Ethics and Compliance in the 21st
Century
DAVID GREENBERG
ABBC
LRN CORPORATION
SEPTEMBER, 2015
1
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A QUARTER CENTURY OF ETHICS AND
COMPLIANCE PROGRAMS
FIRST GENERATION: 1990 – 2005
Lawyers, rules and codes of conduct
The Federal Sentencing Guidelines and comparables around the world
SECOND GENERATION: 2005 – 2010
Training and technology
Values, tone in the middle, and aspirations to ‘bake into the business’
THIRD GENERATION: 2010 – 2015
Outcomes, not just design and implementation
Blended learning, predictive metrics, empowered CECOs, business value
FOURTH GENERATION: 2015 and into the future
Purpose-driven, values-based, behavior-obsessed
E&C as an element of culture as a conscious business strategy for winning
4
Program Dimension
Orientation
1G
2G
3G
4G
Predominantly rules based
Values acknowledged
Acquiescence with
established order
•
•
•
Predominantly values based
Values prioritized
Individual responsibility for conduct
•
•
•
Strongly values based and purpose driven
Values instrumental in inspiring conduct
Individual ownership of stakeholder trust
and corporate reputation
•
Develop “defensible”
program
Emphasize “tone at the
top”
Implement and train on
comprehensive Code of
Conduct
•
Leverage technology to
manage risks
Emphasize importance of
ethical culture and “tone at
the middle”
Make training more engaging
•
•
Address extended enterprise risks
Strengthen program in relation to
enforcement priorities
Implement blended learning
•
•
Take systemic approach to managing risk
Apply strategic, transformative focus on
culture and values
Turn “push” into “pull”
Ensure program has at
least minimal elements
prescribed by official
guidance
•
Enhance and scale program
to serve needs of global
enterprise
Engage and leverage
functional and operational
leaders through E&C
committees
•
Emphasize independence of E&C
function
Elevate CECO role
Enhance oversight capabilities of
board of directors
•
Distribute Code of
Conduct and corporate
policies
Require certification of
training completion
•
Involve operational managers
in training
Recruit E&C champions in
business units
•
•
Engage and align business partners
Communicate business value
contribution of E&C
•
Mention program in
employee onboarding
Communicate periodically
with employees regarding
program
•
•
Conduct ad hoc
assessments focused
mainly on program design
•
•
Structure
•
•
•
•
(Culture)
•
Evaluation
2015 - 2020
•
•
•
•
(Effectiveness)
2010 - 2015
Rules based
Values ignored
Command and control
•
Social
Integration
2005 - 2010
•
•
•
Strategy
Business
Integration
1990 - 2005
•
•
•
•
•
•
•
•
•
•
•
•
•
Brand program
Establish awards and
recognition programs
Maintain frequent employee
communications
•
Evaluate program periodically
as to its effectiveness in
preventing unethical as well
as illegal conduct
•
•
•
Optimize E&C-related information sharing
and collaboration across the enterprise
Utilize real-time risk intelligence gathering
Leverage technology to enable smart
decision making and risk taking
Set and evaluate strategic goals based on
core purpose and values
Consolidate E&C as core business
function
Demonstrate business value contribution
of E&C
Include values-based criteria in
individual performance appraisals
Celebrate acts of ethical leadership
•
•
•
Hire for character (as well as skills)
Evaluate ethical leadership skills
Utilize 360°appraisals, including valuesbased behavioral assessment
Evaluate outcomes; design and
implementation of program
Seek and apply predictive metrics
wherever possible
•
•
Identify and leverage effectiveness drivers
Regularly assess organizational culture5
(especially with behavioral focus)
What’s the Underlying Theme?
“Compliance is a Culture,
Not Just a Policy.”
US Department of Justice, Deputy Criminal Director of the Antitrust
Division
DEEP DIVE ON E&C EFFECTIVNESS
Introducing the Program Effectiveness Index (PEI)
• Designed to measure the degree to which E&C programs in
genuinely impact their companies
• Last data published Q2 2015 based on responses from more
than 200 companies worldwide.
