Years ago, a nonprofit hired me to lead a turnaround of its construction division. I had never run a construction business, but I knew how to lead people, and the team I inherited knew the trade. With a boss who mentored me on the business itself and a direct report who let me lean on his expertise, we figured it out together and watched the division come back to life. I walked away from that experience believing I had learned how to lead a turnaround.

Then the organization asked me to lead its consulting division.

The role had the same title and almost nothing else in common with what I had just done. The consultants behaved less like employees than like subcontractors operating beneath a shared corporate umbrella. There was no mentor this time, no close partner, and no team waiting to be led in any conventional sense. The confidence I earned from the construction work, the kind I assumed would translate, turned out to be the least useful thing in my bag.

For a while, I kept reaching for what had previously worked and watching it fail to land. I had built a self-image as someone who knew how to do this kind of work, and that self-image was harder to set down than I would have predicted. 

The shift came once I stopped, stepped back and saw, from what Ronald Heifetz calls ‘the balcony,’ that my construction success had not built any general capability for leading turnarounds. What it built was a particular capability for a particular situation. Only then did I realize that I would have to build something new here, through this work, with these consultants. 

So, I experimented. I changed how I ran meetings, how I gave feedback, how I paid attention to who each person was. Over many months, I came to believe, in a way I had not believed at the start, that I could lead this particular group toward something that mattered to all of us. Their belief in me grew alongside my own. Both had to be built.

That realization changed how I think about leadership effectiveness. Many organizations still place significant weight on confidence because confidence is visible. It signals readiness. It reassures stakeholders, but confidence and capability are not the same thing, particularly when leaders encounter situations they have never faced before.

Two beliefs that look alike

There is a word for what I was missing in those first months with the consultants, a word that leaders rarely encounter in their development. The renowned psychologist Albert Bandura spent decades distinguishing it from its more famous cousin.

Self-confidence and self-efficacy are not the same thing, and they predict very different outcomes.

Self-confidence is the general sense of being capable. It travels with us across contexts the way a self-image does, regardless of whether the new context warrants the assumption. Self-efficacy is a leader's belief in her ability to perform a specific task within a specific domain, and it is built rather than assumed. 

The research linking self-confidence to leadership performance has remained stubbornly thin, while the research linking self-efficacy to performance, persistence, and the willingness to take on hard things has become one of the more robust findings in organizational psychology. Stajkovic and Luthans' foundational meta-analysis established self-efficacy as one of the most reliable predictors of work performance, while subsequent work by Fida et al. extended that finding into the harder-to-measure leadership behaviors that compound overtime. Confidence, while directionally helpful, did not show the same predictive strength.

Here is one example of what this data looks like in the real-world: picture two recent graduates starting their first leadership roles. One arrives believing she has it figured out; she has always been a high performer and expects this experience to be no different. The other arrives having completed hard internships, made real mistakes, and built genuine belief in her ability to figure difficult things out. One has confidence. The other has something more useful.

Confidence can exist in the absence of evidence. Self-efficacy is the evidence.

For organizations, this distinction has practical implications. Hiring and promotion decisions that prioritize confidence risk over-indexing on perceived readiness. Decisions grounded in evidence of self-efficacy are more likely to identify leaders who can build capability when circumstances change.

What makes leadership development investments compound

Leadership development has built a strong toolkit over the years: coaching engagements, feedback programs, stretch assignments, cohort intensives. Even still, two leaders can move through the same program and come out with very different results. This gap is explained by examining what each leader brings into the room.

Bandura identified four sources from which self-efficacy develops. Mastery experiences come from succeeding at hard things. Vicarious experiences come from watching credible peers navigate similar challenges. Verbal persuasion comes from honest feedback and coaching. 

The first two sources are especially important because they create evidence. Leaders build belief in their capability by doing difficult things themselves and by learning from people who have successfully navigated similar challenges. Over time, those experiences become the foundation on which future capability is built.

While the first three are largely external, the fourth source is internal: physiological and affective states. A leader's bodily and emotional signals (the stress, the fatigue, the moments of doubt) shape her sense of whether she can perform in a given situation. As Kirsten Weir underscores in her 2025 article for the American Psychological Association, how a leader interprets those signals is what determines whether they undermine her self-efficacy or strengthen it. A leader who reads her own anxiety as evidence she cannot do something will avoid the situations that would build her capability. A leader who reads it as evidence that she is in new territory will stay in the work long enough for capability to develop.

That fourth source, physiological and affective states, is where metacognition becomes indispensable. A leader who understands how she receives information, where she tends to get stuck, and what her internal signals are telling her is able to extract more from developmental experiences than a leader who doesn’t. 

This is what makes self-efficacy and metacognition something beyond personal capability: they are what determine how much of a development program that a leader can absorb, and how long she keeps building from it after it ends.

