Why many entrepreneurs come across as jerks

August 7, 2012, 2:57 PM UTC

FORTUNE – It’s a common debate: Do the very best leaders exude — and lead with — humility, or are they self-absorbed to the exclusion of everything and everyone else?

In the course of conducting research of entrepreneurs across the globe, my co-authors and I found that most exceptional leaders tend to balance their convictions with a healthy dose of humility.

Walking this tightrope calls for careful balance, and much of that equilibrium comes down to three questions all entrepreneurs must ask themselves: Are they right? Are they true to what they say and feel? What stage or evolution is their company at?

Are they right?

Business-builders need to lead with conviction, especially if they are trying to be disruptive. When companies are really pushing boundaries — think Ikea democratizing well-designed furniture, or Uniqlo doing a parallel effort in clothing, or Facebook (FB) morphing from college meet-up project to global social network — they need a leader at the helm who has the conviction (and yes, sometimes the ego and arrogance), to know he or she is right about something. The big question is: Are they actually right?

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If the business succeeds, people are quick to be revisionist and recall a leader’s conviction as “visionary” and may be more forgiving of his or her strategies and flaws. If the company doesn’t live up to expectations, people tend to recollect a leader’s certainty in less kind terms, or to say something along the lines of “Great-leader-Lousy-Human-Being.” With that said, the very best leaders can celebrate their progress while retaining the humility and good sense to shift gears when things aren’t going well. After all, how many of us still remember Odeo as the precursor to Twitter?

Are they true to what they say and feel?

The most effective leaders constantly question themselves while wrestling with self-doubt. But the best of the best swiftly resolve to suspend their own disbelief. They believe what they are doing is worth caring for, worth attempting, and is important enough that it might actually change the way people act and think.

Our research found, not surprisingly, that the best business builders were comfortable with genuinely expressing themselves. They weren’t perfect, but you always knew where they stood and who they were. They weren’t pitching you with slides and complex plans, but rather with an infectious story. You may have felt a little put off or even overwhelmed by the degree of self-confidence in the room, but you might also have found yourself falling in love with the ideas, too.

What stage is the company at? 

Balancing conviction with humility is essential throughout the business-building journey, but it matters most at two key points. The first is when a company evolves from the founding to the growth stage, and the second is when it moves from the scaling stage to an extending stage — that point where the business needs to either reinvent itself or broaden its core offerings for the sake of new growth. For example, Google (GOOG) evolved from a search company to an all-encompassing platform company, and Coach (COH) went from making handbags to offering consumers a complete lifestyle solution.

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All companies pass through common growth phases or cycles that begin with getting a proof-of-concept followed by — in a successful scenario — a first period of rapid growth. Most founders hit a wall or at least speed bump when they are looking to grow their company without making some tradeoffs in culture or vision.

At this stage, a company often requires different skills and processes — and leaders need to exercise the humility and pragmatism to acknowledge this. They must ask themselves, “What are the things about this company that are core and incorruptible, and which elements are less sacred and need to change?” Another key question to ask: “Do I have the skills to do it myself, or should I bring in a different person?”

Truth is, there are very few Michael Dells and Richard Bransons out there, and in many cases, these leaders relied on other executives to fill gaps while they carried the broader vision forward.

A similar dilemma holds true for companies that have gone through long-term, successful growth and now enter into the extending stage of growth: does the leader have the guts not just to persevere but also to evolve? Apple (AAPL), of course, is a poster-child for this (dropping the word “computer” from its company name in 2007 to reflect the shift), and Yahoo (YHOO) and Research in Motion (RIMM) have found themselves at their own moment of truth. But over the next decade, the same questions will come about for our contemporary darlings — the Facebooks of the world — that will have to meet new innovations and entrants into the market.

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How do you lead with strength while keeping a sense of honesty about your company’s vulnerabilities? It starts with self-awareness, both as it relates to a leader’s individual qualities as well as the decisions they make. It’s a timeless quality that marks all great business leaders.

Are you arrogant? Are you humble? Are you a little of both? What really matters is that you know yourself; that you have a sense of when to dial it up and cool things down, and to ask for help when the situation demands.

Anthony Tjan is CEO of Cue Ball Capital and is co-author of Heart, Smarts, Guts and Luck (Harvard Business Review Press).