Before the lovely Audrey Hepburn appeared in My Fair Lady in 1964, there was George Bernard Shaw's Pygmalion in 1913, and before that there was the mythological Greek sculptor Pygmalion, who was so enamored with his work that he fell in love with the statue he created. The Pygmalion Effect is a form of self-fulfilling prophesy, where the belief in a thing is so strong that it comes to be. This phenomenon has been studied (and disputed) in the classroom for decades. The theory suggests that teachers who believe their students are high performers will inevitably (and often unconsciously) have an influence on the aptitude of their students. Regrettably, the reverse is also true; teachers who feel their students are poor performers will have a negative effect on their students' development.
The Pygmalion Effect carries over into the workplace.* Case studies have shown that managers who believe their employees are high achievers will influence the performance of their employees. Conversely, managers who have lower expectations of their employees will inevitably influence employees to perform just enough to "get by." It's not a question of motivating them to work harder--performance expectations that are beyond achievable goals will inevitably result in failure. Rather, it is how a manager treats their employees and how they feel about them that will have a greater impact on their performance.
As a new manager coming into an organization you may be particularly susceptible to the Pygmalion Effect. In the workplace culture of an organization, there will inevitably be some employees that are viewed as a "drag" on the company. This is a pivotal moment in your development as a leader. You will be influenced by the opinions of others, including your supervisor, your peers, and especially from within your own team. Importantly, your ability to inspire your employees will depend on how you think about your own abilities. If you have the confidence to motivate your team, they will respond. If you are shaky about your leadership skills, perhaps because you feel you are lacking experience in the industry, your ability to inspire them could be a challenge.
Leaders need the confidence of a Henry Higgins. Many employees have the capacity of a Liza Doolittle. Be your own Pygmalion. Make your own assessment of an employees' abilities, and give them a chance to succeed.
*Livingston, J. Sterling. Pygmalion in Management. Boston: Harvard Business Review Press, 2009.