(FORTUNE Magazine) – Before we get started, before we give you our fabulous advice on how to manage your ego, and those of your big-headed colleagues, let's get one thing straight: We have nothing against ego, per se. Some of our best friends have them. And truth be told, you can't get far in business without one. A healthy ego makes a leader confident, clear-headed, able to cope with change. There's no denying it. "Oh, hell, everyone in this game has ego," says General Electric's Jack Welch. "You have to have self-confidence to seize the opportunities."

All true. And so is the fact that an excess of ego can make you promise more than you can deliver, fly too high, ignore other people. Abundant self-regard is an affliction that has killed many a corporate career. It can make a CEO deaf: Think Doug Ivester tuning out his lieutenants and his board of directors at Coke. And blind: Think Lucent's Rich McGinn, oblivious to the signs of his ouster until the very end. And dumb: Think Mattel's Jill Barad. A few years ago Barad exhorted her staff to create a "CEO Barbie" even as Mattel's sales and marketing people argued that most little girls don't know what a CEO is. Barad insisted that the doll wear a pink Chanel suit with gold buttons just like hers and be accessorized with a bumblebee pin like the one she always wore. CEO Barbie got the boot. So did Barad.

Not surprisingly, given all these pitfalls, getting big business egos to talk proved as difficult as coaxing beauty queens to discuss vanity--sure, it's what got them to the pageant, but talking about it is so...uncouth! So how did I pull it off? I knew you'd ask. I dropped names ("Jack Welch and John Chambers are talking"). I flattered ("You'll be in a star lineup"). I felt their pain. Cisco chief John Chambers says the topic "makes me uncomfortable. In a gut way, I don't like the word." I endured their euphemisms. Global Crossing founder Gary Winnick says that ego is often interpreted as "ugly. I prefer 'passion.' " And I accepted their rejection. Warren Buffett declined to be interviewed, but what writer's ego wouldn't get satisfaction from his parting comments to one of my colleagues: "The truest sign of ego is wanting to be in this story."

Donald Trump, of course, passed that test. Flattered to be invited to the assembly, he invited me to his office on the 26th floor of Trump Tower. There, sitting beneath dozens of Donald photos that decorate his wall, I asked whether he has the biggest ego in America. "I hope not," Trump replied, furrowing his bushy brow. For 15 seconds or so, he wondered whose might be bigger. Then, unable to think of an alternative, Trump elected Trump.

Trump is hardly the only big-time CEO who rolls along without making much of an effort to rein in his ego. Many great company leaders perilously ride the borderline between confidence and arrogance. Bill Gates' competitive ego, Steve Jobs' messianic ego, and Larry Ellison's self-indulgent ego have, as we know, caused these CEOs problems with the courts, colleagues, and competitors. But do you think Microsoft, Apple, and Oracle would be the companies they are today without their tremendous egos? Then there's Lou Gerstner (the biggest ego of all, some big business egos say), who turned around IBM but talks down to almost everyone. As Walt Disney's Michael Eisner argues: Mighty ego is fine, as long as talent is in equal proportion. "They have to be simpatico," he says.

The rest of us earthbound mortals, however, need to master the art of confidence without arrogance. "There's nothing worse than people who are full of themselves, who huff and puff and aren't curious," Welch says. "If you aren't curious, you become arrogant. And that's the road to disaster." Not all of us are born to be humble, and reining in our self-approbation can be a struggle. After all, feeling good about yourself feels...good. It's easy to get carried away, and even hot-stuff leaders like Jack Welch do. "My hubris clearly got in the way in the Kidder Peabody deal," confides Welch, referring to GE's 1986 buyout of the soon-to-be-troubled Wall Street firm. "I got wise advice from Walter Wriston and other directors who said, 'Jack, don't do this.' But I was bully enough and on a run to do it. And I got whacked right in the head." Welch ended up selling Kidder in 1994.

The Internet boom swelled the heads of lots of really smart people. Lise Buyer, a venture capitalist at Technology Partners in Silicon Valley, remembers visiting Webvan, the online grocer, in 1998, when she was an analyst at Credit Suisse First Boston. That was before Webvan's IPO, and Buyer asked management how the company would make money. Buyer recalls: "One of the senior executives said, 'Lise'--and he paused--'What you have to understand is that we are very, very smart.' That was his answer. The room fell silent." The executive says that's a total fiction, and he rightly notes that many investment banks were salivating to get in on the IPO. But we know what happened. In late 1999, Webvan's market value reached $8.2 billion; now it's $53 million. The stock trades for 11 cents. Smart. Very, very smart.

