The core theme of my blog is positive organizational behavior (POB), and optimism is considered one of the cornerstones of POB. To be optimistic means one generally expects to experience positive outcomes. Optimism is usually considered a personality trait, which means that in adults it is pretty stable.
Optimism is good stuff. Optimistic folks in general enjoy better physical and psychological well being. Optimists are better at forming lasting friendships and developing more extensive social support networks, which helps them cope better with stress and persist in the face of adversity.
But folks that are really high in optimism can sometimes hold unrealistic expectations, be overconfident, discount important negative information, and re-order their perception of reality to make it more positive and less contradictory. And it should come as no surprise that entrepreneurs usually score higher in optimism than the general population.
A recent study examined the relationship between entrepreneurs’ optimism and the performance of their new ventures (Hmieleski, K.M. & Baron, R.A., 2009, Entrepreneurs’ optimism and new venture performance: A social cognitive perspective. Academy of Management Journal, 473-488). This study of 207 entrepreneurs with an average firm age of 5.7 years found a negative relationship between optimism of the founders and performance of the new venture. Furthermore, “the negative relationship between entrepreneurs’ optimism and the performance of their new ventures is strongest when entrepreneurs are high in previous business founding experience and lead their firms in dynamic environments” (p. 480).
Did you get that? Being highly optimistic was NOT good in this sample of entrepreneurs, and being an experienced entrepreneur made it even worse!
Unfortunately, the study was not able to tell us how optimism affects the decision making process of the entrepreneur so that we could better understand why it negatively affects performance.
It’s also important to note that there was both revenue and employment growth in the firms studied. So in these companies, although the optimism of the founders may have limited performance, it had not driven them out of business. And because we know that optimistic folks are generally more satisfied with their work, we have no reason to believe that these optimistic entrepreneurs were not completely satisfied as well.
If you are or aspire to be an entrepreneur, just be aware that you are probably more optimistic than the average person, and realize that you need to balance your optimism with realism with respect to your new venture. Then press on and enjoy the ride!
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Balancing optimism with realism with respect to new ventures. Good, sound advice.
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Thanks, TR. Continue to appreciate your thoughts.
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Great post!. From my personal experiences, optimism was always a good allied, problem arises when irresponsibility joins the team
Best regards,
Martín
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I’m assuming being a pessimist would also have a negative impact on success, so there’s an optimistic sweet spot somewhere in there. Might be a good call for teamwork that pairs the highly optimistic with the less so, kind of Walt and Roy Disney thing.
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Fred, great question. As you might imagine, there is much less written about pessimism. And having balance at the top is also a great suggestion. The problem is we like to surround ourselves with people just like us, so optimists will be attracted to each other.
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