This week is a return to one my favorite themes for every Chief Compliance Officer (CCO), compliance professional and compliance program: Sherlock Holmes. In this podcast series, I am considering themes from the Holmes short stories to illustrate broader application to components of a best practices compliance program. In this episode, I consider the theme of mentoring in compliance though The Adventure of the Six Napoleons.

 

In the story The Adventure of the Six Napoleons, Inspector Lestrade says to Holmes, “Well,” said Lestrade, “I’ve seen you handle a good many cases, Mr. Holmes, but I don’t know that I ever knew a more workmanlike one than that. We’re not jealous of you at Scotland Yard. No sir, we are very proud of you, and if you come down to-morrow, there’s not a man […] who wouldn’t be glad to shake your hand.” This comment provides insights into how Holmes is viewed by other law enforcement officers; Holmes is a sort of living legend and the other officers respect his skills.

The matter involved the theft of jewelry as Inspector Lestrade of Scotland Yard brings Holmes a seemingly trivial problem about a man who shatters plaster busts of Napoleon. One was shattered in Morse Hudson’s shop, and two others, sold by Hudson to a Dr. Barnicot, were smashed after the doctor’s house and branch office had been burgled. Nothing else was taken in any of the break-ins. It turns out that the thief had stolen several pieces of jewelry and then hid them in the Napoleonic busts. The thief, having been released from prison on an unrelated offense, was tracking down the busts in which he had placed the jewels for hiding, breaking them open and reclaiming his purloined property.

What are some of the ways that you might mentor a younger or less senior compliance professional? I think there are several ways suggested by Conan Doyle as epitomized by the statement by Lestrade and his relationship with Holmes and Watson. CCOs and seasoned compliance professionals tend to be passionate about compliance even if (like myself) they have a legal background and came to compliance from a corporate legal department. You should work to transmit that passion to others you are mentoring. In today’s hyper-transparent world of reputational risk, that passion can stand out as a differentiator. It is not simply the crossing of siloed boundaries but understanding the differences in business units, corporate functions and even geographic locations that can bring this broad sense of context.

As compliance professionals, transmit the ability to see not only the technical details but also the big picture of compliance. Introduce your mentees to others in your organization, so that they can be exposed to different leadership styles and see how such leadership styles work in various areas and with different constituencies. Encourage mentees to have a powerful sense of compliance community by encouraging cultivation in personal and professional networks. Any chance to participate in such an opportunity should be accepted.

Beyond passion, help them to develop purpose around careers in compliance. This can be aided through reflection, introspection and ability to change as a leader. Moreover, rather than influencing others through individual speeches or stories, the everyday connections between a compliance professional’s sense of purpose and the compliance vision can work to form an indelible impression about the importance of compliance to an organization. This is Louis Sapirman’s 360-degees of compliance in action.

If you are mentoring a compliance professional, you probably have a next generation mindset. But it is equally important that you communicate that to your mentee as it is certainly important that each generation of compliance leaders be fit for the future and be committed to continuous improvement going forward.

By using these steps, a successful enterprise leader, a CCO or compliance practitioner can bring greater corporate wide presence to the compliance function. Moreover, by using them as guideposts for mentoring, you will make compliance a part of the business process as it becomes second nature and a recognized part of any business transaction. As you communicate to those under you to develop better relationships and how to mobilize compliance for the greater good, it will have the direct benefit of allowing you as the mentor to deliver more value for the company. It does not get much better than that.

I have used three primary resources in putting together this series: Maria Konnikova’s Mastermind (Konnikova); the online site shmoop.comand its contribution, The Return of Sherlock Holmes (shmoop); and finally the most seminal print work on the entire Holmes canon, the two-volume The New Annotated Sherlock Holmes (Klinger) edited with notes by Leslie Klinger.

