Some associates and I recently got talking about how to encourage smart young people still studying, or starting on their career tracks, to understand and use an ethical approach to work.

Many of the young people we were speaking of have a strong desire to start their own businesses.

Our conversation came about because some young people entering a class on professional ethics for a particular profession had a ‘surface’ understanding of what being ethical is all about. It’s difficult to engage on the specifics of compliant and ethical actions and processes required for a specific profession if a student does not have an existing framework helping guide him or her about what it means to be ethical, and how to recognise ethical dilemmas.

When, as result of this conversation, I started researching specific ways young entrepreneurs can make ethics part of their business plan, I came across an article so pertinent that I felt it unnecessary to write something new. Rather, I’d like to share the 11 practices that entrepreneurs can incorporate in their start-ups, as set out by ethicist Kirk O. Hanson.

Hanson was executive director of the Markkula Center for Applied Ethics at the Santa Clara University in the United States until his retirement in 2018.

Here we go:

One. Ethical entrepreneurs recognise the ethical dilemmas surrounding them in the early months of their new venture, says Hanson (2015). They know that the pressure to do smart things may translate into cutting corners or telling half-truths e.g. ending a new product into the market before sure it’s reliable, or totally ignoring the employee benefits of founding team members because there’s just no money.

Two. Ethical entrepreneurs make ethics a core value of their business. Hanson suggests entrepreneurs should explicitly set themselves apart by stating their intent to do business ethically. This can be achieved by stating which standards they adhere to, or including a code of ethics in the business plan and all company documents.

Three. Ethical entrepreneurs find early ways to make their ethical commitment real. This can mean stepping away from a business deal, for example, or letting a person go whose only criterion for success is financial success.

Four. Hanson (2015) says the ethical entrepreneur anticipates the ethical tensions that will be present in day-to-day decisions. “As business plans are written and product capabilities are described, the ethical tension between the truthful and the ‘hopeful’ is inevitable. As a start-up tries to attract top talent, there is an unavoidable ethical tension in determining how rosy a picture to draw for the prospect. The ethically thoughtful entrepreneur anticipates these tensions and talks about them with the team before the situations are confronted. In later years of a company’s life, this practice will become more formal ‘ethics training’.”

Five. The mature ethical entrepreneur is open about ethical questions and debates. He may not know the answers to ethical dilemmas immediately, but is willing to discuss and resolve difficult challenges with colleagues and clients.

Six. The ethical entrepreneur is cautious and consistent about avoiding conflicts of interest that come about as result of the partnerships and business relationships necessary at the start of a new enterprise.

Seven. The ethical entrepreneur talks about ethical values all the time.  She does not assume that all involved in the new business share the same values, or know what the shared ethical values are. She talks about them at any opportunity, so that all staff can avoid doubt.

Eight. The ethical entrepreneur hires the right people, and moves people who do not embrace the ethical values of the enterprise, out of the enterprise “before they can do damage to the reputation or culture of the firm”, says Hanson. This is where making the values of the organisation explicit early on is helpful, because there can be no doubt that a person who does not adhere to them needs to go.

Nine. The ethical entrepreneur looks for opportunities to engage the enterprise in service to the community in which it operates.

Ten. The ethical entrepreneur stops to assess whether his business is living up to its purported values, and if not, takes steps to redirect its course.

Eleven. The ethical entrepreneur renews commitment to ethical behaviour from time to time, especially as the business grows. Hanson says this involves checking and recommunicating the ethical vision for the business from time to time, and “preparing the company and its employees to deal with the ethical dilemmas currently faced”.

“The rewards of being an ethical start-up are many. Personal and team satisfaction is the most prominent. Workers who feel free to act ethically and to deal with others ethically feel better about themselves. Greater personal satisfaction translates into higher productivity and to lower turnover,” he says.

“For the individual entrepreneur, a reputation for ethical dealing can increase the opportunities for business partnerships and lower the ‘transaction costs’ of managing an ongoing relationship. ‘The ability to trust the other party and to do business on a handshake speeds up the progress we can make,’ commented one entrepreneur. A reputation for ethical dealing can make it much easier to attract employees and financing to the current venture or the next.”

 

References

Hanlon, K. O. 2015. A Good Start: Ethics for Entrepreneurs. Eleven key steps. https://www.scu.edu/ethics/focus-areas/business-ethics/resources/a-good-start-ethics-for-entrepreneurs/  Accessed 26 Sept 2019