In June 1972, The Rolling Stones double album Exile On Main Streetwent to No.1 on the US chart. It is my all-time favorite Stones album. According to This Day in Music, in 2010, the re-released album entered the UK chart at No.1, almost 38 years to the week after it first occupied that position. The Rolling Stones are the first act to ever have a studio album return to No.1 after it was first released. Oddly (or perhaps not) the album presages today’s topic of compliance and the value chain.

The sheer uniqueness of the double album cover of circus and side-show performers made it almost worth the price itself. But it was the culmination of the Stones at their song writing and musical peak that made the album stand out. That and the number of uber-talented musicians who joined them in the studio. From Bobby Keys on sax, Jim Price on horns, “Nicky Hopkins and Ian ‘Stu’ Stewart on pianos, and a mass of backing vocalists including Gram Parsons, Clydie King, Joe Green, Venetta Fields, Tamiya Lynn, Shirley Goodman, Dr. John, Kathi McDonald and Jess Kirkland. Jazz sessioneer Bill Plummer added upright bass to Rip This Joint and Turd On The Run, Al Perkins from Manassas played pedal steel guitar on Torn And Frayed, Billy Preston contributed keyboards to Shine A Light, and Richard Washington played marimba on Sweet Black Angel.” One contributor I was not aware of was Ry Cooder, who influenced Keith Richards on his chord selection and gave the album its timber.

The album was recorded largely in France but mixed in Los Angeles. The trans-Atlantic pairing informs a way to think about implementation or enhancement to your compliance regime. In a recent Harvard Business Review (HBR) article, entitled “Strategy for Start-Ups, authors Joshua Gans, Erin L. Scott and Scott Stern laid out four strategies that start-ups can use to get their products to market. I found one of those, the value chain strategy, has significant implications for a corporate  compliance program.

For an entrepreneur, “a value chain strategy seems somewhat pedestrian. The start-up invests in commercialization and day-to-day competitive strength, rather than in controlling the new product and erecting entry barriers, but its focus is on fitting into the existing value chain rather than upending it.” That seems to me to be a pretty good description of what a compliance professional should do to more fully operationalize a compliance program. Moreover, identity of such a successful corporate compliance function arises from competence rather than competition and by the manner in which the compliance function adds value to the business operations. Finally, while a compliance function is driven by its internal customers and technology available to it, compliance must focus on developing scarce talent and unique capabilities to become preferred partner of its business units.

This entrepreneurial strategy depends on integrating itself with a wide variety of business functions; including IT, Operations, Internal Audit, Finance & Accounting, Human Resources and a wide cross-section of other corporate disciplines. Every compliance function must understand its customers and how they do business. This means far more than simply being able to understand a spreadsheet; it means understanding how your company does business and determining a mechanism through which compliance facilitates that practice. That is the operationalization of compliance.

Technology and your employee base are connected. At Dun & Bradstreet, Inc. (D&B) that technology base is connected through the company’s internal social media initiatives and a 360-degree approach to compliance. While there are a plethora of tech solutions open to the compliance professional, the business unit is rarely considered in the decision making process. If compliance could demonstrate the benefit to sales or other corporate functions for investment in a technological solution, it might go a long wait towards funding the project.

Such an approach should also incorporate your corporate values and what you stand for as a business. It can both create and help to communicate a narrative about corporate values, corporate expectations of behavior and consequences for not doing so. The bottom line is that compliance “capabilities must translate into enhanced differentiation or cost advantage for the established companies. And even if the innovation does enhance the competitive position of the overall value chain” the compliance function will only succeed if the employees in the chain are able to replicate the value it has created through their embrace of the compliance solution.

Once compliance moves forward on that strategy, there must be alignment between strategy and purpose, which is crucial for internal customers to travel the chosen path. As the authors’ note, the focus on internal advocacy groups encouraged with meaningful collaboration opportunities show how the solution will bring enhanced efficiency and profitability. Still, every strategy affects possible future pivots, removing some and opening up others. A compliance function must be mindful of this so that it does not raise future costs but does enable opportunities to move throughout the organization.

Lastly, the implementation of this strategy by a Chief Compliance Officer (CCO) does not eliminate or minimize the uncertainty inherent in moving forward. The authors state, “What it does is provide a coherent framework for escaping the perceived realities of the existing environment and defining possible new environments to choose from. The word “choose” is critical here:” When a compliance function moves forward with such an initiative, success is largely determined by how its strategic choices are informed by the employees tasked with implementing the strategy. This means the more closely you can tie your compliance strategy to the business unit strategy, the better chance you have of success.

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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