In this episode, Jay Rosen and myself take a look at some of the top compliance stories over the past week, including inquiring into where are the chickens in England.

  1. The Supreme Court narrows the definition of who is a whistleblower in Digital Realty v. Somers. See Kevin LaCroix’s report in the D&O Diary, Sam Rubenfeld’s report in the WSJ Risk and Compliance Journal. Henry Cutter surveys white collar defense and vendor reaction in his piece in the WSJ Risk and Compliance Journal.
  2. Banks behaving badly yet again. Mike Volkov reports on Rabobank’s $368MM penalty for conspiracy to money launder and obstruct justice in Corruption, Crime and Compliance.
  3. Bill Coffin hits his 3rd straight homerun. He writes about the ethical and compliance failures of Twitter in his Compliance Week
  4. Companies need to prepare for more robust international investigations and enforcement of anti-corruption laws. Mara Lemos Stein reports in the WSJ Risk and Compliance Journal.
  5. Jaclyn Jaeger reviews due diligence practices for corporate sponsors in Compliance Week.
  6. Curling goes big-time with a doping scandal. An amazed Adam Turteltaub writes in the SCCE Compliance and Ethics Blog.
  7. How can you evaluate in-house investigations? Sundar Narayanan explores in an article in Corporate Compliance Insights.
  8. Hui Chen and Professor Eugene Soltes consider a more analytical approach to testing compliance program effectiveness, in an upcoming Harvard Business Review article (sub req’d).
  9. KFC shuts down in the UK for (wait for it) lack of chicken to fry. Tom considers what is risk in a piece for the FCPA Blog.
  10. Tom had a week-long series on the intersection of Sherlock Holmes and innovation in compliance. Check out the following topics: Digital Strategies; Using the Digital Twin; CCO as Data Interpreter; Interpreting Data; and Digital Future in Compliance.
  11. The Everything Compliance gang is back for wrap up of their highlights from the first year of compliance under Trump. It is available on the FCPA Compliance ReportiTunesLibsynYouTubeand JDSupra.
  12. Tom and Jonathan Armstrong premier a new podcast, Countdown to GDRP. This podcast will consider what US companies can do to prepare for GDPR on its go live date of May 25, 2018. For the inaugural episode, click here. Episode 2 will go up next Wednesday, February 28th.
  13. Tom announces presales of his next book, the Complete Compliance Handbook, which will be published by Compliance Week in April 2018. It is available for PreSale here.

This week I have been exploring how to change the culture in an organization based upon a series of articles in the most recent edition of the Harvard Business Review (HBR) by Boris Groysberg, Jeremiah Lee, Jesse Price and J. Yo-Jud Cheng. We previously considered their lead article “The Leader’s Guide to Corporate Culture”. We next considered how you might move the needle forward on culture, in an article entitled “What’s Your Organization’s Cultural Profile”. Today I want to consider their final piece in the HBR series entitled “Context, Conditions, and Culture and ponder some more challenging leadership variables which a Chief Compliance Officer (CCO) might face in this effort. This is because “Context matters when assessing a culture’s strategic effectiveness. Leaders must simultaneously consider culture styles and key organizational and market conditions if they want their culture to help drive performance.”

The areas the authors focus on are: region, industry, strategy, leadership and organizational design. Yet I was interested in the area of leadership. Obviously tone at the top is important as both the character and behavior can greatly affect culture. I considered this when about Paula Kerger, the Chief Executive Officer (CEO) of the Public Broadcasting System (PBS). She was profiled by Adam Bryan, in a New York Times (NYT) piece entitled “Find the Courage to Take a Scary Leap”. Kerger identified cultural change as the “biggest challenge for leaders, and it’s also the thing that will kill you if you can’t figure out how to manage what is clearly a shifting landscape, and get people moving along that path and not be stuck.”

Kerger said that PBS has gone through such a change, by noting “We’re going through a big rebuild of our whole infrastructure of how we distribute our content. When you get your head around it, it’s such an extraordinary time, and it’s not one for the faint of heart.” Many companies who have gone through a Foreign Corrupt Practices Act (FCPA) investigation or enforcement action have been required to make such a change in the culture of how they do business. If your senior management is not committed to such change, the message will not make its way down to the troops in the field.

