Lack of self-awareness and business failure

I found a particularly good article the other day that considers whether workers have the capacity to accurately evaluate their ability to do their own jobs. The article - Ignorance is bliss (Chip Heath, David Dunning and Jerry M Suls, The Guardian) - suggests people, on average, tend to believe themselves to be above average - a view that violates the simple tenets of mathematics.

For instance, in a survey of nearly a million high school seniors, 70 per cent said they had "above average" leadership skills; only 2 per cent felt they were "below average". On their ability to get along with others, almost all rated themselves as at least average - with 60 per cent rating themselves in the top 10 per cent and 25 per cent rating themselves in the top per cent.

One of the reason behind a widely held view of being better than in reality is that people are often motivated to reach flattering conclusions about themselves and their place in the world. They mould, manage and massage the feedback the world provides so they can construe themselves as lovable and capable people. It is also firmly argued that when one looks at self-assessment in the workplace, from the office cubicle to the boardroom, it would seem that people tend to hold overly inflated self-views that are modestly related to actual performance.

It's quite a long article and it goes onto discuss ways in which workers can be more effectively assessed (i.e. 360 degree appraisals, 3rd party assessments, etc. instead of self-assessment). However, it is only near the end where the potential harm in having an organizational lead by self-unaware employees is explored. It would seem that "egocentric neglect" comes to a head when entrepreneurs feel they have the skills to succeed in a situation when most would fail. I'd be as much concerned about what factors allow people to make such flattering conclusions about themselves.