I conclude my week-long exploration of the intersection of Sherlock Holmes, innovation and compliance by asking: is your compliance function ready for a digital future? For if it is not, not only will you fail as a Chief Compliance Officer (CCO) in your role as a leader, you will fail in your role as a compliance practitioner in helping your company do business ethically and in compliance; you will also not be able to demonstrate the effectiveness of your compliance program as now required by the Department of Justice (DOJ).

Today’s blog post is informed by The Adventure of the Copper Beeches, in which Holmes exclaimed “‘Data! Data! Data!’ he cried impatiently. ‘I can’t make bricks without clay.’” In this story, Violet Hunter, a governess is paid an outrageously high salary to cut her waist length hair short, wear a blue dress and sit with her back to the gardens of the estate. She is forbidden from one wing of the manor and of course, the owner and staff are all eccentric. Holmes and Watson arrive to discover not a mad woman in the attic but the owner’s step-daughter being starved and tortured so she would sign over the inheritance her deceased mother had left her, which her step-father wants to purloin. Holmes and Watson free the daughter and the owner’s starved Mastiff attacks and mauls him. Holmes’ inference from his quote was that one cannot draw solid conclusions without data, much the same as you cannot build solid bricks without clay. The materials you use to build your business is just as or even more essential than your expected outcome. You need the right data, from the right people, on the right platform before you can expect any type of return.

Yet it is this need for data that drives Holmes. One thing has been made clear about the current compliance profession is that it has evolved considerably and the need for data and its accurate interpretation is even more paramount. Hui Chen and Eugene Soltes, writing in a Harvard Business Review (HBR) article, entitled “Why Compliance Programs Fail—and How to Fix Them”, discuss the use of metrics to help design and evaluate compliance programs. They stated, “simple univariate metrics will not adequately capture a program’s effectiveness. Successful compliance engineering requires some creativity, some testing, and careful model design to appropriately measure outcomes.” This means data, data, and data.

Are you, as a CCO, ready for this innovation and more importantly is your compliance program ready for such rigor? In a MIT Sloan Management Review article, entitled “Is Your Company Read for a Digital Future?”, authors Peter Weill and Stephanie L. Woerner explored pathways that businesses can use to become more efficient in the digital future. They apply equally to a corporate compliance function.

The authors note, “Future-ready enterprises are able to innovate to engage and satisfy customers while at the same time reducing costs. Their goal is to meet customers’ needs rather than push products, and customers can expect to have a good experience no matter which service delivery channel they choose. On the operations side, the company’s capabilities are modular and agile; data is a strategic asset that is shared and accessible to all those in the company who need it.” If you substitute “employees” for “customers” in that quote, you have a very good description of a future focused compliance program.

The problem generally is that compliance services are supported by a complex set of business processes, systems, and data. The result is a fragmented, labor-intensive, and frustrating employee experience, often made worse by product silos within the company. The authors identify four ways to achieve a better digital future. The first is to standardize your platforms so that compliance solutions can be delivered. This manner allows a more integrated service experience for the employee. It requires a strong design for your compliance solution with input from your users for their experiences. This is a feedback loop system, feeding information back into your compliance system, in a continuous loop allowing for continuous improvement.

The second approach is improving your employees experience first through a more integrated approach to operationalizing compliance. It can include such non-compliance concepts as more mobile apps and access to more useful websites, improving compliance communications through a greater speak up culture and empowering relationship managers, all with the goal of increasing your employees’ compliance experience. This ties into Chen and Soltes discussion of whether compliance training works to prevent misconduct and reinforce a company’s ethical values.

The next approach is to tie the operationalization of compliance to the business objectives. Obviously doing business ethically and in compliance should be a standard business objective but if your compliance program can help the business run more efficiently and then more profitably, it will certainly take your compliance program to the next level. The authors note, “With this approach, the difference between success and failure is having a road map that informs everyone’s efforts versus taking a haphazard approach. The best way to tell the difference is to ask a manager how a specific project fits into the overall plan. The advantage is that the steps, which consist of tightly coordinated sets of projects, are smaller, reducing risk.”

Whichever route your organization might take to more robustly embrace a digital future, the real work will begin after you decide how to proceed. You will need to have stick-to-it-ness which will require real commitment not just from yourself as the CCO but also the Chief Executive Officer (CEO), senior management and the Board. Then all company stakeholders will need to understand where compliance is going and how it plans to get to that digital future. Finally, the authors state “the digital era is a great opportunity for leaders to reinvent the enterprise. The most successful enterprises will need to become future-ready and ambidextrous — constantly innovating to improve customer experience while also working to reduce costs.”

I would add that if you do not embrace the digital future for compliance, not only will your company not have a documented, effective compliance program; yourself as a CCO or compliance professional will likely become consigned to the dustbin of those left behind. Innovation in compliance is here to stay; embrace it or you will be overtaken.

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, 2018

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