In the early stages of launching a business, entrepreneurs spend much of their time focused on things like product development, marketing, researching the right vendors, hiring key people, and, of course, finding the right funding to support their vision. Those types of foundational pillars, however, can draw attention away from something equally important to long-term success: Creating a culture of integrity.
Defining and living out your company’s vision, mission, values and operating principles is just as important as where the next investment or customer will come from, otherwise the ship will flounder without a rudder and end up in precarious seas.
Many companies, of course, list integrity as a core value. And – setting aside the criminal elements of the world – you’d be hard pressed to find an enterprise that doesn’t aspire to operate honorably from the outset. Yet, case study after case study describes businesses that started strong but faltered when things like pride, avarice, and dishonesty grew dominant within their cultures.
These companies have at least one thing in common: They failed to feed a culture of integrity.
It’s generally agreed that integrity is an integration of your beliefs, actions and words. In other words, saying what you mean and doing what you say. And while integrity always begins at the individual level, individuals form a collective culture. So it is incumbent upon entrepreneurial leaders to not only set the example, but also create supporting policies and structures for a culture that knows what it believes and integrates that with its actions and words.
The temptation, however, is to talk a nice game about integrity while the real culture emphasizes revenues, profits, and growth to the point that the ends begin justifying the means. When organizations feed this aspect of the culture, it thrives and integrity starves to death.
Uber Trouble
David Larcker, a professor of accounting at the Stanford Graduate School of Business, called Uber an example of a company that failed to “pay enough attention to how they wanted to do business from a cultural and ethical standpoint.”
In an article about the ride-sharing company for Standford’s Closer Look Series, Larcker and researcher Brian Tayan pointed out that, “Over time, competitive, operating, and governance problems popped up like a game of whack-a-mole.”
Uber’s toxic culture began to come to light in 2017, and, among other things, the Equal Employment Opportunity Commission, “found reasonable cause to believe that Uber permitted a culture of sexual harassment and retaliation against individuals who complained about such harassment.”
Uber’s growth happened so quickly that its board found itself unable to slow down and look at disturbing claims and issues that resulted from cracks in their culture.
As with many successful startups, charismatic leaders at the top can become revered and their personalities, for better or worse, embedded in the company’s culture. When the CEO is a founder, the board has to be especially diligent about asking questions and proactively addressing issues related to integrity in the culture.
A “We” Bit of Trouble
Uber made a series of changes to its board and leadership that led to cultural healing, but other companies have not been so fortunate. WeWork, for example, launched in 2010 and grew quickly thanks in large part to the big personality of cofounder Adam Neumann, but is still struggling from the fallout of a lack a solid mission, values and operating principles.
Shortly after the company filed for an IPO in 2019, an article in The Wall Street Journal exposed questionable financial practices and a culture out of control. WeWork’s valuation dropped by nearly $40 billion in about a month and Neumann stepped down as CEO.
WeWork stated purpose was to “Elevate the world’s consciousness,” which sounds noble enough, but isn’t actionable. And Neumann brought on trouble by hiring family members in key roles, buying buildings that he leased to WeWork (putting himself on both sides of the transaction), and charging the company $5.9 million for the rights to its name after he had it trademarked.
Standing up for Integrity
Erica Cheung, one of our featured speakers on campus last year, understands the importance of start-ups having a clearly defined culture of ethics.
Cheung was a whistleblower who helped bring to light many of the cultural and ethical lapses within Theranos, the medical testing startup founded in 2003 by Elizabeth Holmes. Theranos raised over $700 million in funding and its valuation peaked at around $10 billion, before Cheung and others exposed a culture that intentionally faked the results of its blood testing technology.
The company went under and Holmes and former president Sunny Balwani are now serving time for convictions on fraud-related charges. Cheung, meanwhile, founded Ethics in Entrepreneurship, a non-profit that focuses on “embedding ethical questioning, culture and systems in startups and innovation ecosystems.”
A Path to Integrity
Integrity doesn’t start or end when you enter and leave the workplace. It involves your character – who you are as a person – and how you bring that whole person to work. For startups, creating a cultural foundation of integrity requires the same type of intentional focus and commitment that’s needed from every individual.
So while working on all the other pillars essential to success, here are some points to emphasize about culture and integrity:
- Define your company’s purpose, its very reason for being, and core values early on. As described by Ranjay Gulati, the author of the book Deep Purpose,” a company’s purpose should be a "unifying statement of the commercial and social problems a business intends to profitably solve for its stakeholders.” A company’s core values should be the behavioral attributes embedded into the approach for accomplishing the purpose. Entrepreneurs should then bring conversations about purpose and core values into regular business meetings. Whether a decision supports the company’s purpose and core values should be debated, just like a financial or operational decision.
- Communicate these regularly with relevant examples to your employees and other stakeholders. Talk about what the company’s purpose and core values are and what they mean, but also point out, celebrate, and reward people who are living it out in the organization. These examples help activate your company’s purpose and core values more broadly.
- Keep your purpose and core values relevant. Defining your purpose and core values is not a one and done exercise. They should be revisited periodically and updated, as necessary. For example, as recounted in Deep Purpose, on Johnson & Johnson’s seventieth anniversary, the company engaged in a “credo challenge session” to critically examine their famous credo (purpose) statement line by line. They held focus groups with over two thousand employees of varying levels of seniority, and ended up revising their credo to keep it timely, even though it had quite literally been carved into stone at their headquarters.
- Regularly engage with employees and stakeholders at various levels to stay in touch. Managing culture is as important as managing the bottom line, and it requires senior management direction and active involvement.
One of the worst mistakes entrepreneurs can make when building a company is to tell themselves they will worry about culture and integrity once they get the business on stable financial footings. Too often, even if financial success comes, the focus on culture never follows until there’s a crack in the foundation that makes addressing the need unavoidable. By then, it’s often too late.
Cindy Moehring is the founder and executive chair of the Business Integrity Leadership Initiative
at the Sam M. Walton College of Business at the University of Arkansas. She recently
retired from Walmart after 20 years, where she served as senior vice president, Global
Chief Ethics Officer, and senior vice president, U.S. Chief Ethics and Compliance
Officer.
