This week, we explore the topic of innovation in compliance by looking at some of the newest business strategies that can be applied by the compliance profession to corporate compliance programs. My inspiration comes from the MIT Sloan Management Review winter edition. Today I want to take a different direction and give you some tips on how to get your organization’s culture right.
As most readers will recall, a very large part of Deputy Attorney General Lisa Monaco’s October 2021 speech was about corporate culture. Regarding culture, Vin DiCianni, founder of Affiliated Monitors, Inc. (AMI), said of Monaco’s remarks, “The announcement from Deputy Attorney General Lisa Monaco and the Department of Justice rekindled the agency’s focus on corporate and individual accountability for white-collar crimes. In doing so, it has emphasized to corporations, their executives, and the lawyers who represent them the importance of implementing and maintaining strong and effective compliance programs and how the DOJ will continue to review these programs in the future. In other words, culture criticality is now paramount. Compliance Officers (CCOs) need to focus on developing corporate culture to lay the ethical foundation for a successful compliance program.
In the latest issue of the MIT Sloan Management Review, Donald Sull and Charles Sull wrote an article titled “10 things your company culture needs to succeed“, in which they posited that “knowing which elements of culture are most important to employees can help leaders foster engagement as they transition to a new reality that will include more distant and hybrid work.” This is a great look at some of the key elements of corporate culture and how CCOs can move forward to lay the foundation for it.
In the article, the authors explored “What distinguishes a good company culture from a bad one in the eyes of employees?” Of course, culture always starts at the top, but unfortunately the authors noted that “an organization’s formal core values signal the cultural aspirations of senior executives, rather than reflecting the elements of corporate culture that matter most.” more for the employees”. Only by listening to what employees want can you begin to understand how to improve the culture. The authors found 10 key elements of culture that mattered most to employees.
- Employees feel respected. Employees are treated with consideration, courtesy and dignity, and their views are taken seriously. This is by far the most important factor and “the best predictor of a company’s culture score is whether employees feel respected at work. Respect is not only the most important factor, it stands out from other cultural elements in terms of importance. Respect is almost 18 times more important than the typical characteristic in our model in predicting a company’s overall culture score, and almost twice as important as the second most predictive factor. The implications of this finding go to communications and a culture of speech and how these might be used by a compliance function.
- United leaders. Leaders help employees do their jobs, respond to requests, respond to individual employee needs, and offer encouragement and support. Here, the authors found that “employees describe supportive leaders as helping them do their jobs, responding to requests, meeting individual employee needs, offering encouragement, and supporting them. Leaders, of course, influence all aspects of culture, but being a source of support for employees is particularly critical and is the leadership trait most closely associated with a highly rated culture. This is linked to the search for respect and also to a culture of speaking up and trust within an organisation.
- Leaders live by core values. The actions of leaders are consistent with the values of the organization. As regulators focus on this issue, employees need to see leaders not just embracing words, but actually doing deeds. Perhaps most interestingly, “Employees don’t expect leaders to live the core values, but they appreciate it when they do.”
- Toxic managers. Leaders create a toxic work environment and are portrayed in overwhelmingly negative terms. Nothing will kill the culture faster than a toxic manager. From a compliance perspective, this can be a disaster because not only does a toxic manager poison the atmosphere of those around him, but also those who train under him will get their toxic approach as a role model.
- Unethical behavior. Managers and employees lack integrity and act unethically. Again, this can portend disaster for an organization. Integrity is a cornerstone of the official culture of most organizations and “Identifying toxic leaders, digging deeper to understand the context of their behavior, coaching them or removing them from leadership positions are tangible actions that organizations can take to weed out people who are undermining the corporate culture and potentially exposing the company to reputational or legal risk.
- Advantages. Employee evaluation of all benefits provided by the employer. While at first this might not seem like a compliance issue, when you look at the DOJ’s mandate that corporate compliance is the bearer of institutional justice and institutional fairness, you begin to see the connection . Perhaps most interesting is that “the benefits are more than twice as important as the compensation. Benefits are important to all employees, but the ones that matter most depend on the employee’s job. Health insurance and benefits are a better predictor of culture assessment for front-line workers, while retirement benefits such as 401(k) plans and pensions matter more for white-collar workers. .
- Advantages. Employee rating of workplace amenities and benefits. This finding once again challenges the CCO around institutional fairness and links to the importance of attracting, acquiring and retaining talent. Here, the most interesting thing I found for compliance was that “Among benefits, company-hosted social events are a particularly strong predictor of a high culture score. Even when you control for how employees talk about benefits in general, social events such as team building exercises, happy hours, and picnics emerge as a strong predictor of a high culture score. Hosting social events is a promising and relatively inexpensive way for leaders to reinforce company culture when employees return to the office. This provides insight into ongoing compliance communications in the post-pandemic world.
- Learning and development. Employee assessment of formal and informal learning opportunities. This finding also bodes well for compliance in terms of formal and informative compliance training and messaging.
- Job security. Perceived job security, including fear of layoffs, offshoring and automation. Most compliance functions do not view job security as part of the corporate culture. However, note the authors, “However, job insecurity weighs heavily on the minds of employees when evaluating company culture. The higher the percentage of employees who talked about layoffs, outsourcing, or the possibility of being laid off, the lower the company ranks on culture.
- Reorganizations. How employees perceive reorganizations, including frequency and quality. I didn’t find this too surprising, but the authors noted that “virtually no one has good things to say about the reorganizations”. Moreover, “the fewer people who mention reorganizations, the higher the cultural score of a company. While you might associate the mention of reorganizations with layoffs and job instability, the data reveals that employee concerns about this point to broader strategic issues for companies.
CCOs and compliance functions face a range of challenges as they navigate the post-COVID-19 return to work. Through corporate culture, companies must maintain a healthy culture, as required by the DOJ. The authors conclude, “Understanding the elements of culture that matter most to employees can help leaders maintain employee engagement and a vibrant culture as they transition to the new normal.”
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