The progression underneath Versatile Leadership

The leaders I have watched navigate genuine uncertainty over the years share a developmental progression: metacognition, meta-efficacy, domain-specific efficacy, and behavioral versatility. Each stage builds on the one before it, and each shows up differently in the leader's actual experience.

Metacognition

Metacognition is the foundation. It’s the capacity to know how you take in information, how you process it, and where you reliably get stuck. A leader without metacognitive awareness reacts to situations based on whatever pattern is loudest in her own head, often without realizing the pattern is hers rather than the situation's. A leader with it can step back, recognize what she is doing, and decide whether the response she is reaching for actually fits what is in front of her. 

The moment I stepped back from the consulting role and saw that I had been leading the consultants as though they were the builders was metacognition in action. I learned something about how I had been showing up, which is the kind of learning that is hard to do while you are still inside the pattern.

Meta-efficacy

Meta-efficacy develops on top of the self-knowledge of metacognition. It is a higher-order belief that whatever the next situation requires, you can figure it out. This belief matters most when a leader walks into a context she has never seen before.

Self-confidence says some version of "I've got this" without much evidence. Meta-efficacy says something more useful: "I have built capacity in unfamiliar situations before, and I trust myself to build it again here." That shift in self-talk shows up immediately in how a leader engages with the situation.

Domain-specific efficacy

Domain-specific efficacy is where meta-efficacy turns into earned capability. The leader develops genuine belief in her ability to lead in a particular context, accumulated through the kind of experience that’s hard to fake: trying things, watching them succeed or fail, adjusting, and trying again. 

I eventually built this domain-specific efficacy with the consultants through that slow accumulation. The resulting belief was anchored in actual evidence, not transferred from the construction work. Each new domain a leader genuinely builds in becomes both an accomplishment in itself and another data point in the broader case she is making to herself about what she is capable of.

Behavioral versatility

Behavioral versatility is what emerges from those accumulated data points. A leader who has built domain-specific efficacy in multiple contexts reads new situations more accurately and responds with a wider range of behaviors than she would have years earlier.

The leader has the capacity to recognize, in the moment, that this situation calls for something different from the last one, and the underlying belief that she can deliver whatever that something turns out to be.

That progression begins with the self, but the same capacities ultimately allow leaders to read and move the systems they lead. Metacognition turns outward, from “How am I taking in this information?” to “What is this system doing, and what is keeping it stuck?

Self-efficacy turns outward too: the leader begins trusting herself to influence a system she does not fully control. The view from the balcony works the same way whether a leader is looking at herself or at the system she sits inside of.

Leadership versatility is not about mastering a single leadership style. It is about expanding a leader's capacity to recognize what a situation requires and respond accordingly.

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A leader who built the capacity

A few years ago, a CEO I had worked with for some time called me in the early days of COVID. His offices had just been shut down, and his 300-person call center, which processed protected health information under HIPAA regulations, needed to move to remote operations with short notice, creating significant compliance exposure and operational risk.

His instinct, the one that had served him for years, was to direct: clear, decisive, fast. He got to the balcony and saw that this was not going to be an ordinary crisis. There was no playbook, and no version of clear-and-decisive that was going to substitute for the learning he and his team were about to do.

So, he led differently than he had ever led before. He moved closer to his team, replaced direction with public thinking-out-loud, and replaced “I know what to do” with “we can figure this out.” He didn’t have all the answers and didn’t pretend to. What he had was the capacity to stay in the uncertainty long enough for answers to emerge, and the trust of a team that had watched him build that capacity over years.

By the time the operation stabilized, his organization had built something it hadn’t previously possessed: the ability to run a distributed, compliant workforce in a highly regulated industry. That is what self-efficacy, not simply confidence, looks like in a leader who has been building it for a long time.

Self-efficacy and the long game of leadership

Confidence is the easier thing to develop, the easier thing to recognize, and the easier thing to assess for. The leaders I’ve watched perform well in genuinely uncertain conditions, year after year, have rarely been the most confident people in the room. They’ve been the ones who knew themselves well enough to keep learning, and who had built, through repeated cycles of experience and reflection, the durable belief that whatever came next, they could meet it.

The world isn’t getting more predictable. The good news is that the capacity to lead through that kind of uncertainty is not reserved fora particular type of person. It can be built. And once a leader has built it in herself, she has something that will compound across every program she attends, every assignment she takes on, and every situation she has not yet encountered.

For organizations, the challenge is not simply identifying leaders who appear prepared. It is identifying leaders who know how to build capability when circumstances demand something new. The organizations that understand the distinction between confidence and self-efficacy will be better positioned to develop leaders who can adapt as change accelerates.

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