inexperience. An external confidence that is not backed up by competence is rather a sign of arrogance, strong charisma, insecurity or even narcissism. This is common not only in the business world, but also in politics and media. People sometimes tend to perceive a very confident or even arrogant leader as a competent one, because of his/her powerful and assuring manifestation.

“People will be more likely to tolerate a bad president who is charismatic that they would tolerate a high-performing president who is not”, (Tomas Chamorro-Premuzic) – this quote is not only applicable for presidents, but also for other politicians and business leaders.

• If we are confident while being aware of our abilities and experience as well as our limitations, then we have built a strong internal confidence. Only if this internal confidence is reflected externally, then we show our competence through genuine external confidence.

Few leaders have the right amount of confidence

The insecure leader

A recent survey by Gartner showed that only half of business-leaders feel confident leading their teams today.

Gartner explains that the growing set of responsibilities coming from various business areas puts a bigger pressure on leaders than before. Often, leaders are not equipped with all the competences, knowledge and expertise that would help them to manage all of these responsibilities. This often leads to a feeling of insecurity and an incapacity to act, decreasing the internal confidence of the leader. Insecurity will also slow-down the decision-making process and will minimize the employees’ level of trust in the leaders and sometimes in a company’s ability to promote effective leadership.

“The Gartner Survey shows that only half of business leaders feel confident leading their teams today.”

The overconfident leader

On the other side, we have the overconfident leaders. They tend to heavily rely on their external confidence, whether this represents a sign of mastering competence or not. This external confidence is often enhanced by traits such as charisma, egotism, narcissism, and arrogance. Overconfidence may also indicate psychopathy. Several articles have recently debated about a higher prevalence of psychopathy among modern leaders. (The Psychopathic CEO, The Disturbing Link Between Psychopathy and Leadership, 1 in 5 business leaders may have psychopathic tendencies).

“There are at least 3 times as many psychopaths in executive or CEO roles than in the overall population, according to a 2010 study.”

Acting is not a challenge for the overconfident leader. Their challenges come from relying too much on their personality traits and thus minimising the focus on taking competence-based decisions. This can negatively impact employee engagement, productivity, and retention as well as leading to tense relationships with other executives, an overall lack of strategic-direction, and decreased company performance.

Eroding trust for businesses

“Trust is the conviction that the leader means what he says. It is a belief in something very old-fashioned, called ‘integrity.’ A leader’s actions and a leader’s professed beliefs must be congruent, or at least compatible.”
Peter Drucker

COVID-19 has brought a tremendous amount of insecurity at various levels: from a general feeling of uncertainty towards the future, to a lower confidence level in economic growth, politics, and business leaders.

Even prior to COVID-19, the level of trust in some established institutions (government, media, businesses, and NGOs), decreased. According to the  Edelman 2020 Trust Barometer, people are skeptical about the various roles that these institutional actors will have in the future. However, business has the best scores for trust, related to competence, compared to the other 3 enterprises.

Interestingly enough, only NGOs score positively for ethical-behaviour, thus emphasizing that people are often questioning the accountability and the overall integrity of people leading these institutions and whether decisions are based on politics or competence. The problem with trust goes further at a more granular level, when it comes to the business world.

“European employees have a lot more trust in their managers (46%) and colleagues (44%) than their company’s leadership (33%).”

Employees seem skeptical about the way decisions are made by their leadership teams: 56% in Europe and 66% in the U.S, think corruption is widespread within businesses in their country. Gallup also points out that leadership teams are among the least trusted teams in any organization – European employees have a lot more trust in their managers (46%) and colleagues (44%) than in their company’s leadership (33%). Rare interactions with their staff, not explaining the reason behind some of the strategic business actions and obvious misalignment between what it is said versus what it is done are among the main causes why leaders often feel very distant and separated from employees within the organization.

Competence-based confidence is more important than ever

These eroding levels of trust show that businesses still have a long way to go in terms of aligning their values with their actions and always seeking a responsible, accountable way of making profit. It also shows that leaders need to put more thought into the way that they are making decisions, i.e. do they reflect competence or just rely on charisma and overconfidence? Are they serving the company’s values or just their own personal goals?

That’s why we believe it is important more than ever to focus on building a competence-based confidence, that will help insecure leaders to achieve their potential and bring, where possible, more balance for the overconfident ones. A healthy confidence in leaders will help them to always act responsibly and to keep the organization, and perhaps, more importantly, themselves, fully-accountable for their actions.

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In our next article, we will discuss building healthy confidence in a leader – one that reflects his/her real, internal competence. How do we help insecure leaders build a stronger internal confidence? What do we do about overconfident leaders, heavily relying on their personality to make decisions?

Based on our extensive experience with leadership development, executive coaching, and using DISC methodology in our consulting and training sessions, we will analyse in our next article how leaders can build and manage their confidence levels, based on the four basic behavioural profiles (Dominance, Influence, Steadiness, Compliance).