Consumer confidence isn’t only bolstered when the economy is doing well. It’s bolstered by how well we take care of people when it isn’t. Since personal consumption drives 70 percent of the U.S. economy, businesses that want to remain resilient through today’s economic downturn must appeal to a higher calling. How are you using your brand to continue standing forward on matters of equity now that the initial impact of COVID-19 and calls for racial justice have settled? Your answer affects the trajectory of our collective economic recovery.
Viewing Your Startup’s Role in the Larger Economic Ecosystem
Between investor calls, marketing meetings and tangential administrative tasks, it’s easy to lose sight of how your startup fits inside the larger economic ecosystem. Yet, taking this perspective lays the foundation for smart, equitable decision-making. So invite yourself to take a step back and observe.
When reduced to their essence, startups are like most businesses: They exist to provide goods or services that people need or want. But they are more than that.
Startups: America’s Economic Engine
For one, startups are drivers of job creation. Between 1977 and 2005, on average, businesses in their first year added three million new jobs to the economy annually, whereas existing businesses subtracted one million net jobs from the economy annually. In 2016, startups (in this case, companies under five years old) created approximately 2.6 million new jobs, according to a recent report by think tank Heartland Forward. Meanwhile, all other companies (those over five years old) lost 267,000 net jobs.
Additionally, private sector employment grows most rapidly in cities with high levels of startup activity such as Boulder, Colorado, or Madera, California. Regions with paltry startup activity, on the other hand, experience less than half the level of job growth as the regions with robust startup activity.
In addition to igniting job growth, startups drive the technological innovation and productivity that our nation prides itself on. “High growth output firms are disproportionately young and make disproportionate contributions to output and productivity growth,” according to a working paper from the United States Census Bureau. They generate more revenue per share of human capital than older companies — largely an attribute of their advanced technical savvy.
As the CEO and founder of a SaaS startup, this economic data reaffirms, in part, my decision to launch a company. I’m proud to be one of the 27 million entrepreneurs in the U.S., and you should be too. However, there’s still another part of the story that goes beyond standard economics.
Viewing Your Startup’s Role in the Larger Framework of Society
The World Economic Forum resurfaced the term “stakeholder capitalism” in its 2020 Davos Manifesto — published less than one month before the first case of COVID-19 appeared. In the manifesto, the World Economic Forum redefined the universal purpose of a company in the context of the Fourth Industrial Revolution.
In a world of stakeholder capitalism, it says, a company must “engage all its stakeholders in shared and sustained value creation. In creating such value, a company serves not only its shareholders, but all its stakeholders — employees, customers, suppliers, local communities and society at large.”
When COVID-19 hit, this newfound appreciation of stakeholder capitalism was thrown into the spotlight. All of a sudden we started seeing the consequences of a society that perpetuates systemic inequities. Black Americans dying from COVID-19 at three times the rate of white Americans. Women’s level of unemployment soaring past that of men’s. The burden of unpaid labor crushing the financial well-being of the 40 percent of U.S. households with children (and 51 percent of Black households) headed by breadwinner moms.
Consumers Are (Still) Watching How Businesses Respond to the Crisis
The pandemic and its ensuing economic fallout — coupled with renewed calls for racial justice — is a stress test for business leaders to live out the ideals of stakeholder capitalism. Consumers are watching. And they’re taking notes too.
Consumers, along with employees, turn to employers for leadership in times such as these. In fact, one of the largest contributors to consumer trust in brands stems from how organizations show up for their employees during times of uncertainty, according to Qualtrics. And for 65 percent of consumers, a brand’s actions during times of crisis are a major factor in determining their level of trust for the brand. What’s more, a recent Edelman report found that 71 percent of consumers say “that, if they perceive that a brand is putting profit over people, they will lose trust in that brand forever.”
Now is not the time to walk back from the “we are here for you” commitments or “we stand in solidarity” pledges made in March, April and May.
Crisis-Related Marketing Collateral Will Fade — Your Commitment to Equity Shouldn’t
What will remain after well-intentioned messages of solidarity ebb from the newsfeed? What will remain after landing page banners directing visitors to racial equity press releases are replaced with the next buzzworthy topic? What will remain after pledges for equality become lost on a list of “more pressing” business priorities?
Remember, startups like yours drive job growth. They drive innovation, productivity and our economy. So whether you call it stakeholder capitalism, old-fashioned empathy, or corporate social responsibility, the point remains: It’s at this moment in history that startups must appeal to their higher calling.
It’s time to recalibrate the economy by placing equity and inclusivity at the core.
How to Take Care of Your Stakeholders, According to Data
Companies that committed to taking care of their people (employees and consumers) in the initial months of COVID-19 now must make the choice to live out their commitments. A good place to start is with the data.
A 2019 JUST Capital survey indicates that the top three issues Americans care most about when it comes to business behavior are employee pay, benefits and treatment in the workplace. Moreover, of all the issues included, how a company invests in its workers carried more weight (35 percent) in the eye of the public than how a company treats its customers (24 percent), supports the community (18 percent), impacts the environment (11 percent) and serves its shareholders (11 percent).
Use this data as your roadmap. Take the top three issues listed above and make a plan to create a more equitable workplace. In turn, a more equitable workplace will strengthen your startup (the benefits of diversity, equity and inclusion are irrefutable) and help propel our economy forward.
Follow These 3 Steps to Get Started
Step one: Ensure your startup pays equitably on every rung of the ladder. If you’re like most companies, you’ll have some gaps to close. Invest in a pay equity audit or software to monitor and close pay gaps.
Step two: Support employees with the resources they need to thrive. Paid caregiver leave is a critical resource. Breadwinner moms are the new norm and 71 percent of U.S. households with children depend on mom for their economic well-being. Don’t forget about employee burnout either, especially in the startup world, which comes at a cost of about $125 to $190 billion each year in the U.S. alone.
Step three: Make sure all employees are treated fairly at every stage of the employee lifecycle. It’s not enough to hire for diversity. You also need to evaluate performance and potential equitably, pay equitably, provide opportunities for advancement equitably and promote equitably.
Finally, I’ll ask this question again: How are you using your brand to continue standing forward on matters of equity now that the initial impact of COVID-19 and calls for racial justice have settled? Our economic recovery is on the line.