• Built on eight data points reflecting impact:
o as a business enabler (e.g., providing guidance, enabling better
decision making);
o as a corporate conscience (e.g., promoting an ethical culture and
values-based behaviors);
o In employee application of the company’s code of conduct;
o In whether E&C education affects employee behavior and decision
making;
o in the celebration of acts of ethical leadership.
C-Suite Behavior Drives Ethics and
Compliance Effectiveness
Making Ethics and Compliance a Real Business
Priority
Communicating the Importance of Ethics and
Compliance
10
Making Real Progress on Regulators’
Guidance Drives Effectiveness
Celebrating Ethical Conduct Drives Effectiveness
Average PEI scores based on frequency of celebrating acts of ethical leadership:
Top quintile companies said they celebrate acts of ethical leadership “often” or
“very often” in the following ways:
• Awards (55%)
• Recognition in team meetings (45%)
• Recognition in company communications 42%)
• Job promotions (23%)
What Have We Learned?
Don’t ‘Do Compliance’ – ‘Get Compliance’
Built-in, not bolted-on
Ethics and compliance as part of core business objectives,
communication, evaluation, celebration
E&C leaders with seat at the table who coach business leaders
CEO and senior leader actions drive beliefs and behavior
Focus on Culture
Values drive behaviors
Behaviors drive outcomes
Purpose, values and trust have disproportionate impact
Measure What Matters
Develop metrics about ‘how things really work around this
place’
Set accountabilities and empirical targets
Reward success and recalibrate for failure
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Measuring What Matters: The Global HOW Report
36,000 Employees, 2 Million Observations
Copyright ©2013 LRN. All Rights Reserved.
Evolving to a human operating system
• There are three systems that bear on behavior: Governance, Culture, and Leadership. Organizations need to
align them into a single system capable of animating inspired behavior.
Three Archetypes of Culture
SELFGOVERNING
INFORMED
ACQUIESCENCE
BLIND
OBEDIENCE
•
•
•
•
Connect & Collaborate
Values
Inspiration
Significance
•
•
•
•
Command & Control
Carrots & Sticks
Rules
Success
• Rigid Hierarchy
• Dictatorial
• Coercion
BLIND
OBEDIENCE
INFORMED
ACQUIESCENCE
SELFGOVERNING
47
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Misconduct
Copyright ©2013 LRN. All Rights Reserved.
BLIND
OBEDIENCE
INFORMED
ACQUIESCENCE
SELFGOVERNING
99
92
92
82
80
67
46
42
38
Innovation
Loyalty
Satisfied Customers
BLIND
OBEDIENCE
INFORMED
ACQUIESCENCE
99
97
SELFGOVERNING
98
84
93
81
74
73
48
45
33
25
Adopt ideas
Good
reputation
Recommend
as employer
Financial
performance
BLIND
OBEDIENCE
INFORMED
ACQUIESCENCE
43% 54%
SELFGOVERNING
3%
“We are
self-governing”
“We inspire
our people”
CEO
Average
27%
3%
27%
4%
“We use
coercion”
46%
84%
“We reward valuesbased behavior”
39%
7%
Likelihood of
outperforming
competition
Trust
1.5X
Mission
1.8X
Values
1.9X
BLIND
OBEDIENCE
Blind
Obedience
INFORMED
ACQUIESCENCE
SELFGOVERNING
Behaviors (percentage high)
3%
2%
2%
1%
Horizon
Collaboration
Information
Speaking up
1% Inspiration
5% Resiliency
4% Operational efficiency
Outcomes
Trust 1%
Values 1%
Mission 8%
25%
47%
27%
28%
46%
46%
33%
42%
37%
42%
45%
49%
48%
38%
Good Ideas are readily accepted
Observed unethical behavior
Unethical behavior reported
No retaliation for reporting unethical behavior
Will be working here in next 12 months
Willingness to put in extra effort
Willingness to recruit friends to work at the company
Company takes community responsibility seriously
Company invests in the community
Company has satisfied customers
Company has a good reputation with customers
I try to inspire others
Better financial performance than competition
Higher level of innovation than competition
BLIND
OBEDIENCE
Informed
Aquiescence
INFORMED
ACQUIESCENCE
SELFGOVERNING
Behaviors (percentage high)
9%
21%
18%
6%
Horizon
Collaboration
Information
Speaking up
18% Inspiration
33% Resiliency
51% Operational efficiency
Outcomes
Trust 14%
Values 6%
Mission 44%
73%
34%
61%
57%
80%
82%
81%
83%
71%
82%
84%
78%
74%
67%
Good Ideas are readily accepted
Observed unethical behavior
Unethical behavior reported
No retaliation for reporting unethical behavior