Game 4 of the ALCS is in the books and the Astros had yet another hiccup on their march to back-to-back championships as Boston took the game on an unbelievable play to end it.  Even with this loss the Astros are still only three wins away from going back to the World Series. Yet our sports-themed week continues but from a more tangential angle today as we pay tribute to Morice Fredrick “Tex” Winter, one of the greatest basketball minds over the last 50 years. Winter’s greatest development was the Triangle Offense, which he convinced a nascent Coach Phil Jackson to use in Chicago. They then jointly convinced Michael Jordan to implement it on the court and the result was six National Basketball Association (NBA) championships. Jackson and Winters then headed off to the LA Lakers and convinced both Kobe and Shaq to use and the result there was another three NBA championships (Jackson and Kobe won two more after Winters retired and Shaq left LA). Winters and the Triangle inform Part II of why design thinking should be used to innovate in a compliance program.

In Winter’s New York Times (NYT) obituary, Phil Jackson said, “I wasn’t a very good coach and didn’t have a lot of knowledge, and he had a lot of knowledge. He’s like the mind of the basketball gods.” Michael Jordan said of Winter, “I learned so much from Coach Winter. He was a pioneer and a true student of the game of basketball. He was a tireless worker, always focused on details and preparation, and a great teacher.” The Triangle Offense focused on process and fundamentals, over playground moves and was a forerunner of the space and pace offense at Miami with LeBron James and the motion offense currently used by the Houston Rockets.

I thought about Winter and his passion for process in innovation in the context of the recent Harvard Business Review (HBR) article, entitled “Why Design Thinking Works”, by Jeanne Liedtka. Yesterday I began a consideration on why design thinking can be such a powerful tool to create a fully operationalized best practices compliance program. Today we consider some of the steps you should take in that process.

According to the Interactive Design Foundation, there are five stages in design thinking which they derive from the model proposed by the Hasso-Plattner Institute of Design at Stanford. It is the leading university when it comes to teaching Design Thinking. The five stages of Design Thinking, according to Hasso-Plattner Institute, are as follows: Empathise, Define, Ideate, Prototype, and Test. Liedtka notes that each step has “a clear output that the next activity converts to another output until the organization arrives at an implementable innovation.”

This change comes through the customer experience or the discovery process, which in the compliance world translates to the employee experience and is a key reason that design thinking is so successful. Liedtka identifies three areas. The first is immersion and this allows the designer to consider the project from the perspective of the end user. The key is to understand the user’s needs which may not be expressed and may also reflect the designer’s own biases. Further, in addition to data a designer may take into account, immersion “in the user experience provides raw material for deeper insights. In sense making, the designers take the most important data inputs and literally have all key stakeholders comment on it. This commenting takes the form of small notes or questions which can be put on Post-It notes. These notes are then aggregated, sorted into clusters and mined for insights. In the alignment prong, the synthesized information is then put into “possibilities” rather than constrained by the status quo. This allows truly innovative ideas and solutions not to be overtaken by “safe incremental ones.”

The next step is idea generation. It begins with the step of emergence where more participants work to build on the ideas generated from the final phase of employee discovery. It is not a negotiation of ideas and concepts of differences. The key here, as Liedtka notes, is that “Champions of change usually emerge from these kinds of conversations, which greatly improves the chances of a successful intervention.” The final step in this process Liedtka labels as Articulation. In it, take all of the ideas which have come through the process to this point and “question their implicit assumptions.” Liedtka believes that if these assumptions are not challenged, then the persons advocating the ideas will only do so from their perspective of “how the world works”.

Liedtka states that at the end of the idea generation process, “innovators will have a portfolio of well-thought-through, though possibly quite different, ideas. The assumptions underlying them will have been carefully vetted, and the conditions necessary for their success will be achievable. The ideas will also have the support of committed teams, who will be prepared to take on the responsibility of bringing them to market.” Liedtka labels the final step as the testing experience. It is not simply a confirmation of the design but rather “It’s about users’ iterative experiences with a work in progress”. In this phase, Liedtka identifies two components. The first is pre-experience and it is “creation of basic, low-cost artifacts that will capture the essential features of the proposed user experience. These are not literal prototypes—and they are often much rougher than the “minimum viable products” that” you can test with your employees. The next step is learning in action and these are real world experiments to not only test viability but to help reduce your employees fear of change.

Tomorrow I will have some concluding thoughts about the use of design thinking in compliance and hopefully report the Astros have started their three game run.

