In response to a question about his strategy for an upcoming fight, former heavyweight champion Mike Tyson responded, “Everybody has a plan until they get punched in the mouth.” Tyson got the first part of this wrong: most individuals and organizations don’t have a plan. But he’s right about the second part: even those who have a strategy can be stunned by a well-placed punch. The punches seem to come more quickly when a CEO considers an M & A deal.

Everyone seems to like confident CEOs–those who have a clear plan and the optimism to execute it. But recent evidence suggests that overconfidence can cause as many problems as its opposite does. That’s what happened on a Kraft Heinz conference call in May of 2018 when Chief Executive Bernardo Hees said he was “feeling more confident about our outlooks.” Nine months later, Kraft slashed its dividends and wrote down its brand’s value by $15 billion.

In January 2018, General Electric CEO John Flannery did something similar when he declared that GE had begun to show progress against each of their key initiatives. He slashed GE’s dividends in July of that same year and was out of a job by October. If only Hees and Flannery had been able to read the research of Washington University professors Xiumin Martin and Guofu Zhou!

In The Merger Mindset, my co-author, Dr. Constance Dierickx, and I pointed out some of the pitfalls and dangers of overconfidence. We and these Washington University professors have all come to the same conclusion: overconfident CEOs tend to overspend on capital projects, research, and acquisitions. When these investments don’t deliver as promised, stock prices, investor relationships, company value, and repute in the industry all plummet.

But something else goes wrong, too. Overconfidence is contagious. When one company does an M & A deal or engages in major organic growth, CEOs who compete in these industries feel pressure to do the same. Soon, companies that aren’t in good enough shape to take care of the status quo start writing a deal thesis and looking for cash to fund it. That helps clarify why 75-90% of deals fail, or at least fail to deliver on the deal thesis. It also helps explain the number of CEOs who can’t remain in the executive chair several years post deal.

CEOs often find themselves surrounded by people who don’t want to talk about reality–people who find criticizing leaders or their decisions difficult. These CEOs, therefore, start to breathe their own exhaust. Like carbon monoxide, the fumes of affirmation have little scent, so leaders don’t always realize others are being too agreeable. One of the most important jobs of the leader, especially when facing a high-stakes decision, is to keep the atmosphere tinged with constructive discontent. That is, there should be enough tension in the system to keep the air moving. This doesn’t happen automatically, especially if people fear speaking up. Smart decision-makers approach any strategic decision with courage and confidence-not arrogance.

While everyone accepts taking a hit as part of boxing, too few people realize that business leaders take hits also. Leaders make decisions every day, and when they go head to head with competitors, they need to lace up their gloves. The sucker punch doesn’t happen every time, and sometimes years pass without a direct hit. But if you step into the ring of a deal, rest assured that a blow of some sort awaits. Business pugilists, like their heavy-weight counterparts, look to win by using similar attributes: strength, smarts, reflexes, speed, endurance, and sheer will.

Boxing matches end one of four ways: a knock out, the judge’s scoring, the referee deeming a fighter incapable, or the fighter himself throwing in the towel. Business leaders win or lose in the same four ways with customers acting as the ultimate judges and referees.

Heavy weight champions tend to know about punches because, in addition to taking them, they throw quite a few. It’s all part of the sport. But too few business leaders know how to throw a knockout punch or a counter punch to redefine the fight on their own terms. They continue to fight at the amateur Golden Gloves level instead of aspiring to take home the prize money.

Emerging as a victor in an M & A deal takes confidence, but overconfidence can be the knockout punch leaders deliver to themselves. To ensure the best outcome of any growth initiative, confidence must march in lock-step precision with reality-always keeping arrogance squarely out of the picture.

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