Will be working here in next 12 months
Willingness to put in extra effort
Willingness to recruit friends to work at the company
Company takes community responsibility seriously
Company invests in the community
Company has satisfied customers
Company has a good reputation with customers
I try to inspire others
Better financial performance than competition
Higher level of innovation than competition
BLIND
OBEDIENCE
SelfGoverning
INFORMED
ACQUIESCENCE
SELFGOVERNING
Behaviors (percentage high)
49%
94%
94%
75%
Horizon
Collaboration
Information
Speaking up
89% Inspiration
57% Resiliency
94% Operational efficiency
Outcomes
Trust 88%
Values 78%
Mission 100%
97%
24%
88%
79%
92%
98%
98%
98%
94%
99%
99%
97%
93%
92%
Good Ideas are readily accepted
Observed unethical behavior
Unethical behavior reported
No retaliation for reporting unethical behavior
Will be working here in next 12 months
Willingness to put in extra effort
Willingness to recruit friends to work at the company
Company takes community responsibility seriously
Company invests in the community
Company has satisfied customers
Company has a good reputation with customers
I try to inspire others
Better financial performance than competition
Higher level of innovation than competition
• Workplace • Customers • Supply Chain • Community
HOW Freedom Works
Freedom FROM
•
•
•
•
Superfluous rules and
regulations
Overly structured
relationships
Top-down style
Zero-sum logic and old
stereotypes
Freedom TO
•
•
•
Work together,
bound by a common set of
values and goals
Fully harness potential in
relationships
Create greater shared
value, impact and
meaning
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Freedom From / Freedom To Boosts
Business Performance
20x
20x
10.7x
6.6x
4.6x
3.4x
x
Financial
Performance
x
x
Innovation
Long-term
success
Copyright ©2013 LRN. All Rights Reserved.
Partner Example 1: Identifying Key
Behavioral Drivers
DESIRED OUTCOME
Ensure people report misconduct when observed
KEY DRIVERS
• There is trust in the work environment
• Behaving according to mission rewarded
• People free to question established ways
Partner Example #3
A major Canadian bank wanted to refresh their
brand identity and ensure that their interactions
with customers felt authentic. In the process,
they realized that they needed to reexamine their
core character.
LRN designed and executed a company-wide
series of conversations to understand the current
climate, articulate a vision for the future, and
design values and behaviors to get them there.
Focus groups and workshops captured the voice
of employees at all levels and geographies in the
organization. Regular calibration with the
executive team provided leadership and
continuity.
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Outcomes
Engagement
Impact
Speak up and
be candid
Admit when you
don’t have the
answers
Be authentic and
transparent
Behaviors
No one can it alone
Vision
Unite to serve our
customer
Seek out new
perspectives
Break down barriers
and over-deliver
Challenge what’s
possible
Help others
succeed
Make it your
problem
Achieve long-term
success over shortterm gain
Go above and
beyond to support
each other
Take ownership and
follow through on
your commitments
Tackle real issues
and innovate
Respect
Embrace
difference
Integrity
Do what’s
right
Why
Service
Balance risk and
opportunity
Find a better way
Values
Loyalty
How We Do Our Work
Listen without
judging
Understand then act
Empathy
See things
from
another’s
perspective
To be the bank that
grows great
communities
Courage
Challenge
thoughtfully
Who We Are
Where We’re Going
Partner Example #4
A large US-based technology company was
looking to spur a major turnaround, starting with
the culture. LRN has been working with them
to re-launch their agile program, design a new
self-governing business unit, and expand their
existing values statement into a full Core
Architecture model.
ACME had recently conducted extensive
qualitative and quantitative employee opinion
research. In addition to a reexamination of the
quantitative data, LRN took the existing raw
qualitative output and re-coded it to analyze it in
the GCL framework. In partnership with the
executive team, LRN created a new Core
Architecture that reflected the existing needs
and aspirations of employees.