I thought that Kerger captured it well when she said, “Life is often about those moments — you have to be willing, every once in a while, to jump, and it’s absolutely terrifying. Our nature as humans is to not change. We get comfortable, and we don’t want to be pushed outside that comfort zone, whether it’s moving from a job that you know is not the right one or because it always feels so much easier to keep doing the same thing, even if it’s painful, rather than taking that leap.”

Kerger described her tools for making and then implementing, a culture shift. She begins with having a diverse leadership team. She said, “With the teams we build, we look for different skill sets and we look for people who bring different voices to the table. I know that’s now become very popular in theory, but that’s something I’ve always done. I always believe that the best projects are managed not by people who all think alike but who are all contributing something different.”

To effect this strategy, she also provided insights into how she has accomplished culture shifts. She has done so by pulling “teams together that have representation from every facet of the organization. So you’re aligning people together around shared projects and shared outcomes, and people get to know each other so then it’s not about us versus them. I think it’s good to have a blend of people that have been there for a while as well as new talent. I think tipping too far one way or another is always a problem.”

Another key leadership point is about communications. Of course listening to your team members is critical but Kerger took it to a broader context when she said, “Sharing information is also really important. In some organizations, leaders can go into their bunkers, and if people don’t get enough information, then they start making it up. I try not to shield people when the news isn’t always good, because they just need to know.”

Yet, at some point, leaders have to make a decision. Whether you are the CEO or the CCO, you will eventually be called upon to make a decision. Kerger said, “I like to get a lot of information before I make a decision, but I’m not afraid to make decisions. That comes back to the whole thing about being the C.E.O. You have to be able to move. People who always want all the information before they make a decision are disastrous C.E.O.s. You’re never going to have all the information.”

Kerger also had some interesting thoughts on hiring which can certainly be useful to the CCO. First is that she looks for people who are intellectually curious, in addition to a passion about the work of PBS. She wants people to have a “fire” for working in the public media. How many CCO’s consider the passion of those working in the compliance function? Many compliance professionals are passionate about doing the work of anti-corruption compliance because it is such a worthwhile endeavor, particularly in the business context. I often say that compliance programs are business solutions to the legal problem of bribery and corruption. If you can tap into a person who has this passion, they can help bring a level of enthusiasm to your company that may not normally be seen.

Echoing the emphasis Kerger puts on disparate team members, she also looks “for people who are going to bring something to the table and who will work well collaboratively, but I don’t want a group of people that just tell me what I want to hear. I just want them to tell me what I need to hear. And so I want people that are going to be comfortable doing that.” Finally, she wants someone who can be the “devil’s advocate, ensuring that “you don’t come up with consensus too fast.”” She ended with the following, “Even if you end up at the same outcome, you don’t want people walking out of the room saying, “Well, I wonder why we didn’t think of… ?””

I hope you have enjoyed and can use some of the concepts that Groysberg, Lee, Price and Cheng put forth. As a CCO, you can use some of the specific tactics of Kerger as well as the theoretical underpinnings of the authors of the HBR pieces.

 

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

I continue my exploration of how to change the culture in an organization based upon a series of articles in the most recent edition of the Harvard Business Review (HBR) by Boris Groysberg, Jeremiah Lee, Jesse Price and J. Yo-Jud Cheng. This series of articles was based on their research into some 230 companies, together with the leadership styles and values of more than 1,300 executives across a range of industries. Their findings were generally that corporate culture most directly affects employee engagement and motivation, followed by customer orientation. All of this was laid out in their article “The Leader’s Guide to Corporate Culture”. The conference issue is paramount for the compliance professional.

I found this to be particularly significant for any Chief Compliance Officer (CCO) or compliance practitioner for a couple of reasons. First is that having a culture which is dedicated to doing business ethically and in compliance can be the single most important motivation for employees and that the customer base for the CCO and compliance function is employees. This means the focus of who is being motivated and engaged are the primary bastion of compliance. Yet it is the underlying style of your organization, which ultimately will move you towards your overall goal. It is these convergences and how to arrive there that I want to consider today.

