Tag Archives: burnout

Unrealistic Optimism Drives Profitability

Overconfident decision-making in financial markets led to myriad negative consequences in the past decade, when companies underestimated business risks. 

Gilles Hilary

Gilles Hilary

In contrast to overconfidence, unrealistically optimistic judgments can result in increased profitability and market value, according to INSEAD’s Gilles Hilary and Benjamin Segal with Charles Hsu of Hong Kong University of Science & Technology.

Benjamin Segal

Benjamin Segal

Hilary, Hsu, and Segal demonstrated that over-optimism differs from overconfidence, and may result in larger growth projections.

Charles Hsu

Charles Hsu

The team drew on earlier work by University of Illinois’s Dirk Hackbarth that showed both overconfident, and overoptimistic managers chose higher debt levels and issued more new debt.
Hackbarth did not differentiate over-confident and over-optimistic investment behaviors, and reported that both tendencies reduce manager-shareholder conflict, which can increase firm value.

Dirk Hackbarth

Dirk Hackbarth

Static over-optimism” refers to an unrealistically positive view of the impact of one’s own actions on future outcomes.
In contrast, “dynamic overconfidence” refers to overvaluation of one’s skills and the accuracy of private information.
In addition, “dynamic overconfidence”  is associated with  underestimates of random events after several positive outcomes, according to Hackbarth.

Together, static over-optimism and dynamic overconfidence lead to “dynamic over-optimism” after successes.

Neil Weinstein

Neil Weinstein

The pervasiveness of this “rose-tinted glasses” view leading to over-optimistic assessments was demonstrated by Neil Weinstein of University of Arizona.
He investigated people’s beliefs about future positive and negative health events, discussed in a previous blog post.
Weinstein reported that people tend to believe negative events are less likely to happen to them than to others, whereas they expect they are more likely than other people to experience positive events.

Hilary’s team built on Hackbarth’s concepts by comparing North American companies’ quarterly earnings forecasts with analysts’ predictions and actual performance.
Then, they calculated the number of company-issued press releases containing optimistic language.

Optimistic performance forecasts were correlated with better-than-expected performance, suggesting that successes led to additional effort and positive expectations.

Hilary noted the potentiating effect of past successful performance, though it may lead to “burnout” after about four quarters due to the challenge of continually exceeding performance expectations.

The team noted that this cycle of over-optimism and burnout might be mitigated by instituting policies to moderate overestimates or underestimates future performance by rewarding executives who provide accurate forecasts.

Sheryl Winston Smith

Sheryl Winston Smith

Similarly, Temple’s Sheryl Winston Smith noted that optimistic entrepreneurs chose higher levels of debt financing relative to equity, facilitating patent-based and product-based innovation among nearly 5,000 US firms tracked by the Kauffman Firm Survey (KFS).

Young-Hoon Kim

Young-Hoon Kim

In contrast to these financial studies, Yonsei University’s Young-Hoon Kim, Nanyang Technical University’s Chi-yue Chiu and Zhimin Zou of University of Illinois reported mixed results for self-enhancing (overconfident) and self-effacing (pessimistic) biases on performance

Chiu Chi-Yue

Chiu Chi-Yue

Kim’s team posited that either over-optimistic or pessimistic biases lead to “self-handicapping” behavior, in which people perform under disadvantageous conditions that provide an explanation for any poor performance outcomes.

Although over-optimism may drive innovation and financial results, longer-term consequences may include performance “burnout,” reduced motivation, and lower performance.

-*How to you manage the impact of optimism bias and pessimism bias on judgments and performance?

Please follow-share-like www.kathrynwelds.com and @kathrynwelds

RELATED POSTS:

Twitter:  @kathrynwelds
Blog: – Kathryn Welds | Curated Research and Commentary
Google+ google.com/+KathrynWelds
LinkedIn Open Group Psychology in Human Resources (Organisational Psychology)
Facebook Notes:

©Kathryn Welds

Advertisements

Facades of Conformity and Surface Acting: Stress for Women, Minorities

David Wagner

David Wagner

When employees mask their true feelings in work situations, they may engage in “surface acting” — or displaying appropriate, but unfelt facial expressions, verbal interactions, and body language.

Christopher Barnes

Christopher Barnes

Surface acting at work was associated with emotional exhaustion, work-to-family conflict, and insomnia outside of work for more than 70 volunteers in a high stress public service occupation, according to Singapore Management University’s David T. Wagner, Christopher M. Barnes of University of Washington and Brent A. Scott of Michigan State University.

Arlie Hochschild

Arlie Hochschild

Emotional labor” is Arlie Hochshild’s earlier term for “surface acting” in customer service interactions, in which employees present prescribed verbalizations and emotions, even when they are not genuinely felt.

She contrasted “surface acting” with “deep acting” in which the person:

  • Exhibits the emotion actually felt,
  •                              Uses past emotional experiences to elicit real emotion and empathic connection with others, in a form of “organizational method acting.
Christina Maslach

Christina Maslach

Surface acting can lead to occupational “burnout,” characterized by emotional exhaustion and detachment from others and reduced workplace performance, noted University of California Berkeley’s Christina Maslach and Susan Jackson.

In addition, Recipients of “surface acting” usually detect that it’s an inauthentic display, according to University of Tampere Veikko Surakka and Jari K Hietanen of University of Helsinki.

Celeste Brotheridge

Celeste Brotheridge

By contrast, deep acting has been associated with a greater sense of personal accomplishment in research by University of Regina’s Celeste Brotheridge and Alicia Grandey of Penn State.

Patricia Hewlin

Patricia Hewlin

Surface Acting can also take a toll, resulting in generalized stress and reduced quality of life outside of work, according to Georgetown’s Patricia Hewlin, and supported by separate findings by University of Lethbridge’s Karen H. Hunter, Andrew A. Luchak of University of Alberta and Athabasca University’s Kay Devine.

They identified stress-inducing behaviors including:

Even people not performing customer-facing roles may encounter situations in which they must behave in “appropriate” ways inconsistent with their true feelings, and experience similar stress spillover from “surface acting” at work.

-*How do you prevent “burnout” when workplace settings seem to require “surface acting”?

-*In what organizational contexts have you observed “Facades of Conformity” and their consequences?

Follow-share-like www.kathrynwelds.com and @kathrynwelds


RELATED POSTS:

LinkedIn Open GroupPsychology in HR (Organisational Psychology)
Twitter: @kathrynwelds
Google+:
Facebook Notes:
Blog: – Kathryn Welds | Curated Research and Commentary
Google+

©Kathryn Welds