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Ego is the invisible line item on every company’s profit and loss statement.” – David Marcum and Steven Smith in egonomics: What Makes Ego Our Greatest Asset (or Most Expensive Liability), Fireside, 2007

Fifty-three percent of businesspeople estimate ego costs their company 6 to 15 percent of annual revenue; 21 percent say this cost ranges from 16 to 20 percent.

That’s somewhat astonishing, considering “ego” is difficult to measure by any standards. But even if ego accounts for only 6 percent of revenue, the annual “cost of ego” would translate to nearly $1.1 billion to the average Fortune 500 Company – roughly equal to the average annual profit of these same companies.

What are we talking about here? Most people associate “ego” with words like “arrogant,” “self-centered,” “closed-minded,” “defensive” and “conceited.”

Big egos invade every team conversation, boardroom debate, marketing plan, client interaction, contract negotiation, employment interview and performance review. There’s no question it gets in the way and is a major cause of bad decision-making.

Each of us has an ego. Most of us strongly believe ours is healthy and vital to our success. Our egos contribute to self-confidence, optimism and drive for success. The overwhelming majority of us – 99 percent – don’t have overinflated egos, but we’re all capable of letting our egos run rampant on occasion.

When this happens, our personal success and organization’s performance pay the price.

10 Signs of Ego

Using five years of research, David Marcum and Steven Smith write about the costs of ego in their book egonomics:What Makes Ego Our Greatest Asset (or Most Expensive Liability), Fireside, 2007. When they refer to the “cost of ego,” they’re really talking about several detrimental workplace phenomena:

  • Hearing, but not listening
  • People thinking “me first, company second”
  • Only the “right” people have good ideas
  • Pressure to fit in
  • Failure to challenge status quo
  • Candid discussion saved for outside the meeting
  • Failures being buried and never mentioned again
  • Silos created and tolerated
  • Meetings going longer than necessary
  • Fear of making mistakes or admitting them

Companies can be populated with talented, high-IQ people with no shortage of vision, education, experience or good intentions, yet they may still have an undercurrent of out-of-control egos responsible for huge losses in productivity and profits.

Ego: Liability or Asset?

Why do people cling so tightly to their egos?

There’s a significant difference between “big ego” and big ambition. High-potential professionals usually start out with great ambitions, big ideas and a healthy ego. A certain combination of ambition, talent, ideas and healthy ego drives success. When coupled with good timing and help from others, great things invariably happen.

But there’s a trap inherent in success. When people begin to believe their “own press,” their success creates the illusion that they alone were responsible for workplace accomplishments.

Once people are in the limelight – and the more publicly visible and celebrated they are – the greater the tendency to forget the other factors involved in success. And once they attribute all of their success to their personal talents, their formally healthy ego relaxes and “big ego” takes over. Ego encourages the belief that anything they do in the future will be just as successful, or even more so.

It can be hard to recognize the point where ego becomes “big ego,” as our past successes reinforce the message that we’re the one – the “only” one – who pulled off the job to rave reviews.

“In over two-thirds of comparison cases (average/good companies), we noted the presence of a gargantuan personal ego that contributed to the demise or continued mediocrity of the company.” – Jim Collins, Good to Great: Why Some Companies Make the Leap…and Others Don’t, 2001

Ego As a Good Thing

Titrated properly, ego is inherently positive, providing a necessary level of confidence and ambition. If we know how to use it effectively and manage it well, it’s a powerful asset. Ego drives away insecurity, fear and apathy. It fuels an optimistic attitude, known to be a powerful predictor of success.

It’s a powerful asset. Ego drives away insecurity, fear and apathy. It fuels an optimistic attitude, known to be a powerful predictor of success.

Left unchecked, however, ego goes on a hunt. It seeks out reinforcement and more of whatever bolsters and strengthens it. But overconfidence and unbridled ambition can also attack our talents and abilities, with big ego leading to bad decisions.

When we fail to manage the intense power of ego, it actually damages our strengths and turns them into weaknesses. Through ego’s overconfidence, over ambition, insecurity and me-centered agenda, talents take on a different appearance, with a decidedly negative impact.

Clearly, ego doesn’t turn all of our strengths into polar opposites, but they become close counterfeits – traits that appear to be positive, but ultimately sabotage us. Consider these organizational “strengths,” which can backfire when left unchecked:

Strength Return Costs
Charismatic Paints a vision, inspires others, attracts talent, keeps people motivated Manipulates bad ideas to sound good; people overlook substance for style
Dedicated Produces, doesn’t let obstacles overcome the end goal, finds a way to get things done-no matter what Won’t consider alternatives, resists changes (even when they provide better outcomes), cuts off creativity in the name of “getting things done”
Optimistic Isn’t frozen by reality, even when it’s negative; can help people get through difficult times; reminds people of better times ahead Won’t listen to bad news, believes a positive outlook can overcome anything, rejects bad news as the pessimism of the naysayers

(For a complete table of strengths and their returns and costs, visit  www.egonomicsbook.com)

These subtle differences become leaders’ ultimate blind spots. Weaknesses feel almost the same to us as our strengths. While we can easily spot these differences in other people, they usually aren’t discernable to us.

Join us next time for Part 2 of The Costs of Ego as we discuss the warning signs of big ego and keys to a healthy ego.