The New York Times (NYC) reported that Eric Broadley had died in May. Due to my inherent love of race car design from as a youngster, I immediately recalled Broadley when I read his obituary, which noted, “Broadley, a tinkerer and self-taught engineer, started building cars in his spare time at the urging of his cousin Graham Broadley. In 1958, they emerged with the Mk1, a lightweight sports car that Eric Broadley raced at the Brands Hatch track in Kent. In a qualifying heat, he raced faster than anyone there ever had.” However, a race car driver, most assuredly Broadley was not as he had points deducted for his erratic driving on the course. Broadley moved into full time design when “the race meet’s organizer suggested that a car that fast should be driven by a better, quicker driver than him. Mr. Broadley agreed.”
Car design author John Starkey, said in an interview that the designer “was on the cutting edge of the wave at the time. He was in the right place at the right time and wasn’t afraid to experiment. And experiment he did, from the late 50s all the way through to this century. My favorite Broadley designs were for the Can-Am series in the 1960, which allowed unlimited engine size and aerodynamics.” Race car team owner and patron Martin Birrane said in a statement “Eric was among the three most important people in British motor sport. In world ranking only Enzo Ferrari and Colin Chapman were his peers.” That is about as high a praise in the racing car design world as one can receive.
One thing Broadley faced was trial and error. He attempted but was never successful at designing a winning car for the European Formula One series. While having the drive and stubbornness to succeed in the wildly competitive world of race car design, it also provides a good lesson for the Chief Compliance Officer (CCO) or compliance practitioner that sometimes changing one’s mind is beneficial for an organization. Tim Harford, the Undercover Economist, writing in a Financial Times (FT) article, entitled “In praises of changing one’s mind”, noted that “U-turns can be valuable, but they already have a poor reputation.”
One of the highest values in the corporate world is consistency. While being stubborn can be an asset in the corporate world, it can be risky but when it takes being consistent too far. As Harford noted, “Discarding what does not work is an essential part of progress in almost any sphere of life. Designers and engineers make prototypes. Programmers debug. Writers edit. Medical researchers use randomised trials to figure out whether a treatment works or is worthless. Evolution works through survival of the fittest. In each case, there’s a way to evaluate and discard what is failing.” John Maynard Keynes famously said, “The difficulty lies not so much in developing new ideas as in escaping from old ones.”
Further, “Economic growth is built on trial and error, with good ideas spreading and bad ones disappearing. Agile businesses reinvent themselves, but often the market does the job for them through the bankruptcy courts.” Another way to consider course adjustments is through test and analysis of data. Harford noted, “A wise policymaker changes course thus: “We had a promising idea, we tried it out on the smallest practical scale, we gathered data, we expanded our pilot programme, and then once the evidence was in, we decided that the idea wasn’t working. We’ve learned a lesson and will stop.””
In the compliance arena, the ability to make changes is a critical element of a successful and best practices compliance program. This idea was phrased in another way in the Department of Justice’s (DOJ) Evaluation of Corporate Compliance Programs (Evaluation) under Prong 1, which states the following: Prior Indications – Were there prior opportunities to detect the misconduct in question, such as audit reports identifying relevant control failures or allegations, complaints, or investigations involving similar issues? What is the company’s analysis of why such opportunities were missed?
This approach is one that I find particularly significant for the compliance professional. If a compliance feature is not working, you need to understand why it is not working. Of course, you then need to execute a course change to fix the issue. However, you cannot do this without data. Take your compliance training, how does your organization measure its effectiveness. I once worked for a company where its outside compliance counsel had drafted a 268-power point slide deck for compliance training, which took a full 7 hours to get through.
After less than one year, it was pulled by the same law firm which prepared it because they did not feel that the training was obtaining their intended effect; that was to have every employee a walking encyclopedia of Foreign Corrupt Practices Act (FCPA) case law. Needless to say, the trainings only use was to put every non-lawyer who received it to sleep. So, a course change was necessary.
Many CCOs are reluctant to consider the trial and error approach for compliance in other areas. They believe if there is an error it could well lead to a compliance violation. This is where having a protocol in place for testing, following that protocol and documenting the results will greatly assist you going forward. The DOJ has never sanctioned companies or CCOs personally for trying new mechanisms to do compliance better and more efficiently. The reality is that companies simply fail to engage in the bare minimum or worse and get into trouble from that direction.
The key is to document why something did not work through a root cause analysis and remediate (change your mind) based upon the documented evidence. If the data demonstrates some portion of your compliance program is not working, figure out why and stop. Your program will not be sanctioned for learning a lesson and then applying it to your program going forward. If you do so with transparency, you will be able to have your program both learn and grow. Compliance programs which are complacent are the ones which get companies into FCPA hot water because they do not learn and grow as the business of a company changes.
John Maynard Keynes is an inspiration in many areas and changing one’s point of view is certainly one of them. Keynes famously once asked, “When my information changes, I alter my conclusions. What do you do, sir?” In the business world, there is constant flux, from many areas and due to many forces. An agile and nimble compliance function should be operationalized to allow the commercial operations to move more quickly to changing market conditions.
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© Thomas R. Fox, 2017