Why Do Start-ups and SMEs Need A Strong Ethical Foundation?

27 May, 2021

As Vanessa Pigrum points out in this article for Women’s Agenda, a significant proportion of start-ups aren’t successful. So how do entrepreneurs give themselves the best chance of success?

There are 305 million start-ups in the world, and 100 million more opening each year.  Of these, a frighteningly high proportion will fail. It is arguably  tougher for women founders, with fewer of them and barriers such as the gender gap in venture capital investment continuing to be a problem.

So, what do start-ups and SMEs need to succeed?

  1. Passionate founders, who can articulate their vision and inspire potential new hires with the same zeal to bring the Grand Plan to life
  1. Brilliant (hopefully) concepts which set them apart from the ordinary in the market, and a belief that what you do is different to and better than anything out there. Unfortunately, enthusiasm alone isn’t enough to build a successful empire.   
  1. Backers who see the potential in your brilliant concepts and are prepared to risk their money on a venture that could be a spectacular success, or flaming failure. With luck, those backers may also provide the benefit of their experience, or you may find other mentors who’ll act as sounding boards as you feel your way forward.
  1. A strong ethical framework. A start-up will face uncertainty, ambiguity and unforeseen challenges.  To successfully navigate the unknown the founders will need to have solid, well examined ethical foundations so they can make the right decisions at the right time.  Times of crisis or high pressure are not the times to begin contemplating what you stand for and what you’ll allow. Gut feel will only get you so far. 

The first three points are pretty self-evident. Number 4 might have been a surprise. In amongst the excitement and can-do atmosphere of small companies where everyone pitches in and does amazing things on the smell of an oily rag, taking the time to consider and articulate the values key to you and your organisation might seem redundant. Either they’re obvious to everyone slogging next to you, or they’re something which will evolve and become apparent as success brings more time for those kinds of conversations. 

However, we know that doing the hard work at the start and really thinking through your values heads off a raft of problems down the track. For a start, defining your ethical framework is as much about what you won’t allow as much as it is about what you stand for. When you’re out there hustling to build your business the temptation to say yes to every piece of work you’re offered is immense. How do you balance the need to turn a profit with the importance of working on projects which align with your values?  How do you scale up without sacrificing integrity?  Making an exception ‘just this once’ is a slippery slope.

As the brilliance of your concept is recognised and your endeavour expands, you’ll be bringing new people onboard – staff, Board members and contractors. They may see the exceptions you’re making and internalise that thinking. A clear set of principles and guidelines will get everyone on the same page, particularly if the growth is sudden and doesn’t allow for the same time to be invested in each new hire.  Some of more spectacular recent corporate falls from grace have been the result of seemingly inconsequential and expedient decisions. Creating clarity around expectations and integrity can help make explicit what’s expected of everyone representing your business.

A clear ethical framework  also helps customers and other external stakeholders understand your brand. It’s more than having a mission statement and a list of values. They’re easy to write, and forget.  An ethical framework means those words leave the page and become part of your business reality. They inform your decisions, provide the lens through which you make choices and bring your brand to life. Consistency inspires trust and confidence in your products’ consumers, and investors.

And when there are unexpected challenges, standing firmly upon a well constructed ethical foundation gives you a strong position from which to respond. As the last 12 months have illustrated, sometimes important decisions need to be made with little warning or in fluid situations. The organisations that kept their values at the fore when making their decisions have fared well. Their examples will be remembered. 

As you prepare to launch your start-up, or build a thriving SME, equip yourself in every way possible  for success. And good luck!

Womens Agenda, Vanessa Pigrum, May 2021. Read the full article here.

Cranlana Centre for Ethical Leadership’s programs include the 2 day Executive Ethics, 6 day Executive Colloquium and year-long Vincent Fairfax Fellowship. We also deliver online and tailored corporate programs. Find the right program for you. They are all held under the Chatham House Rule to encourage genuine and open debate, and allow participants to candidly discuss sometimes sensitive issues in private while allowing the topic and nature of the debate to be made public, and contribute to a broader conversation. The alumni program offers ongoing leadership development support and a lifelong connection with Cranlana.

Photo by AbsolutVision on Unsplash