Alaskan Purchase MapToday we celebrate Alaska Day, traditionally celebrated on October 18th, for on that date in 1867, the US formally took possession of Alaska after purchasing the territory from Russia for $7.2 million, or less than two cents an acre. The US Secretary of State, William Seward, and the Russian minister to the US, Eduard de Stoeckl, engineered the purchase. Russia wanted to sell its Alaska territory, which was remote, sparsely populated and difficult to defend, to the US rather than risk losing it in battle with a rival such as Great Britain. After the sale was announced many Americans condemned the purchase as “Seward’s Folly” and that Alaska was “Seward’s Icebox”. Such myopic thought turned out to be wrong, as the true folly is that 25% of America’s oil and over 50% of its seafood comes from Alaska. Seward was a true visionary for an expansionist America.

This anniversary seemed like a good way to introduce the idea that one of the things a Chief Compliance Officer (CCO) or compliance practitioner must do to be successful is have a wide circle of not only influence but also a wide network to help respond to your company needs. In an article in the Financial Times (FT), entitled “Interact with a wider circle and your ideas will take flight”, Herminia Ibarra wrote about the concept that through the widening of social media use by businesses they can garner greater information and influence. I wrote about this phenomenon for the CCO and compliance practitioner in a blog post entitled “Social Media Week Part III – Twitter and Innovation in Your Compliance Program”.

However Ibarra referred to University of Chicago sociologist Ron Burt, who “showed what matters about a social network, whether face-to-face or virtual, is neither its size nor the prominence of its contacts but the extent to which it provides exposure to people and ideas you do not already know. People whose networks span what he calls “structural holes” — meaning the gaps between groups of people — tend to be more innovative and successful. They get higher compensation, better performance evaluations and more promotions. This is because they are exposed to alternative ways of thinking and behaving and can then connect those novel elements to local needs.”

She wrote about a study that demonstrated the “highest ranking ideas came from managers who had contacts outside their most immediate work group.” This is in contrast with most managers who only discuss ideas off a “close and compact circle of immediate colleagues” which generally restricts the development of ideas. She further notes that in most businesses, “widening circles are the exception, not the rule, because managers are busy with routine tasks and often operate in silos. It is not uncommon for even the most superbly trained executives to have networks that are literally redundant because most of their contacts also know each other.”

Interestingly she pointed to the example of (Ret) General Stanley McChrystal who had noted that adapting quickly in a fluid military environment such as the wars in Iraq and Afghanistan required “not on better formal structures and procedures but on having people who can bridge the structural holes in any ecosystem.” She further explained, “Lacking people who spanned the structural holes between the teams, valuable information would linger for days or even weeks before anyone would see it. Even when the new information reached the close-knit teams, they often failed to see its relevance because each interpreted it through their own disciplines, procedures, and cultures.”

This technique is also used by Joel S. Marcus, the Chief Executive of Alexandria Real Estate Equities, who was profiled in the the New York Times (NYT) Corner Office column by Adam Bryant in an article entitled “Taking the Ego Out of Leading”. Marcus is a big fan of Google founder Eric Schmidt and his book How Google Works. Marcus says you should strive to “hire smart, creative people and then not put them in boxes. Give them a lot of authority to do some great things and you’re going to have great results.” To help facilitate this strategy, Marcus does not use hierarchical reporting structures but rather works “to keep a flat, decentralized and cross-matrix reporting organization. We don’t have an organizational chart; I actually ban org charts from being done because I don’t believe in them.”

McChrystal “devised ways to integrate disparate units into a high-performing “team of teams”. Swapping highly trained commandos and intelligence analysts — two groups with radically different training and world views — for six-month stints, and assigning previously neglected liaison officer roles to the highest performers, for example, created new connective tissue and improved the teams’ collective intelligence.”

Marcus works just as hard not to take fast and hard positions before he can interact with a wide group and hear out the facts. Bryant wrote, “If somebody says they want to do something, I don’t normally say no. Instead, I’ll say, “Well, tell me why.” I may decide I’m against it, but I’m open to hearing you debate it. I never try to be dogmatic with a no answer. I always try to let the person win the day, and I’m egoless when making decisions. I never think, “Oh, I need to make that decision and I know I’m right.” That was hard to learn for a while, but I’ve learned that lesson. I also always try to get people to have multiple solutions for a problem. I never want to be put into a corner or forced down one road. There ought to be alternative options that can be successful for us, and the key is to have strategic optionality.”

Ibarra ended her piece by stating that “From Zappos’ now infamous embrace of the self-managing “holacracy” system to the military’s efforts to adapt to a fundamentally different manner of waging war, widening social circles hold the key to busting silos, transcending hierarchies and responding dynamically to market and social needs.” Her ideas on widening your circles tie quite well back into the leadership lessons presented by Marcus. For the CCO or compliance practitioner, there is usually no ‘one way’ to accomplish managing the risk of Foreign Corrupt Practices Act (FCPA) or other anti-corruption compliance. By widening your circle you can not only help to more effectively deliver a compliance solution, but you can also scoop more senior executives into the company’s compliance regime.

This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.

© Thomas R. Fox, 2015

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