What is a Self-Fulfilling Prophecy?

Definition: A self fulfilling prophecy is a  statement that foretells the appearance of a given situation and it also unfolds the reaction needed for the situation to actually take place. It is a prediction that unconsciously promotes the required response for it to happen.

What Does Self-Fulfilling Prophecy Mean in Business?

This term was coined by the sociologist Robert Merton in a 1948 article called Sell-fulfilling prophecies” and it refers to declarations made by individuals that trigger the events they were prophesying. It is a cause-effect event, where the effect is foretold but that action is actually the cause for the event to take place. This phenomenon is sometimes referred to as a psychological pattern where human perceptions and opinions affect the way things are perceived and acted upon, and these opinions are confirmed as valid ones but only because the behavior influenced the variables to react that way.

In the business world, sell fulfilling prophecies are abundant, since it is a highly relational environment where interactions become very influential and statements made can derive in many different consequences. Individuals in management positions should be very careful about what they think or say about their co-workers, since whatever opinions or perceptions they might have can act in a way that what they think actually comes to life but only because their behavior was affected by those perceptions in the first place.

Example

Bank of Deutschland LLC is a big financial institution with presence in Germany and many other countries in Europe. Due to the recent financial crisis the bank has experienced financial difficulties. In his latest press conference, when the Chief Executive Officer of the bank was asked to comment about it he stated “If a portion of our clients decide to take out their money today we might be broke tomorrow”.

The public felt threatened by this statement and the people’s reaction was to withdraw their funds quickly in order to save themselves from the bank’s fallout. This created an insolvency situation at the bank and caused it to cease its operations. The declaration made by the CEO became a sell fulfilling prophecy and it was the trigger that caused the debacle.