Integrating Ethics Into The Core Of Your Start-Ups: Why And How

by | Mar 20, 2010 | Development

Great article from TechCrunch guest author Vivek Widhwa on how to integrate ethical behaviour into the core fabric of your organization’s culture. He notes that without it happening at the very beginning, modelled by the executives (especially the CEO), and reinforced by the Board (via their expectations and to some degree by the very composition of the board itself) that it will be very hard to modify a culture.
Interesting quote: “Harvard Business School professor Michael Beer researched the difference between companies that perform at high levels for extended periods and those that implode when they reach a certain size. When analyzing the spectacular failures in the recent financial meltdown, he found that:
  • Of the original Forbes 100 (named in 1917), 61 had ceased to exist by 1987. Of the remaining 39, only 18 stayed in the top 100, and their return during the period 1917 to 1987 was 20% less than that of the overall market.
  • Of companies in the original Standard & Poor’s 500-stock index of 1957, only 74 remained in 1997; of these, only 12 outperformed the S&P 500 in the period 1957 to 1998.
  • The average CEO tenure in the U.S. is 4.2 years, less than half the 10.5-year average in 1990.

Beer posited three core reasons for the failure of so many Wall Street firms in the fall of 2008: the firms lacked a higher purpose (in other words, they were focused on short-term gains, profits, and bonuses); they lacked a clear strategy; and they mismanaged their risk. Companies like Charles Schwab and US Bancorp were able to avoid the fallout by having a laser-like focus on customer service and on honesty and transparency. Neither company touched the subprime mortgage securitization market, because they saw it as risky and simply not the kind of business that served the company’s long-term interests.”

He offers six tips that leaders can implement to effectively build a healthy culture and they all make sense to me. The underlying premise, of course, is that good people don’t intend on becoming unethical, but once they start it’s very hard to dig yourself out. These tips are practical enough that it should create some internal barriers to bad behaviour. They are:
  • Create a culture of openness and welcome dissent
  • Lead by example
  • Learn from immediate peers or distant models
  • Recognize your own fallibility as a leader, know your limits, and beware of the myth of immortality
  • Remember that institutional character — like a liquid cupped in your hand — is fragile; easily lost; and hard, if not impossible, to regain
  • Establish an independent board

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