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Why Over-Optimism Can Crush Your Company

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As entrepreneurs who need to raise funds and market our businesses, we tell a lot of stories. In doing so, we usually paint a positive light and add some sparkle to the face that we're presenting to the outside world. Sometimes we get so used to reporting the sunny side that it becomes difficult to see the drab threads of reality amongst the luster.


But that's a problem.

When the stories we tell others and ourselves verge on over-optimism, it becomes both easy to lose the threads of reality and confusing for forging ahead as a business.

I come from a law and engineering background, which brings its own baggage for how I approach the truth. There's that saying, "An optimist will tell you the glass is half-full. The pessimist, half-empty. And the engineer will tell you the glass is twice the size it needs to be."

I had the lawyer's traditional pessimism and the engineer's eternal quest to get the closest to objective truth. Yet when my team was dispirited, I would try to inspire with a story of glass-half-full optimism. My team knew better though. They had helped me come up with that sunny story to sell in the first place.

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Optimism is overrated. In fact, a 2009 study by Keith Hmieleski and Robert Baron surveying 209 entrepreneurs found a negative correlation between founders' optimism and the performance of their new ventures. Their findings suggest that entrepreneurs, who turn out to be a generally optimistic bunch, would do well to temper their expectations and find balance.

So I found myself going back to the words of Admiral James Stockdale, whose leadership and strategy during his time as a prisoner of war in Vietnam was featured in Jim Collins's Good to Great:

"This is a very important lesson. You must never confuse faith that you will prevail in the end -- which you can never afford to lose -- with the discipline to confront the most brutal facts of your current reality, whatever they might be."

Where I had gotten stuck believing that expressing tones of optimism was necessary to fuel motivation. I didn't think about the danger of ignoring or downplaying brutal facts for myself and my team. Instead, I thought that as a leader I was obligated to cheerlead the team to get more done in the face of challenges. But this backfired, and instead of motivating my team, it distracted them from confronting the real facts.

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Teresa Amabile and Steven Kramer came to a similar conclusion when surveying and analyzing hundreds of managers and employees for their book, The Progress Principle. They found that people aren't motivated by motivation for the sake of motivation.

Instead, the most powerful motivation came from within, when people were engaged with their work. The key is to facilitate progress and remove obstacles as best you can so that employees can stay engaged. Take a hard look at the cold, hard facts and then pave the way for action. Choose a goal. Explore how you'll get over that bump in the road.

I realized that confronting my startup's reality and engaging in how to get from brutal facts to kinder ones was invigorating and motivating in itself. Plus the practice actually strengthens the stories we tell the outside world. The best investors want a real account, not a sales song and dance.

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Maintaining the balance between faith and realism gives you a boost in the entrepreneurial world. Rather than blind faith, we require a "seeing" faith, one that is informed by the most brutal facts of the reality of our businesses. The result is a more robust team and a more powerful story.

How have you curbed the urge to be over-optimistic? Let us know in the comments.

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