When failure looms, an out-of-control ego starts denying everything. Look at AT&T CEO Michael Armstrong, who lost his $100 billion gamble to bring AT&T into the future with grand cable acquisitions. He refuses to admit that his plan to break Ma Bell into four companies is a reversal of strategy. Last October he scolded analysts: "There seems to be a lot of fun in writing that this is a reversal or a repudiation of our strategy. I find that not only wrong but offensive."

Now stop and reflect. If you've reached this point in our story and think to yourself, "My talent and ego are equally huge. They are simpatico. I am the next Bill Gates," then there is nothing much we can do for you. (Seriously. Stop reading. Throw away the magazine. Go be your huge self.) But if you are mulling the possibility that your ego and your talents are, shall we say, unbalanced, read on. There is hope.

You don't need to kill your ego. Far from it. Ego, after all, is your sense of self. What you do need is to exercise some self-control. And to do that, you have to first recognize that you have a problem. For illustration, we turn to David Pottruck. He is certainly a successful fellow. The co-CEO of Charles Schwab is a risk taker, a visionary who pushed Schwab into its online strategy. But chances are he wouldn't be where he is today had he not confronted his arrogance back in 1992. He was a rising star, but he was also a know-it-all. He bulldozed into meetings with all the answers. He made people feel small. One day, his boss, then-president Larry Stupski, called Pottruck into his office, sat him down, and slammed him with shocking news. "He told me he and my peers couldn't stand working with me," recalls Pottruck, 52. "He said, 'You're overwhelming. Like a freight train.'"

Pottruck was devastated, enough so that he met with Terry Pearce, an ex-IBM executive turned leadership coach. In twice-monthly sessions, Pearce worked with Pottruck on how to empathize, build consensus, lead without dominating, and, most critically, listen. "Listen to understand," Pearce instructs, "rather than to defend your position." Pearce's listening course in three quick steps: (1) Pause ten seconds before answering--try it, it's painful! (2) Ask a question to clarify intent. (3) Respond with feelings as well as facts.

Over the years Pearce has changed Pottruck's view of what a true leader is. "Ego should be quiet self-confidence," says Pottruck. "You know, you meet people who don't fill a room, because they're comfortable with who they are." Like who? "Chuck Schwab comes to mind," says Pottruck, without missing a beat. Cynics whisper that Pottruck wants to be Schwab, his statesmanlike co-CEO, but will fail because a brawler can't really change. Maybe they're right. What's clear is that Pottruck wrestles with his ego every day. At a recent meeting he tried to ram an idea down his colleagues' throats. They called him on it. "I don't want to sound like a recovering alcoholic," he says, "but under stress, we revert to old ways."

Which leads us to a second step. Like members of Alcoholics Anonymous who call each other to avoid temptation, recovering egomaniacs are better able to keep to the straight and narrow when surrounded by people ready to challenge their arrogance. That's one reason many great leaders pick strong-willed, opinionated people to work for them. "Leaders like Welch and Andy Grove [of Intel], even though they have egos the size of Texas, have people under them who are unafraid and intellectually adroit," says Warren Bennis, who teaches business at the University of Southern California. So set up your organization so that you'll be challenged.

The leaders at eBay go this one better: They hold executives up to collective scrutiny. At the Internet auction house, subsuming the "I" is part of its philosophy. "We hire people who aren't focused on me, me, me," says CEO Meg Whitman. "One of the first questions I ask when I interview people is, 'What are the most effective teams you've been on, and how did those teams work?'"

These are not idle questions. Quarterly "ops meetings" are public forums, open to all employees, where senior execs rate themselves for successes, misses, and downright failures on the goals they set three months earlier. Such self-flagellation forces managers to recognize their own inadequacies, and eBay's as well. Chief operating officer Brian Swette, for example, gave himself a bad score for the launch of eBay Motors, a used-car exchange. The startup was rushed and sloppy. Following some major fixes, eBay Motors got on track. Swette, the former top marketer at Pepsi-Cola, has been retooled too. "Brian was cocky at Pepsi, but cocky within a cocky milieu," says Whitman, with a smile. Now, in his new milieu, he comes on (almost) humble.

Executives at eBay are not the only ones who seek out public humiliation to keep their egos in check. Jack Welch throws himself into "the Pit" at GE's management training center in Crotonville, N.Y., where he invites criticism and riffs on his mistakes. "We ridicule pompous asses all the time," he says. "You don't want to work for a pompous ass." At Cisco, Chambers holds "birthday breakfasts," where employees celebrating in that month grill the CEO. The more brutal, says Chambers, the better.

