Beware the A-Hole Tax

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Not long ago, it was generally accepted that nice guys and gals finish last, at least in the cutthroat world of big business. A lot has obviously changed since American economist Milton Friedman insisted that there is “only one social responsibility of business — to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game.” But while the social enterprise movement has helped make the end-game of capitalism more likable in recent years, the idea that jerks make better CEOs stubbornly persists.

For example, after collectively wondering if they should be tougher leaders or negotiators, a Boston group of tech executives gathered in 2012 to discuss the benefits of so-called “assholicism” in the corner office. A marathon discussion ensued and, according to the Boston-based Xconomy website, the following conclusion was eventually reached: “Yes, a CEO has to be somewhat of a jerk to succeed.”

Since the global economic meltdown, of course, Ivey Business School research on leader character has demonstrated that long-term sustainable success is best gained by having a balance of personality traits in C-suite personnel. And these traits include compassion and humility and empathy. In other words, putting a jerk at the helm of an established company isn’t advisable even if they have excellent experience, drive, commitment and competencies.

However, whether or not it pays to be a jerk when founding a business remains a more complex question, at least at first glance — and not just because the leadership of Steve Jobs gave us Apple.

As Business Insider pointed out in a 2014 article entitled “Why ‘Arrogant Jerks’ Become Rich and Successful in Silicon Valley,” there is a persistent notion amongst the entrepreneurial crowd that the so-called right “Startup DNA” is comprised of characteristics such as “resilience” and “ability to accept risk,” along with “arrogance” and the ability to be “a huge jerk.” Inside Silicon Valley, the article notes, people accept CEOs behaving boorishly because “arrogance runs rampant and investors seem to reward ruthless behavior with piles of cash.”

But what if all those billionaire jerks that everyone uses as an example of why it pays to be an ass when launching a company had actually reined in their inner boor when bringing ideas to market? According to Ivey Professor Ann Frost, there is a good chance that many of the world’s so-called successful A-holes would be richer today if they had played nice, or at least nicer.

Keep in mind that even visionary company founders need lots of help navigating the road to success. And that help includes everyone from the suppliers who influence product profitability to the financial backers who dictate a start-up’s ownership distribution. And it is no secret that these critical partners dislike doing business with jerks — even visionary jerks.

As Business Insider noted, when venture capitalists invest in start-ups, they end up spending a lot of time with the management team that they are betting on. And it can be a real pain in the ass working with an ass. VCs also typically add founders of their new portfolio companies to their CEO networks, which tend to function much better when members comfortably bat around ideas instead of aggressively butt heads over egos. For these reasons (and others), some VCs actually have what they call no A-holes policies.

However, as the Business Insider article also pointed out, taking a pass on a visionary idea just because the person behind it acts like God’s gift to capitalism is not easy. “I want not to invest in jerks,” VC Eileen Burbidge explained, noting life is too short. But she still can’t help wondering if avoiding asses is a bad investment philosophy. “I’d like to think not,” she said, “but I’m supposed to back founders for the best ROI, not personality.”

The flip side of feeling bad about avoiding doing business with jerks, of course, is feeling bad about agreeing to work with them — and that’s where nice guys and gals have an advantage.

“Business is all about deal making,” says Frost, who teaches executives the art of deal making in the Ivey Negotiations Program. “And nobody likes to negotiate with an ass, so they make them pay an A-hole tax, often without even realizing it. This isn’t a trivial matter. Being a jerk can be seriously costly, especially for an entrepreneur negotiating ownership stakes with early-stage investors. Think about any one of the business world’s high-profile billionaires known to have made it despite being a total jerk, and then think about what a difference that an extra one or two per cent ownership in their own companies would make to their net worth.”

Nobody knows exactly how much being an ass costs you in negotiation outcomes. But Frost is working on it. In partnership with University of Regina Professor Chris Street, the Ivey negotiations expert is designing a study to assess how much a person’s reputation for being a jerk costs them in deal making. “We hope to put together some hard data on the A-hole tax in order to help better convince people that character matters in negotiation, just like it matters in the corner office.”

Frost isn’t saying that you don’t need to be tough when you negotiate. Her message is a warning about the risk of limiting your ability to strike a favourable deal by coming to negotiations with a reputation that makes people across the table regret working with you before talks start. “Too many people think negotiations is about beating the other side,” she says. “But as we drive home in the Ivey Negotiations Program, the goal is really finding common ground. And nobody wants to share ground with a jerk, so they are inclined to make them pay.”

Now, if you already have a reputation for being an ass, don’t fret. Whether you earned your bad rep or not, you can repair the damage. According to Frost, A-holes generally inflict damage by looking down on people, so anyone trying to strike the best deal possible needs to check their ego at the door. But that does not mean softening legitimate demands. After all, when it comes to seeking mutually beneficial outcomes, conflict itself is not a problem. In fact, conflict over ideas generally leads to superior outcomes. Interpersonal conflict, on the other hand, leads to the A-hole tax.

“So if you are perceived as an elitist ass,” Frost says, “you need to address that issue before talks start, which can be done by simply showing respect for the other side before sitting down to negotiate. Giving the other side respect is free and it leads to mutual respect because it is actually hard for someone else to perceive you as a total jerk if you treat them like an equal.”

 

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