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The ancient era of Vice Media, cofounder Shane Smith sent emails of several copies  of the Montreal-based start-up's nascent publishing  record store in a skate shop in Miami  in Los Angeles so that the company could tell advertisers its readership was distributed across North America—an act befitting the nickname "Bullshitter Shane," allegedly bestowed on him by a friend and colleague.

 Such shady behavior is all too frequent in the startup industry. Entrepreneurial standards urge founders to hustle and promote their businesses. Indeed, great founders are lauded for their capacity to inspire others, even if it requires distorting the truth. Consider Steve Jobs, the ultimate start-up pitchman.

Early Apple employees characterize him as having the ability to "convince anyone of practically anything." Engineer Andy Hertzfeld described Jobs as having a "reality distortion field, a confounding mélange of a compelling argumentative style, an unbreakable will, and a will to manipulate any fact to meet the cause at hand.

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 That's an important ability for founders, who must persuade their audiences to suspend disbelief and recognize the opportunity that the entrepreneur sees: a world that could be but isn't yet. However, reality distortion is a slippery slope. Enthusiasm can lead to exaggeration, then to deception, and finally to fraud. This decline is exemplified by Elizabeth Holmes, the Theranos founder and Jobs enthusiast who reportedly defrauded investors and customers by peddling fake blood tests.

 The Holmes situation is unusual; few entrepreneurs face criminal fraud accusations, as Holmes did when this article went to print. Obfuscation, lying of omission, exaggeration, embellishment, evasion, bluffs, and half-truths are among the more common infractions. They come at a cost. Deception causes market inefficiencies by extending the lifetimes of failed ventures and making it harder for VCs and employees to decide where to put their money or labor. We believe it also has a personal impact on entrepreneurs, given the tremendous stress that often comes with lying.

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Reality distortion is a slippery slope. Enthusiasm can lead to exaggeration, then to deception, and finally to fraud.

How can we eliminate deceit in the start-up culture while encouraging entrepreneurs to take chances and dream big? We have spent decades exploring this subject and will address it from a multidisciplinary perspective. One of us (Jackson) is a successful entrepreneur turned academic; one (Haris) teaches business and philosophy; and two (Nick and Christian) have academic posts focusing on ethical entrepreneurship. In this post, we will first investigate why deceit is so popular among entrepreneurs, and then show why common arguments for it are false. Finally, we propose behavioral principles that can assist entrepreneurs in being both successful and honest, which benefits everyone.

Why Entrepreneurs Lie.

Frank Knight, a Chicago economist, was among the first experts to investigate the function of entrepreneurs in the modern capitalist society. In his 1921 book Risk, Uncertainty, and Profit, he distinguishes between entrepreneurs and other businesspeople by their willingness to act in the face of uncertainty. Of course, established organizations suffer uncertainty, but start-ups must travel through a thicker fog. Entrepreneurs frequently don't know if their product will work, how it will be created, who their customers will be, or how to reach them. Knight defines an entrepreneur as someone who, in the face of uncertainty, acts while others dither.

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However, action alone is insufficient. An entrepreneur need the assistance of others and must thus be a persuasive cheerleader—when pitching VCs for money, luring prospective employees away from lucrative professions, persuading customers to take a risk on a new product, and instilling confidence in the team amidst the start-up's fluctuating fortunes.

 That is the first reason some entrepreneurs are dishonest: they take advantage of numerous opportunities to commit fraud. They, more than most other businesspeople, are always "on."

The second reason is that entrepreneurs face significant risks. They have the potential to generate significant wealth as a community, but it will be dispersed unevenly. According to research, the median entrepreneur earns poor risk-adjusted returns—statistically, founders would be better off working for an existing company or investing in a diversified index fund rather than owning their own equity. But what the median lacks, the maximum compensates for. A small minority of entrepreneurs achieve huge riches. Indeed, entrepreneurs top the list of the world's wealthiest people.

To achieve such large rewards, a thousand things must go well, and a founder's fortunes may be on the verge of collapse at any given meeting. Failure can mean not only missing out on a massive fortune, but also disappointing friends, family, employees, and investors. With such high stakes, it can be tempting to bend the truth.