This deliberate humility is good practice for the real crises that require burying ego. Jacques Nasser, a naturally cocky man who describes himself as "a battler," had to choke back his pride last year during the Firestone tire recall. He went on TV and took responsibility, even as, he says now, he was frustrated that he wasn't getting adequate information from Firestone. Nasser says that he summoned a mantra--"Think of the customer first in everything you do"--to focus himself and his managers. It sure sounds like a platitude, but, Nasser says, "it was a beacon for us."

If you can learn to control your ego, then you are ready to move on to the next step: managing other people's egos--above and below. One of the best ego managers around isn't a FORTUNE 500 CEO; he's New York Yankees manager Joe Torre (see previous story). Who else has dealt so effectively with the notoriously dictatorial Yankees owner, George Steinbrenner? "He's the boss. He knows it. I know it," says Torre, who has avoided the knockdown verbal battles that other Yankees managers endured. "He likes to be called 'Boss,' so I call him 'Boss,'" Torre says.

Some bosses are not so easily appeased. In late 1998, Citigroup's CEO Sandy Weill ousted Jamie Dimon, his protege of 17 years. Dimon's ego was bruised, and the two didn't speak for a year. But then Dimon phoned Weill and invited him to lunch. Dimon knew that the way to make peace with his famously big-ego ex-boss was to swallow his pride and say, "I made mistakes." Which is exactly what Dimon did say to Weill. Although the two will never be close again, they're now on speaking terms.

Dimon had to confront the abyss after being ousted by Weill, but he survived. He's now chairman and CEO of Bank One--ego intact. John Mack is just beginning to confront the same chasm. Mack recently quit as president of Morgan Stanley after losing a power struggle with CEO Phil Purcell. Four years before, Mack had agreed to let Purcell, then of Dean Witter, be top dog of their newly merged company for the first five years. "The ego side of me said, 'Be CEO,'" Mack says. He's not sorry he ceded the job to Purcell to get the merger done. But now he's trying to figure out what in the world to do after 29 years at Morgan Stanley: "The thing you have to determine is, Who am I when it's over?"

Most big egos have a nagging need to do something, if only to prove to themselves that they're still great. Billionaire Eli Broad, 67, has done that. After building Kaufman & Broad (now KB Home) and SunAmerica, he became one of America's preeminent collectors of contemporary art and lead cheerleader for reviving downtown Los Angeles. "People ask me, 'Why don't you retire?' I want another act. It's venture philanthropy," says Broad, who lists 107 activities and 36 honors in his bio (need we say more?). Lee Iacocca, the one-time savior of Chrysler, keeps busy with new projects. At 76, he lives in Bel Air, Calif., and runs EV Global Motors, a struggling electric-bike startup with 13 employees. He goes into the office every day. EV will soon be introducing a bike that you might say is tailor-made for Iacocca. It's called (and this is not a joke) the e-Go.

But we hear what you're thinking: It's easy for the old guys, but what about those of us still in the maw of corporate America? Well, frankly, here's the deal: You thought you were going to be a dot-com billionaire, and now you know you're not. Taste that bitter reality. That's step No. 1 in mastering your ego. Now stand up, brush yourself off, and start anew as a mere mortal.

And be glad you're not Michael Saylor. Among the flaming egos that the Internet ignited, Saylor's may have burned brightest. He created a nice little software company called MicroStrategy, and then proclaimed that he was on a "mission from God" and that MicroStrategy would someday be "the next General Electric." It turned out that Saylor's ego was on a mission from outer space. The SEC charged MicroStrategy with misreporting revenues and profits. Saylor settled the case, paying a huge fine without admitting any wrongdoing. Now his stock is down from a high of $313 last March to $2.63; his personal net worth is down by $13 billion. Saylor, 36, is just trying to hold on. "My ego will get me through this," he says, as if to convince himself.

Lately he's been cutting staff and revising his dreams. A new home, reminiscent of the mansion from the film version of The Great Gatsby, is on hold. In his nondescript townhouse in Northern Virginia, Saylor used to have a Trump-like vanity wall decorated with 25 framed magazine covers and articles about himself. "That was my old stage," he says. He recently pulled down those ornaments and hung Van Gogh prints in their place. "I admire people who created great works and got very little notoriety," he explains, adding mysteriously, "Van Gogh ran out of money." Interesting choice for a role model, especially because less than two years ago he told FORTUNE that his hero was Julius Caesar. Not anymore. After all, he says, "Julius Caesar ended up with a knife in his back."

REPORTER ASSOCIATES Ahmad Diba, Ellen Florian

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