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

Compliance into the Weeds is the only weekly podcast which takes a deep dive into a compliance related topic, literally going into the weeds to more fully explore a subject. In this episode, Matt Kelly and I take a deep dive into the Benczkowski Memo and what it means for not only the monitor selection process but for compliance officers who may be in front of the Justice Department in a FCPA investigation.

Some of the highlights from this podcast are:

  1. Will there be corporate monitors going forward?
  2. Tom argues this memo sets out a road map for any company under FCPA investigation to avoid a monitor.
  3. Matt wonders if this memo will assuage mergers and acquisition liability for inadequate pre-acquisition due diligence.

We unpack of all these points and consider strategies going forward.

For more reading: see Matt’s piece New DOJ Policy on Corporate Monitors and see Tom’s blog posts Astros Heading to Back-to-Back as DOJ Announces New Monitor Policy and Back-to-Back (again): More on the Benczkowski Memo.

 

Game 3 of the ALCS is in the books and the Astros had yet another hiccup on their march to back-to-back championships as Boston took Game 3 in Houston. However our sports-themed week continues but from a more tangential angle today as we pay tribute to Paul Allen, co-founder of Microsoft. Allen, together with Bill Gates, had a more direct impact on the last 20 years of the 20thcentury in the business world than almost anyone else on the planet. While being known as “Microsoft’s other founder” the skills Allen used in the sports world informs today’s post on why design thinking works in compliance. Over the next two blog posts I will explore this topic.

Yet there is a sports connection for Allen as while certainly most well-known for his Microsoft roots, he was also the majority owner of two professional sports teams, the Portland Trailblazers in the National Basketball Association (NBA) and the Seattle Seahawks in the National Football League (NFL). He was a minority owner in the Seattle Sounders, the city’s Major League Soccer (MLS) offering. Jon Wertheim, writing in Sports Illustrated, said of Allen, “Here is a man who combines Cuban’s passion with Howard Hughes’s instinct for publicity. Allen is, unmistakably, fanatical about his teams, the Blazers in particular.”

I thought about Allen and his passion for innovation when I read a recent Harvard Business Review (HBR) article, entitled “Why Design Thinking Works”, by Jeanne Liedtka. She believes design thinking “can be thought of as a social technology.” She reported on a seven-year study which led her to conclude that design thinking can “unleash people’s full creative energies, win their commitment, and radically improve processes.” The basic problem is that while we know how to stimulate new ideas “most innovation teams struggle to realize their benefits.” Liedtka believes the cause is that both employees biases and behavioral habits prevent innovations from gaining traction. She believes design thinking provides a structured approach which allows breakthroughs to occur.

I took a course in design thinking last year so I could familiarize myself with the technique. One key is the input from your customer base as a part of the design process. For any Chief Compliance Officer (CCO) or compliance practitioner your customer base are your employees. You may have additional stakeholders, both inside and outside of the organization, but your employees are the people who will implement the solutions you come up with the innovation process of design thinking. Generally, an innovation process must provide three deliverables: superior solutions, lower risks and employee buy-in.

In a very well put observation, the author wrote “Defining solutions in obvious, conventional ways, not surprisingly leads to obvious conventional solutions.” Compliance programs which are legal driven, check the box exercises are just that, conventional solutions which do speak to the business process involved or business efficiencies. Moreover, “it’s also widely accepted that solutions are much better when they incorporate user-driven criteria.” This means that if you incorporate ideas from your employee base it will make your innovation stronger.

This leads to the next observation which is that “An innovation won’t succeed unless a company’s employees get behind it” and the surest way to do so, is by having them involved in the process of generating ideas. Of course this means as a CCO or compliance practitioner you must listen but this listening can occur in a variety for forums such as town halls, focus groups or through a variety of other mechanisms, such as interviews or social media.

Liedtka believes that innovation should help to reduce both risks and costs. The flip side is that any change will bring some uncertainty. She writes, “The trade-off is that too many ideas dilute focus and resources. To manage this tension, innovators must be willing to let go of bad ideas—to “call the baby ugly,” as a manager in one of my studies described it.”