As we noted yesterday, to move the needle forward on culture, a company must know where it stands. In an article entitled “What’s Your Organization’s Cultural Profile” the authors suggested asking the following questions as a starting point:

  • What do you most like about the current culture in your organization? Is your organization a caring environment where the focus is on relationships and mutual trust? These types of work environments are warm, collaborative, and welcoming places where people help and support one another. Further, employees are united by loyalty; leaders emphasize sincerity, teamwork and positive relationships.
  • What behaviors and mindsets might you evolve? Is curiosity and learning emphasized in your company? If so, you would expect employees to engage in exploration, expansiveness and creativity. Such companies are inventive and open-minded places where people spark new ideas and explore alternatives. Leaders emphasize innovation, knowledge, and adventure and employees are united by curiosity.
  • How efficient are your organization’s leaders at role modeling the culture? Does the culture tend to be authoritative and hierarchical, most generally defined by strength, decisiveness, and boldness? Such work environments tend to be competitive places where people strive to gain personal advantage. This type of culture is generally facilitated by leaders who emphasize confidence and dominance and where employees are united by strong control oversight and control.
  • What are the characteristics of people who are most successful in your company’s culture? Is your company results oriented, characterized by achievement and winning? Many such workplaces are outcome-oriented and merit-based places where people aspire to achieve top performance. In these businesses leaders emphasize goal accomplishment, where employees are united by a drive for capability and success.
  • When new employees do not succeed in your organization, what is the most common reason? If they failed did these outsiders break the order of the organization that may be more focused on respect, structure, and shared norms. Many such places are methodical places where people tend to play by the rules and want to fit in. In these types of businesses the company leaders emphasize shared procedures and time-honored customs and employees are united by cooperation.

All of these are clearly adaptable for the CCO or compliance professional to use in such a survey.

The authors lay out three phases to setting your new cultural target. Through the prior steps you will understand where you are culturally. After examining your culture, through such mechanisms as the company’s founding and heritage, it’s espoused values, subcultures, leadership style, team dynamics and the impact on the organization today, you should consider the “current and future external conditions and strategic choices and determine which cultural styles will need to be strengthened or diminished in response.” From this, you should “formulate a culture target according to which styles will support future changes.” Finally you should “translate the new culture target into organizational change priorities.” The authors noted, “It should be framed not as a culture change initiative but in terms of real-world problems to be solved and solutions that create value. Focus on leadership alignment, organizational conversations, and organizational design as the levers to guide the culture’s evolution.”

After you have assessed where you are, you can consider where you want to go. The authors note you should “identify culture targets. The best ones have some attributes in common: They align with the company’s strategic direction; they’re important to execute; and they reflect the demands of the external business environment.” Obviously doing business within the context of the law (i.e. legally) should be paramount. But doing business ethically might be considered another step. Here you might consider Dun & Bradstreet and it’s #DoTheRightThing campaign or a similar example of how you can use other key phrases and tools to move forward in this area.

To converge all of these concepts together requires a focused campaign, communicated to your employees, all with the backing of senior management. It also requires employee engagement beyond the first step of communication. Here I thought of Peter Löscher who was hired as the first outsider to become the Siemen’s Chief Executive Officer (CEO) since it’s founding in 1847. Löscher’s attitude when he was hired can be summed up with the following quote from another HBR article, entitled “The CEO of Siemens On Using a Scandal To Drive Change”, where he said, “never miss the opportunities that come from a good crisis – and we certainly didn’t miss ours.” More importantly, Löscher recognized that as strong as a strategy might be, the key is in how you change the culture of the company.

The Siemens story is an important one in both the compliance world and in the greater business world. It demonstrates that a company can change its culture so that it can operate and do business ethically and it has become an example of how a company can do so.

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

Culture trumps strategy. That phrase is well-worn for a reason. Think about every major corporate failure you can recall; Uber, Wells Fargo, Volkswagen, FIFA or you name the scandal and there was a failure of corporate culture, even with a successful sales strategy involved in the business. A section in this month’s Harvard Business Review (HBR) entitled Leading Culture had a series of articles dealing with the intertwined issues of culture and strategy and most importantly, how to effect a change in corporate culture. Over the next few blog posts, I will be exploring the issues raised by these articles. Today I will consider the article “The Leader’s Guide to Corporate Cultureby Boris Groysberg, Jeremiah Lee, Jesse Price and J. Yo-Jud Cheng.

