05/12/2016 03:59 EDT | Updated 05/13/2017 05:12 EDT

Why Being An A**hole Costs Money


This just in: Jerks make better business leaders. That, of course, is an assumption that has been around for a long time, not to mention one that has been somewhat difficult to counter, especially in Silicon Valley.

Indeed, 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 that the so-called right "DNA" for an entrepreneurial business leader 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 tend to 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 "Beware the A-hole Tax," an Ivey Business Journal article based on negotiations research being conducted by Ivey Business School 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 Business Insider 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."

AUTHOR BIO: Thomas Watson is the editor of Ivey Business Journal published by the Ivey Business School at Western University in London, Ont.

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