Business Ethics

Posted by On November 14, 2008 1 Comment

Nothing tests your ethics like being a startup CEO.”

Someone said this to me recently and after laughing out loud I thought, you know, that’s really insightful.

Few are outright , but every early stage startup CEO is repeated stretching the truth or conveniently omitting facts to make things look better than they really are.  This is particularly true in the very early days when you are trying to hire key employees, raise money and land customers.  And it usually takes the form of describing what the company/product/etc. will look like in 3-4 months and implying that is how it is today.  The trick, of course, is to do this in such a way that it comes across as optimism and doesn’t cross the line to either “out of touch” or, of course, fraud.  Here are a couple of tips on how to avoid the latter:

  1. Ethics Find a foil.  If you’re a startup CEO, odds are you’re an optimist.  What you need is someone on your team (CFO is a great place to find these folks) who will keep you honest.  And be explicit…tell them you need for them to be your fact checker and buzz kill if need be.
  2. Come clean.  Before you finalize anything based on your best sales pitch (e.g. hiring, raising money, signing a contract, etc.) set aside a time to come clean and reset expectations appropriately.  It’s sort of like the speech Obama gave in Grant Park the night he won the election.  He was already resetting expectations.  For example, if you’re raising money, it’s best to sit down with your new investor sometime before close and say, “I think we’ll win, but if we don’t here are all the things that will be the potential cause.”
  3. Remember it’s a slippery slope.  Everything is relative and we’re always judging the current truth based on the last “truth.”  If a booking isn’t “when you receive the signed contract” instead of “he told me he faxed it,” then it’s not far to “he told me he’s going to fax it.”  This is the take away from one the of the first cases they teach to new MBA students at Harvard Business School (the case is The Parable of the Sadhu) and it’s a good thing to always keep in mind.

And my last point goes pretty much without saying that, at the end of the day, it is far better to lose the hire, the funding or the sale than it is to lose your ethics.