22. Ethics in a Downturn - How to Stay True to Your Principles Under Pressure

Balancing profitability and integrity when resources are tight

1. Introduction

It’s easy to live by your values when things are going well. But when cash runs low, when team morale dips, or when the next big contract conflicts with what you believe in - that’s when ethics get tested.

This article, part of Pillar 6 - Regenerative Business, explores how small business owners can make decisions that preserve both their bottom line and their integrity. Staying ethical during a downturn isn’t just noble - it’s strategic. It builds reputation, trust and long-term loyalty that can’t be bought.

2. Representative Narrative

David runs a recruitment firm in Christchurch. He’s built a strong reputation for ethical placements, only putting candidates forward when there’s a genuine fit. He also refuses to work with clients who underpay staff or use exploitative terms.

But in the past six months, his leads have dried up. One large national employer approached him with a high-paying contract, but with terms that didn’t sit well. High churn, under-market wages and a poor safety culture.

He spoke to John Luxton from RegenerationHQ, seeking clarity. John didn’t push an answer. He simply asked, “What would it cost you to take this job and what would it cost you not to?”

David didn’t sign the contract.

3. Recommended Actions

• Write down your non-negotiables now - before you need them
  These are values or conditions you will not compromise on, no matter the circumstances. They become your compass when clarity is hard.

• Create decision filters for difficult choices
  When the pressure’s on, have a few core questions ready -

• Will this hurt someone?

• Would I be proud to share this decision publicly?

• Is this consistent with the culture I say I’m building?

• Be honest with your team when values are tested
  You don’t need to present perfection. You just need to model reflection and responsibility.

• Track the long-term cost of shortcuts
  A deal that fills this month’s gap but damages next quarter’s trust often sets you back more than it helps.

• Lean on your advisory circle
  Talk decisions through with those who share your values. A 15-minute call can prevent a 6-month regret.

4. Expected Outcomes as Narrative

David turned the contract down. It was hard in the short term. Cashflow stayed tight. But two months later, a long-time client referred him to a values-aligned organisation looking to expand their ethical hiring practices.

He landed that contract, secured 12 months of steady work and brought on a junior staff member to help. But more importantly, he could look his team in the eye. “We’re not for sale,” he said. “And that’s why people trust us.”

John later shared, “The test of your ethics is never about what’s easy - it’s about what endures.”

5. Red Flags & Mitigating Strategies

Red Flag 1 - Saying “just this once” to behaviour you’d normally reject
Mitigation - Keep a written record of past compromises and what they cost

Red Flag 2 - Making values-based decisions alone under stress
Mitigation - Seek counsel from peers or trusted advisors when judgement is clouded

Red Flag 3 - Treating values as secondary to survival
Mitigation - Build ethics into your operations - not just your marketing

6. HR Best Practice

Your staff notice how decisions are made - especially when things get hard.

• Be transparent about why you do or don’t take certain opportunities

• Invite values-based discussion in team meetings

• Recognise staff who stand up for integrity or challenge decisions respectfully

• Use tough moments as teaching moments - not threats

As John Luxton often reminds owners, “Values don’t need to be loud - they just need to be lived.”

7. Psychological Perspective

Ethical stress can weigh heavily. Owners may feel torn between what they believe and what the business needs. This internal tension can create guilt, confusion or disconnection.

The way through is clarity. Owning your decision-making process - even when the answer is messy, restores confidence and cohesion. Mistakes happen. What matters is whether you repair and realign.

8. Recommended Owner's Mindset

Lead with courageous clarity. Your values are not abstract - they are active. They live in every invoice you send, every hire you make, every deal you accept. Courage doesn’t mean never struggling - it means returning to your principles even when it’s hard.

9. Reflective Questions for the Owner

• What are my three non-negotiable values and are they visible in my decisions?

• When was the last time I felt I compromised and why did I do it?

• Have I shared our ethical stance with my team - or is it just in my head?

• Am I proud of who we are becoming - not just what we earn?

• What would my future self say about the decisions I’m making now?

10. Suggested Ongoing Actions

• Write a personal code of conduct and share it with your team

• Role-play difficult choices with staff or trusted peers

• Create a simple “values check” on new proposals or contracts

• Use a session with someone like John Luxton to reflect on one ethical dilemma you’re currently navigating

• Celebrate one decision made for integrity - even if it came at a cost

Critical Takeaway - Ethics are not an extra - they are the foundation that holds everything upright when the rest begins to shake.

If you’d like a confidential, free of charge, free of obligation conversation about your business, here’s how to get me.

📞 Phone +64 275 665 682
✉️ Email john.luxton@regenerationhq.co.nz
🌐 Contact Form www.regenerationhq.co.nz/contact

If you’d like to read more RegenerationHQ thinking on SME business and other things, go here – www.regenerationhq.co.nz/articlesoverview

🔹 RegenerationHQ Ltd - Business Problems Solved Sensibly.
Supporting NZ SME Owners to Exit Well, Lead Better and Build Business Value.