The third reason entrepreneurs are prone to dishonesty is that they can easily get away with it. Entrepreneurship has a high level of what economists refer to as "information asymmetry." Founders typically head private, closely owned organizations and have access to information that others, such as investors, customers, and workers, do not. Leaders of publicly traded firms are subject to stringent transparency rules and intensive scrutiny; if they make a falsehood, many people will be able to find out. Even at a venture-backed start-up with a board of directors, only a small number of people have access to the company's internal operations, so deceptions can easily go undetected or uncontested.And, because start-ups are staying private for longer periods of time than in the past, such opacity is becoming more widespread and permanent.

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None of this implies that entrepreneurs are less ethical than other businesspeople. Based on the limited studies available, they appear to have higher moral standards than corporate executives. However, the temptations that may persuade them to be less than entirely truthful are enormous—and decades of psychological research have shown that even persons with high moral standards are more prone to transgress in situations where ethical failures are prevalent and condoned.

How to Identify the Causes of Underachieving Salespeople

H.L. Mencken famously stated, "For every complex problem, there is an answer that is clear, simple, and wrong." I'm not sure he was referring to sales compensation, but he might have been.

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 When sales performance falls short, many CEOs immediately change the sales compensation scheme. Before you tackle a complex problem with a simple solution, consider why it may not be the silver bullet solution you seek. 

 Rethinking Sales Compensation.

Many CEOs believe that changing compensation schemes can re-energize their sales teams and motivate them to win new business. However, history demonstrates that this technique frequently falls short. The shortcoming stems from the idea that financial incentives are the key motive for salespeople.

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 The new fact is that most salesmen are not financially motivated. Over time, the share of salesmen motivated by money has dropped substantially to just 17 percent. The majority are intrinsically motivated, meaning they find contentment in mastering their craft, loving their work, and contributing to a greater cause. 

This finding is critical: adjusting compensation plans only works with financially motivated sellers. The remaining 83 percent are motivated by coaching and prospects for improvement, rather than monetary benefits. 

 A more successful strategy is to investigate the root causes of sluggish sales performance. These often focus around three areas:

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 1. Talent: A salesperson's effectiveness is largely related to their suitability for the role. Hiring and onboarding methods that fail to discover candidates with the necessary dedication and sales DNA may result in a sales force that underperforms regardless of how much you pay them.

2. Selling Capabilities: The market has shifted drastically over the last few years. If your sales team's abilities have not kept up, they will struggle to find leads, sell consultatively, qualify prospects, and complete deals.

 3. Performance Conditions: The sales support system includes processes, CRM integration, marketing support, and territory management. Any deficiencies or irregularities in these areas can degrade overall effectiveness.

Smart Strategies for Progress.

Before you make any compensation modifications, you must first answer the following critical questions: 

 • Finding the Right Team: Can your present team get you where you need to go?

 • Role segmentation: Do you distinguish between hunters, farmers, and account managers?

 • Leading Indicators: Have you recognized the important factors that influence sales performance?

 • Managing Performance: Are you willing to phase out underperforming "C" players who have been on your team for more than a year?

 • Money Conversations: Which team members struggle to address financial issues?

 • Defined Processes: Is there a defined sales process that everyone follows?

 • Leadership Role: Do your sales managers primarily sell or effectively manage their teams?

• Unpacking Excellence: What distinguishes your best performers from those who underperform?

 • Training Analysis: Have you identified specific training needs and evaluated the program's return on investment?

 • Coaching Priorities: Which areas of learning and coaching have the greatest potential for improving performance?

 Starting sales is a difficult problem. There are no simple solutions. That's why changing compensation programs is rarely effective. 

To summarize, I would like to say rejecting the illusion that altering compensation schemes is a quick cure. Instead, investigate your sales team's motives, processes, and competencies. Addressing underlying issues and focusing on coaching and growth will ensure that the problem is solved correctly the first time. Remember that a comprehensive understanding is the key to achieving extraordinary sales results.