The Top Five Things Companies Should Be Doing Right in Compliance (and At Least a Few Are)

by Luis Ramos


Stories of corporate scandals, financial miscues, questionable ethics and outright criminal acts have become – sadly – an everyday occurrence. However, there are shining lights, companies that are working hard to build and maintain robust ethical cultures and highly structured compliance programs with performance-enhancing qualities. These companies know and follow the old adage: compliance is a journey, not a destination.

reputational compliance

Companies with exemplary compliance programs have committed to maintaining environments that share certain characteristics, like navigational beacons that have directed them along their way. These beacons are not perfect, nor are they beyond reproach, but they can certainly be described as effective. Let’s take a look at five such attributes that companies should be working toward (and some even already have in place) to maintain compliance excellence.

Compliance Asset #1: Engaging the Workforce

Stellar compliance organizations know that engaged employees are essential to protecting their organizations against misconduct. They don’t bore them with mandatory, 20-year-old video-based HR training or 800-page codes of conduct written in legalese. They make their workforce an integral part of the compliance process and use interactive awareness and training that’s relevant and engaging.  Why?  Because if content is engaging, employees will retain and apply it, which is essential in compliance. A report from the Corporate Leadership Council found that in “engaged” organizations – where the workforce played a tangible role in compliance efforts – employees “are 2.5 times more likely to exceed performance expectations than their disengaged colleagues.”

Some organizations mistakenly think that they do a code of conduct one time and then let it collect dust.  But smart companies know a code should be interactive, written in clear language and refreshed at least once per year.  Plus, these leading companies understand that corporate policy works best when it’s seen as principles of guidance rather than measures to be enforced.

Compliance leaders also know that they must continually re-train and re-apply policies across the organization, or else the staff loses touch with the meaning behind compliance. According to Rick Steinberg of Steinberg Governance Advisors, “The reality is that employees who don’t know why they’re supposed to do something will go through the motions with a checklist mentality, if at all.”

Compliance Asset #2: Leveraging Compliance to Drive Performance

Compliance leaders understand that viewing the function as a necessary evil is shortsighted because compliance can not only protect the business, but also drive improved business performance.  One study by Corporate Executive Board found that companies report 16 percent higher performance returns where a high integrity culture exists, while also seeing a 66 percent reduction in business misconduct. Noteworthy organizations realize this and are taking these returns directly to their board of directors as evidence of the value of compliance.

Our first asset, the engaged workforce with an eye toward compliance, ties directly into performance as well. Per a global survey by Tower Watson, “the operating income of companies with engaged employees improved by 19 percent in one year, while it declined by 33 percent for companies with low levels of employee engagement.”

Every business operates in a risk environment at some level, and risk management is all about knowing where that risk threshold exists and preventing the organization from crossing the line. For companies with highly structured and effective compliance programs, risk isn’t seen so much as a four-letter word, because those organizations can make better decisions based on better information, and with greater confidence in where they stand.

Compliance Asset #3: Taking a Proactive Approach

Rather than simply reacting to incidents, companies with gold-medal compliance programs have taken to heart the notion that compliance should be “baked in” to the entire DNA of the organization. Too many companies fail at compliance in this area because they are, as Norman Marks describes it, “satisfied with mediocrity.” This “check the box” approach leaves companies vulnerable because, a) they fail to see the potential issues because they operate in firefighting mode, and b) regulators and other enforcers will want to know why better prevention measures and awareness weren’t already in place. Look no further than the differences in how authorities and stakeholders view what has happened first at Morgan Stanley and then at Wal-Mart, where one company proved it was working the compliance curve while the other revealed wide gaps in its process and procedures.

While ethics may be more about perception, compliance is more about reality. Companies intent on raising the bar for their ethics and compliance programs see the shortcomings in taking a laissez-faire attitude. These organizations have made this realization and are diligent about applying proactive measures to how they prevent issues and correct those that do occur.

Compliance Asset #4: Investing in Compliance Integration

Investing in your compliance structure provides a huge ROI – as long as your compliance data isn’t siloed. Companies that are getting it right are implementing technologies and processes that integrate compliance data, giving them visibility not just into incidents, cases, training courses and policies, but also into the connections between them.  If this data all resides in one place, you can quickly navigate and see problem people or locations. According to PwC’s recent “Broader Perspectives” study, almost half of the compliances officers surveyed plan on spending more money in 2012 on compliance-related technology and tools than they did in 2011. The same study found that compliance staffing is growing incrementally. The companies that are getting it right have “taken the plunge” and invested in their compliance future, via new reporting tools and systems designed to provide a multi-dimensional view into compliance-related activity.

Compliance Asset #5: Walking the Talk

We’re all familiar with the phrase “tone from the top,” but it’s a vital attribute for companies with successful, effective compliance. True executive commitment, including promoting the right behavior and responsibility as ways to sustain an ethical culture, shows employees that you walk the talk and helps you stop problems before issues get out of control. Leaders in these gold-standard companies also maintain a high degree of transparency and accountability and work hard with management as well as their board to not allow double standards to degrade the overall process.

But often this is an uphill battle. According to surveys conducted by The Network, the number-one challenge facing compliance leaders is a lack of executive support. In fact, 82 percent of those polled said that their executives only communicated their commitment to compliance once or twice a year, if ever. On the contrary, companies that are getting compliance right tend to communicate the value of ethics and compliance more frequently using a variety of methods.

Leaders must be wary of rose-colored success, where compliance levels look appealing to the naked eye but issues lurk under the surface. Committed executives continue to walk down the compliance path, even when all seems well. They avoid what compliance strategist Donna Boehme calls the “Kumbaya approach,” thinking that by having a few compliance programs in place and a few words of wisdom from the corner office, everyone will join hands in a sing-a-long, and, as if by magic, the organization becomes ethical and compliant.

Getting it Right 

Becoming one of the shining lights of compliance doesn’t happen overnight, but it doesn’t have to be futile effort, either. Many struggle, but given proper compliance tools, a holistic approach and a firm commitment, best-effort compliance is attainable – and can make a huge positive difference toward performance goals. As noted by Carlo di Florio, head of the Office of Compliance Inspections and Examinations for the SEC: “The culture of compliance is an elusive concept and a real challenge but it has a huge impact on how ethically a company performs.”

This article was written by  Luis Ramos  and originally published on corporatecomplianceinsights


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