Another key insight was the structure that design thinking provides. As this is for non-design professionals, the “structure and linearity” helps those using it. Further, as the author noted, “Kaaren Hanson, formerly the head of design innovation at Intuit and now Facebook’s design product director, has explained: “Anytime you’re trying to change people’s behavior, you need to start them off with a lot of structure, so they don’t have to think. A lot of what we do is habit, and it’s hard to change those habits, but having very clear guardrails can help us.””

This last quote explains why compliance programs are now ready to embrace design thinking as an innovation technique. When anti-corruption compliance programs came into existing, largely in the first decade of this century, they were written by lawyers for lawyers. This is because companies had finally awoken to the need of effective compliance programs to not only prevent bribery and corruption but also as a bulwark under the US Sentencing Guidelines if a Foreign Corrupt Practices Act (FCPA) violation occurred. However, now corporate compliance programs have imbued the basic tenets not to pay bribes and are now ready to fully embrace business process as the manner to more fully operationalize compliance.

Tomorrow we will consider how the use of design thinking can shape the thinking of both the compliance practitioner and the corporation to more fully operationalize a compliance program.

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

This week returns to one my favorite themes for every Chief Compliance Officer (CCO), compliance professional and compliance program: Sherlock Holmes. This podcast series will focus on themes from the Sherlock Holmes short stories to illustrate broader application to components of a best practices compliance program. In this episode, I consider the theme of institutional justice through The Adventure of the Abbey Grange.

In the story The Adventure of the Abbey Grange, Holmes feels something is just not right about the story told by Lady Mary Brackenstall regarding the death of her step-father Sir Eustace Brackenstall. Holmes’ largest concern turns on the contents of three wine glasses, one of which contains beeswing and the other two do not. It turns out that Sir Eustace was killed by a companion of Lady Mary, which Holmes uncovers. However, Holmes has an adaptability for justice when the situation demands it, stating, “Once or twice in my career I feel that I have done more harm by my discovery of the criminal than ever he had done by his crime.” Satisfied the actions of the criminal and his accomplice (Lady Mary) were both warranted and just; Holmes does not report his findings to the local police. Klinger dryly noted, “his sympathies may have overridden his judgement: Many scholars believe that Holmes lets himself be fooled by a villainess clever than he credited.”

This story illustrates a key point for every CCO and compliance practitioner; institutional justice. As a CCO or compliance practitioner how can you work towards achieving it? Institutional justice is a primary factor as to whether an employee will come forward with a concern. Management might try a quick-fix reaction to a messy investigation with more reporting mechanisms, posters or asking a Chief Executive Officer (CEO) to use compliance training to generally get the word out. Employees view it as a trust issue, and you must garner that trust through providing institutional justice.

One of the ways to insure institutional justice is through the Fair Process Doctrine which mandates that every hotline complaint should be treated with both dignity and respect; with an efficient and thorough vetting. From there if discipline is warranted, a company should follow a prescribed process. Follow that process and an employee would almost always uphold a company’s decisions. Fail to follow the process and the employee would be required to engage in remedial action.

Companies must have an absolute prohibition against retaliation. If not, any sense of institutional justice will be destroyed. A final problem of inconsistent outcomes is that companies must demonstrate that consistent and fair outcomes are routine, regardless of people, relationships or scenarios. If employees view outcomes as fair, they will be more compelled to report concerns. Employees know that inconsistency equals personal risk.

Both the Fair Process Doctrine and the more recent concept of institutional justice are central to the modern compliance profession. The compliance profession must remind companies that even if they can engage in an action, they should not always do so. Sometimes the reputational damage, even if an action is legal, is so great that the risk cannot be managed. The compliance discipline within every company is the one corporate function most well suited to bringing institutional justice into the fabric of a company.

I have used three primary resources in putting together this series: Maria Konnikova’s Mastermind (Konnikova); the online site shmoop.comand its blog post, The Return of Sherlock Holmes (shmoop); and finally the most seminal print work on the entire Holmes canon, the three-volume The New Annotated Sherlock Holmes (Klinger) edited with notes by Leslie S. Klinger.