It is not just the handy alliteration that has made some people wonder whether we tend to mistake confidence for competence – and why. But what is perhaps even more relevant: what does this mean for our organisations, including pension funds? 

 

Recruitment consultants might know that there is no link between displays of confidence and underlying competence in a job. Yet people often willingly choose the most confident – possibly incompetent – person to lead them (and some might say this is a common occurrence in modern politics). 

One psychologist goes as far as saying that there is an inverse relationship between (over)confidence and leadership talent. 

 “The ability to build and maintain high-performing teams, and to inspire followers to set aside their selfish agendas in order to work for the common interest of the group” is not something overconfident or arrogant leaders have, argued Tomas Chamorro-Premuzic, psychologist and author, in the Harvard Business Review a few years ago. 

Because they don’t, and because we choose leaders not fit for the job, they tend to fail – leaders that succeed are the exception, he writes, not the norm. 

 

Others might say that competence results in confidence, calling this a ‘confidence/competence loop’ - perhaps equally plausible, but while competent people might develop confidence over time, not all confidence is based on competence. 

It could be argued that a complete lack of confidence is paralysing and acts as a barrier to decision-making. It is perhaps this point that contains the answer to the question of why we keep choosing confident but not necessarily competent leaders. Technical knowledge in particular is almost regarded as an obstacle to becoming a leader in the UK. 

Attitudes to competence and technical knowledge are often culturally defined, it seems; Germany's chancellor Angela Merkel has a PhD in quantum chemistry and is fluent in Russian, allowing her to have direct conversations with, and perhaps even gaining some respect from, Vladimir Putin. It seems highly unlikely the UK will have a scientist prime minister who can converse in Russian or Chinese anytime soon, even as these competencies are becoming more important than ever given the pandemic and global power shifts. So what is going wrong?

 

Humans seem to like decisions being taken and taken assertively: having a single direction makes life simpler, it makes it easier for others – shareholders, customers, employees etc – to in turn take their own decisions. People, like markets, hate uncertainty – the situation with Brexit before the last elections was a case in point. 

Very confident leaders, even if they are incompetent, can deliver on this need for certainty in the short term; they take quick decisions because they don’t doubt themselves and their choices. The problems start later, when it turns out that some of these decisions were poor and stakeholders or voters become restless, eventually calling for a new leader – often only to repeat their mistake. 

 

What does this all mean for pension funds?

It possibly means the loudest voices around the board table are not always the ones with the best answers. If it’s the chair, this can be a problem – they might simply ‘run their own programme’, which is almost certainly not the best outcome for members.

The chair needs to prioritise other trustees' views and ensure everyone contributes – and, crucially, that everyone’s contribution receives consideration. I am convinced members would rather have considered than quick decisions, and most trustees understand that. Would you agree?