Dec 11, 2015 · 6 minutes

It’s as cliched for founders to say they have a “no asshole rule” as it is for them to say they “only hire A players.”

The inevitable collision of those truisms, along with competition and scarcity, lend themselves to companies fraught with brogrammers, people who talk a better game than they have, and just plain jerks.

Harvard Business School has released a new working paper that might help to explain the asshole tolerance: It finds that toxic employees are more productive. Coupled with the fetishization of finding “stars,” you can see where that could bring the two rules come into conflict. If you want A players, do you just have to suck it up and hire the asshole? 

After all, previous research had found that "stars" are four times as productive as average workers and may generate as much as 80% of a business’ profits. That seems like something you want to optimize for, right?   

Wrong. The overwhelming result of this new HBS research is that the gamble is just not worth it: Toxic employees do more to damage your company than stars may do to uplift it. From the report:

We found that toxic workers are much more productive than the average worker. Thus...we found that there is a potential trade-off when employing an unethical person: they are corrupt, but they excel in work performance. This might explain how a toxic worker can persist in an organization. To explore this tradeoff further, we explicitly examine the tradeoff in increased productivity and the propensity for toxicity. When doing so, setting aside justice and ethical motivations for avoiding toxic workers, we found that avoiding toxic workers is still better for the firm in terms of net profitability, despite losing out on a highly productive worker. We also identify which personal characteristics present a tradeoff (or not) in terms of influencing both productivity and toxicity.

Finally, we estimate the value of finding a "superstar," defined as workers in the top 1% of productivity, versus the value of avoiding a toxic worker. Succeeding in the latter generates returns of nearly two-to-one compared to those generated when firms hire a superstar. This suggests more broadly that "bad" workers may have a stronger effect on the firm than "good" workers. In other fields and disciplines researchers have found that a negative has a stronger impact than a positive. For example, in the domain of finance, loss aversion recognizes that in terms of magnitude losses have more of an impact than gains... In the discipline of psychology it is a generally accepted principle that bad experiences have a stronger hold on our psyches than good ones... Finally, in the field of linguistics, it has been found that humans preferentially attend to negative words over positive or neutral ones (Estes and Adelman (2008)). It is no surprise to us that these findings hold true in the field of human resource management, as well.

The report described toxic actors as “Machiavellian” in nature, overly “self-regarding” and overconfident. The “machiavellian” bit came in because candidates who said in interviews that rules should always be followed were more likely to be terminated for breaking the rules than any other group, leading researchers to believe they were simply saying what they had to say to get the job. “Self-regarding” behavior essentially read as a lack of caring or empathy for others, and overconfidence lead to bad work and sloppiness.

How do researchers assess whether someone is toxic? For this study, they relied not just on surveys, but looked at performance of employees who’d been fired for toxic behavior. Here’s a handy chart:

You could also argue that it describes the actions of several of the Valley’s most celebrated founders.

Let’s revisit the “asshole” cover we did for PandoQuarterly a year ago.

Bullying certainly seems the remit of David Byttow’s (the “H”) now-defunct Secret app, and I can tell you from personal experience it was an admitted trait of Michael “I’m a hammer and everyone else is a nail” Arrington (The “L”).

Bullying and misogyny seem clear hallmarks of Uber’s management team. Worse: When caught in those acts, Uber’s Travis Kalanick (the “A”) didn’t fire anyone, maintaining a toxic culture. Ditto with Uber’s New York general manager, Josh Mohrer’s clear abuse of customer data. The survey is clear that toxic behavior compounds when surrounded by more toxic employees.

Tinder’s Justin Mateen (the second “S”) is in that graphic too. He was kicked out of Tinder for allegations of sexual harassment. And the toxicity at Tinder didn’t leave with him: His buddy Sean Rad has also threatened to smear a female journalist – sexism and bullying.

On that topic, I’m guessing we could consider the emails Snapchat’s Evan Spiegel (the first “S”) and the annotations of Genius’s co-founder Mahbod Moghadam (the “O”) in the camp of sexist or misogynist behavior. Although we should note, there have been comparatively few reports of Spiegel’s toxicity of late, and Moghadam has left the company. Sean Parker (the “E”) is in that graphic too. He has certainly been called self-destructive, and tends to wash out of organizations for those reasons. But his actions don’t seem to fit these definitions of toxicity, so let’s give him a pass for now.

Funny thing is, whenever any of these concerns are raised, the Valley elite seem to draw a line in the sand between founder/CEOs and everyone else at a company, arguing that many of the best founders in the history of Silicon Valley were assholes. You have to be a certain kind of person to build these companies, they say.

This research suggests there’s a positive short term trade off for working with assholes. But there’s nothing to suggest that, in the longer term, detrimental effects would only be contained to employees and not the CEO.

I asked author and Wharton professor Adam Grant if there was any reason to believe there is a double standard for founders. He said he’d never seen any evidence to support that being an asshole is a plus when you are the boss.

Via email:

“There is no compelling evidence that overall, it’s advantageous for a boss or a founder to be a jerk. Sometimes aggression helps them get ahead in the short run, but the long-term effects are generally devastating to their careers and their companies. When assholes succeed, it tends to be in spite of that quality, not because of it.” 

For Byttow, Moghadam, and Mateen, it seemed only to work in the short run. Arrington’s reputation caught up with him as well, and he’s mostly retreated from the startup world. Maybe Spiegel has reformed his ways, as investors have said to me. We’ll see with the others.  

Not bad for an unscientific sample size: Out of seven toxic founders we identified just a little over a year ago, four are already largely washed out of the system.

I’d love to see researchers take a look at toxic founders over time. Because hearing everyone cite Steve Jobs as the reason it’s cool is getting old.