The authors begin by noting, “Strategy and culture are among the primary levers at top leaders’ disposal in their never-ending quest to maintain organizational viability and effectiveness. Strategy offers a formal logic for the company’s goals and orients people around them. Culture expresses goals through values and beliefs and guides activity through shared assumptions and group norms.” They believe, “strategy provides focus and clarity for collective action and decision making,” whilst culture is the unspoken behaviors that move an organization forward. While most senior leaders are more than comfortable directing strategy, they are usually much less able when it comes to directing culture. Leaders often essentially outsource culture to the Human Resources (HR) function, which the authors believe is a big mistake.

The authors next turn to defining corporate culture, finding four characteristics. A culture is shared as it “resides in shared behaviors, values, and assumptions and is most commonly experienced through the norms and expectations of a group—that is, the unwritten rules.” Culture is pervasive in that it is manifested “in collective behaviors, physical environments, group rituals, visible symbols, stories, and legends.” A culture is enduring as it “develops through the critical events in the collective life and learning of a group.” Finally, it is implicit as even though it may be unspoken, employees are hard-wired to recognize and respond to it.

The problem for many Chief Compliance Officers (CCOs) or other senior leadership is how to impact a true cultural change. This can be after a major Foreign Corrupt Practices Act (FCPA) violation and attendant enforcement action or even at a time less than such a dramatic event. Obviously executing a new business strategy can be much easier but that does not mean it cannot be accomplished. The authors note four practices through which they have seen a successful cultural change.

Articulate the aspiration

As with any new change, before you make it, you need to know where you are. This means you should assess your current culture with a “framework which can be openly discussed throughout your organization.” Clearly there can be cultures which do not align with doing business ethically and in compliance with laws such as the FCPA. Yet change can be framed “in terms of real and present business challenges and opportunities as well as aspirations and trends. Because of culture’s somewhat ambiguous and hidden nature, referring to tangible problems, such as market pressures or the challenges of growth, helps people better understand and connect to the need for change.” If your change is to do business more in line with the requirements of anti-corruption laws, you might aspire to be named as one of Ethisphere’s World’s Most Ethical Companies.

Select and develop leaders who align with the target culture

Obviously strong top-level leadership is required to make such a culture change. But it will require more than tone at the top but true leadership from the top. If a leader will not embrace this challenge, they may well need to move on. Yet, the authors found “Incumbent leaders who are unsupportive of desired change can be engaged and re-energized through training and education about the important relationship between culture and strategic direction. Often they will support the change after they understand its relevance, its anticipated benefits, and the impact that they personally can have on moving the organization toward the aspiration.” This also applies to new leaders who come into the organization and they can serve a higher profile role as catalysts for change.

Use organizational conversations about culture to underscore the importance of change

This ties into the articulation principle set out above but takes it a step further. You need to engage your employee base early and often about the culture change and then keep at it. The authors note, “As employees start to recognize that their leaders are talking about new business outcomes—innovation instead of quarterly earnings, for example—they will begin to behave differently themselves, creating a positive feedback loop.” There many different types of communication tools which can be utilized, all of which will be familiar to a CCO. They include road shows, listening tours, town halls, social media platforms or any other mechanism which facilities a true 360-degree approach to communications.

Reinforce the desired change through organizational design

This can be a key area where a CCO or compliance practitioner can use a corporate compliance program to help impact cultural change as this practice uses written standards, policies and procedures and internal controls to effect transformation. This can even move down into such systems as performance management where an obvious carrot approach can be viewed as a positive incentive. The authors note, “When a company’s structures, systems, and processes are aligned and support the aspirational culture and strategy, instigating new culture styles and behaviors will become far easier.”

The authors conclude that at times, cultural change is vital. It may be a legal violation, business reason, market conditions or disruption which requires a cultural change. Distilled down senior management “must become aware of the culture that operates in their organization.” They must target the culture they aspire to embrace. The final step is to “master the core change practices of articulation of the aspiration, leadership alignment, organizational conversation, and organizational design. Leading with culture may be among the few sources of sustainable competitive advantage left to companies today. Successful leaders will stop regarding culture with frustration and instead use it as a fundamental management tool.”

Every CCO should consider these points and use them going forward to effect a cultural change, if needed in your organization. Tomorrow we will consider how to shape your culture to do business ethically and in compliance.

