One of the most constant things that I have observed in my 10+ years of practice in the compliance space is its constant evolution. Compliance techniques and practices, which were considered cutting edge when I began, have moved to standard fare and are now largely minimum practices. The Department of Justice (DOJ) and Securities and Exchange Commission (SEC) have mirrored this evolution in not only how they view compliance programs but also in their own enforcement regimes and protocols. Today I want to consider agile innovations methods for your compliance program.

According to a Harvard Business Review (HBR) article “Embracing Agile, by Darrell K. Rigby, Jeff Sutherland and Hirotaka Takeuchi, agile methodologies “involve new values, principles, practices and benefits and are a radical alternative to command-and control-style management.” It is accomplished by taking employees “out of their functional silos and putting them in customer-focused multidisciplinary teams”. As the customers of the compliance function are the company’s employees, I think the transition can be made.

One of the most basic problems is that business executives basically understand only enough about agile to be dangerous but they do not understand the comprehensive approach that needs to be taken. This means that senior management “unwittingly continue to employ conventional management practices” that in fact work to undermine the agile process. The authors suggest the solution is that executives learn the basics of the agile process and understand the conditions in which it does or does not work. They should begin with a small team and project and let the operation spread organically.

Some of the right conditions for the success of an agile initiative in the compliance arena are as follows. You should have the right market environment for the project. This means you need to have your internal customers involved and allow feedback to change any proposed solution. You must be willing to innovate, particularly if there are complex compliance problems involved. You will need to break down the solutions into digestible junks, which may actually change the scope but through cross-functional employee collaboration, you can have appropriate creative breakthroughs.

Digestible junks will allow you have incremental developments, which can be tested and then rolled out for use by your employee base. As your internal customers use the innovations, the work cycles can be broken down further so both testing and innovation can continue unabated. This allows a continual feedback loop so that late changes in the innovation can be managed and incorporated going forward. Finally, if there are interim mistakes, it can be a valuable source of lessons learned going forward.

An example might be around compliance training, a topic oft-times commented upon as rote and something employees simply have to get through. Some commentators have characterized such training as a basic ‘tick the box’ exercise simply to get government credit. While such commentary fails to understand the benefits of communication through training, it does point up the issue of the stiltedness of compliance training.

An approach to this might be to put together an agile team to look at training so that compliance could create topical training, in a few days to respond to market or other conditions, separated out by the challenges met in various product lines or geographic areas. This innovation can include budgets as well, making your compliance function more cost effective through innovation.

Another concept is to start small and let the word spread. This is antithetical to many large companies that “launch change programs as massive efforts” largely because the project sponsors feel that if they do not do so, the rest of the company will divine that the effort is not really supported by senior management and respond accordingly. However, the authors suggest “agile might spread to another function, with the original practitioners acting as coaches. Each success seems to create a group of passionate evangelists who can hardly wait to tell others in the organization how well agile works.”

The C-Suite has a role to play by practicing agile at the top of the organization. so not only could senior management provide new techniques through an agile exercise, they could learn how to support more fully the compliance function which might engage in an agile review. The authors said, “Senior executives who come together as an agile team and learn to apply the discipline to these activities achieve far-reaching benefits. Their own productivity and morale improve. They speak the language of the teams they are empowering. They experience common challenges and learn how to overcome them. They recognize and stop behaviors that impede agile teams. They learn to simplify and focus work. Results improve, increasing confidence and engagement throughout the organization.”

The authors went on to provide three succinct benefits. First by having senior management involved in an agile exercise, it would allow them to “catch up with the troops” and to reprioritize their efforts going forward to be better aligned with the real-time nature of agile. Second, it allows a speedier corporate transition as it can allow the employees to know if management is in tune with what the employees care about going forward. Finally, it can present clear alignment of departments and functions on a common vision. I can think of no greater strength for the compliance function to rely upon. This can be used to expose senior managers to break out of their “silos in today’s overspecialized organizations-for general management roles.”

The authors conclude by noting the need to destroy barriers to agile. They list five pointers. First “get everyone on the same page” which they believe is the key responsibility of management. Second is not to change structures but to change roles so that internal company disciplines “can learn to work together simultaneously, rather than separately and sequentially.” Next is to name only one boss for each decision as in the agile operating model it must be “crystal clear” who can make the final decision. Penultimately, your agile exercise should focus on teams not individuals because it is the team’s collective intelligence that brings the power to an agile exercise. Finally, lead with questions not orders. Here the authors cite to General George S. Patton, who “famously advised leaders never to tell people how to do things: “Tell them what to do, and they will surprise you with their ingenuity.””

The agile exercise will probably not work in a compliance function under the thumb of the corporate legal department, as innovation is typically not in the remit of legal. However for a compliance function that desires to bring new and unexpected ways of doing compliance to your organization, going through an agile exercise might be just the thing to move compliance into the very DNA of your organization.

 Three Key Takeaways

  1. Agile compliance involves new practices and benefits and is a radical alternative to command-and control-style management.
  2. Agile compliance allows you to take small, digestible steps.
  3. Agile compliance works at the top.

 

This month’s podcast series is sponsored by Oversight Systems, Inc. Oversight’s automated transaction monitoring solution, Insights on Demand for FCPA, operationalizes your compliance program. For more information, go to OversightSystems.com.

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