The "no asshole rule" has pretty rapidly ascended from interesting business read to highly overused startup cliche in record time. Every founder seems to have latched onto this in some form or another in their quest to build a truly great company they can be proud to take home to mom and dad. It's a really nice sentiment and in theory a great little guiding principle. No one likes working with that guy. The one that you secretly fantasize about punching in the teeth. The problem is not too many people are always assholes. So in practice sorting out the assholes from the well, not assholes is tough. The only absolute is that there are no absolutes.
Now in all fairness there are plenty of clear cut cases. If you are sexual, physically, emotionally or otherwiseharassinganyone in the workplace you deserved to be forced to clean the septic system with a toothbrush or worse before you are shown the door. In most cases it's not that black and white. We live in the grey. There are rarely good people and bad people. We all have threads of both and the capability to be either one in any given situation. The issue is the people that seem to be incapable of shifting.
To be effective in any organization, be it big or small you have to know when to be a hard ass and when to be willing to give some ground. If you live in either camp 100% of the time, life is going to be tough. If you try to live life in the absolutes you're going to find life harder than it needs to be. Chances are if you are a hard ass all the time and have a hard time collaborating with other people, teams, or ideas you may be an asshole.
On the other hand if someone in your organization is a hard ass sometimes. It doesn't mean they are an asshole. Often it just means they have conviction. Listen to them and if you disagree, decide if you have as much conviction about your position. Then decide if you need to hold your ground or you need to find a way to get where they are.
I think it's time we retire the "no asshole rule" and just stop tolerating assholes. Go ahead and don't hire them, fire them, whatever it takes to make your team stronger. Do you really need a rule for this though? Isn't it sort of a given.