At a most basic level, self-awareness helps you to understand why you react in the way you do, assisting you in identifying your own emotional ‘stuff’ so you can separate this out from the real issue at hand. This helps you to respond to criticism better so that you can actually use it to grow, instead of getting defensive.
People who are self-aware also tend to manage other people better, whether those people report to you or are at a senior level to you.
For the people reporting to you, being self-aware can help you to motivate and get the best out of your employees. Consider for a moment how being unaware of your own insecurities can cause you to undermine a top-performing staff member. If you’re not aware of the fact that you feel threatened by them, you’ll never be able to control those negative aspects of your behaviour. You might try to take credit for a staff member’s good idea, or quash the idea before it can be implemented. This is incredibly demotivating and, ultimately, your business will lose good people and good ideas as a result.
Greater self-awareness also tends to lead to a better understanding of other people and their issues, and this can help you greatly if you’re in a position of having to work for a difficult boss. When you have insight into your own stuff and, equally, understand what makes them behave the way they do, they are less like to push your buttons.
What all of this boils down to is emotional intelligence. People who have it are better leaders, bosses and managers than people who don’t.