 

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

One of the big differences in a corporate compliance function and in-house legal department is that compliance is there to prevent, find and fix problems while the legal department exists to protect a company from the problems it gets itself into. Moreover, as Roy Snell, Chief Executive Officer (CEO) of the Society of Corporate Compliance and Ethics (SCCE), continually reminds us, it is this ‘fix’ component requiring a Chief Compliance Officer (CCO) to remediate problems, even when a corporate law department is trying to protect the company from criminal or civil liability. Put another way, a CCO must engage in creative problem solving.

In a recent Harvard Business Review (HBR) article, entitled ““Sorry” Is Not Enough”, it speaks to what is the best manner to impact customer services. As I read the article I became more convinced that it spoke to the role of a CCO that Snell has been talking about all this time. In customer service, it turns out that finding solutions is the key which separates a successful interaction by a customer with a problem from one in which the customer walks away dissatisfied. In the article it was called “problem solving work”; that is, work by a customer service function which found a solution for the customer.

One thing that compliance officers must never forget is that their customers are company employees. This means when an employee comes to you with a problem, they need you to fix it or to help them fix it. As the article noted, customers cared less about the actual outcome than about the process by which the employee tried to offer assistance. “It’s not about the solution—it’s about how you get there.” Once again, the Fair Process Doctrine raises its head not only in the corporate world but specifically in the compliance realm.

The basis of the article was a study by a team led by Jagdip Singh, of Case Western Reserve, who obtained and analyzed videos filmed at airport customer service desks in the US and UK. Their findings broke customer interactions into three phases which every compliance professional should work to understand. They are: “sensing (in which the employee asks questions to try to understand the issue), seeking (in which the employee brainstorms and explores potential solutions), and settling (in which the employee works with the customer to choose the solution that will provide the best outcome).” Most interestingly, “Singh’s research suggests that companies may benefit from teaching employees to find imaginative answers to service problems.” That last quote is instructive as it is definitely not the role of a corporate legal department to find “imaginative answers to service problems” but is exactly what a compliance professional is called upon to do.

At the most basic customer service level, it is not about giving a customer services representative a script with the right words to use. It is about finding solutions. I once listened to an intriguing conversation by my dentist, Dr. Batiste, on her hiring of a new dental technician. Dr. Batiste said what she looks for in a dental technician is more than simply technical qualifications of even technical competence. She is interested in whether or not the dental technician is a problem-solver. She said the issues her office faces are varied and wide ranging every day. It can be 10 people in the waiting area who ‘dropped in’ with no scheduled appointment; to more complicated dental and even medical problems; to financial and insurance issues; to tech issues around things from computer signatures to X-Rays machines. In other words, a wide variety of issues far beyond the technical competence. Diverse problem-solving is what the compliance professional must do.

As a companion to the HBR piece, there was interview with Bob Easton, the chairman and senior managing director of Accenture’s Australia and New Zealand business. He was intrigued by Singh’s research because it related to how person’s, even as high in an organization as is he, interact with customers under stress. He noted that as an executive, he is a “front-line service worker” and if Easton is, that means every CCO or compliance practitioner is as well. Easton had two interesting insights on the research.

The first is how to deal with issues when something goes wrong. Easton stated, “We’re all trained to apologize when something goes wrong—and the desire to do so is almost instinctive. Lately, though, I’ve avoided words like “apologize” and “sorry.” Instead, I’ll say something like, “I acknowledge the problem, but you probably want us to move immediately into finding options to solve it, so let’s start talking about the options.” This goes against our instincts, but it’s very effective. Clients care less about the apology and more about how quickly and effectively you present options and solutions.”

The second is that to fully fix a problem, or remediate, you need a combination of data coupled with intelligence. For the compliance professional, it is not about simply saying ‘no’ but creative problem solving. This is where compliance professional who can read a spreadsheet has a very large leg up on the legal department folks who do not know how to do so. With the Department of Justice’s (DOJ) continuing focus on the operationalization of compliance this will become more important.

Corporate compliance should exist to do compliance, not be a paper program run by lawyers. Compliance should be there to solve problems. In many ways compliance is the fulcrum corporate discipline because it touches so many aspects of the corporate world. When the senior managing director of Accenture in two countries says he is a frontline service worker, it clearly speaks to the compliance professional to have a similar understanding. For a corporation to actually do compliance, it must be done in conjunction with the other corporate functions.

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