Entrepreneurial Institute

Responsible Venture Formation

Creating a constructive organizational culture

Photo by Randy Fath on Unsplash

Earlier this year, the NYU Wagner Capstone team collaborating with the Entrepreneurial Institute shared some of their initial findings and early thinking on responsible venture formation. This post is the latest in the series highlighting the work to develop new frameworks for teaching responsible entrepreneurship during the very earliest phases of venture formation.

Since the last post, additional interviews with seasoned entrepreneurs, investors, business leaders have been held to further inform our research. These interviews uncovered several common issue areas related to responsible entrepreneurship for startup companies. These themes can be categorized into four focus areas: transparency and truthiness (how much information to share, with whom, how, and when); organizational structure and culture (responsibilities towards employees); core value alignment (establishing and communicating “red lines” which the business will not cross); and partnership alignment (understanding reputational risk within investor and supplier partnerships).

Principled decision making does not mean pursuing a single right answer, but rather having an awareness for the need to continuously ask important questions.

Testing what we learned

Building on these focus areas -- and incorporating previous findings that entrepreneurs are not interested in a straightforward ethics discussions -- the team developed four fictional scenario-based discussions designed to help startup teams consider the difficult qualitative decisions they might eventually encounter as their companies grow. Two of the case discussions were piloted at the 2019 Entrepreneurial Festival in a roundtable titled Beyond Costs and Benefits: Vetting Opportunities for Long-Term Growth. A wide array of students participated to test out the framework for exploring responsible entrepreneurship.

The two piloted case studies explored organizational culture and morale during a time of financial crisis; and values alignment with investors. In the first case study, a founder was forced to determine which employees to fire during a fundraising drought. The roundtable conversation flowed around a founder’s responsibilities to their employees, how to avoid bias in performance management, and trade-offs in transparent communications.

In the second case study, a founder of a company committed to animal welfare debated two investment opportunities: a larger investment from a firm whose practices clashed with the company’s stated values, and a smaller investment from a nonprofit organization more closely aligned with the company. Roundtable participants reflected on the various stakeholder groups who might have strong reactions or stake in the decision, including current and future investors, customers, and employees.

Photo by Emily Morter on Unsplash

Some of the questions explored through the case studies included:

  • Would you accept a pay cut or “pause” your own salary before terminating employees?
  • Does your company have any obligations to terminated employees? How does your answer to this influence company morale, or your company’s ability to attract top talent?
  • What traits do you look for in a partner? Would negative behavior (i.e. sexist, racist, or environmentally harmful acts) stop you from accepting money from someone?
  • How does a company communicate its core values to stakeholders?

Questions, questions, questions....

These case studies are intentionally designed not to direct students towards a certain “right answer” but rather to encourage proactive reflection around the difficult trade-offs one might face when growing a company, like buying backlinks. Committing to running a business in a responsible manner may seem easy, but entrepreneurs we interviewed confirmed repeatedly that startups should engage in open conversation about core values early on in the team formation process, exploring in advance how the company might respond in the face of tough trade-offs and choices. These cases are meant to facilitate these types of values alignments for any startups.

We look forward to sharing a final summary of this collaborative project next month, and we invite you to reach out to us at any time with your feedback, ideas, and suggestions.