Summary of LRN’s Model for ACME
•
For each of ACME’s Core Values,
LRN identified six behaviors that
any individual in the organization
can demonstrate, regardless of role
or title.
•
The 24 behaviors were articulated in
both long and short statements; the
former fully characterize the
behavior, while the latter were
developed to help people more
easily internalize the Core Values.
•
Finally, LRN mapped culture
tendencies that hinder ACME’s
progress to the behaviors in the
model that can counteract those
tendencies.
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EXAMPLE: Core Architecture Model incorporates 4
core values supported by 24 behaviors and oriented
around 3 guiding principles
INNOVATES & ADVANCES
RESPECT
Adapts easily
Challenges status quo
Creates space for new ideas
Improves continuously
Takes risks
Provokes constructively
Engages meaningfully
Communicates openly
Extends trust
Speaks out
Embraces diversity
Responds promptly
innovation
CUSTOMER LOYALTY
Delivers excellence
Builds continuity
Puts customer first
Initiates action
Anticipates needs
Envisions solutions
TEAM SPIRIT
execution
speed
Seizes responsibility
Commits thoughtfully
Seeks feedback
Looks for synergies
Supports others
Promotes accountability
35
Innovates & Advances
Respect
Is adaptable and willing to embrace change.
Does not hold on to old ways of doing things out
of fear.
Adapts easily
Engages meaningfully
Is genuinely interested in establishing
meaningful connections with others, irrespective
of their role, title or tenure.
Creates room for new ideas and opportunities;
doesn't postpone to tomorrow what can be done
today.
Challenges status
quo
Communicates openly
Communicates with openness and integrity:
Presents the same truth to all parties and
promotes shared understanding.
Extends trust
Trusts team members to deliver what they say
they will deliver.
Speaks out
Speaks out when faced with behavior that is
inconsistent with CA's Core Values.
Takes risks
Embraces diversity
Respects colleagues' work styles and
commitments; helps team to look at differences
as a potential asset.
Provokes
constructively
Responds promptly
Responds to others in a timely fashion;
communicates back in an attentive way.
Is not complacent; takes action to change the
status quo if a process is inefficient or
duplicates other efforts.
Seeks to continuously improve oneself: Looks
for learning opportunities in project work,
relationships with colleagues, and formal
training and development.
Creates space for
new ideas
Improves
continuously
Takes and shares risk to develop new ideas.
Is a respectful agitator: Pushes team to come
up with new ideas and make time to explore
them.
Customer Loyalty
Delivers superior quality, services and support
in all he/she does. Strives for excellence,
irrespective of constraints or deadlines.
Earns customers' trust: Consistently meets
expectations and delivers on time.
Displays a service mindset; seeks ways to help
even when not expected or required to.
Takes ownership of emerging problems; does
not wait for others to make decisions, nor uses
others' inaction as an excuse not to act.
Is invested in fully understanding his/her
customers; aims to anticipate their needs, rather
than react to them.
Thinks in terms of end-to-end solutions rather
than standalone deliveries.
Team Spirit
Delivers excellence
Builds continuity
Puts customer first
Seizes responsibility
Commits thoughtfully
Looks for synergies
Takes responsibility for mistakes and is able to
learn from them.
Is thoughtful about the way he/she commits:
Plans ahead, perseveres in the face of
obstacles, and always follows through.
Proactively looks for ways to create and/or
leverage synergies across the company.
Initiates action
Seeks feedback
Encourages feedback and seeks out other
people's point of view.
Anticipates needs
Supports others
Helps colleagues achieve their goals and offers
practical support in tough times.
Promotes accountability
Holds himself/herself accountable for his/her
contributions to the team's goals, shares
potential challenges, and encourages
teammates to do the same.
Envisions solutions
Negative Tendencies and
Behaviors That Can
Counteract Them
Politics /
Favoritism /
Managing up
Engages meaningfully
x
Communicates openly
x
Extends trust
Information
Diffusion of Low trust in
hoarding /
Skepticism
responsibility / leadership's
Opaque
of new
Lack of
commitment
information
initiatives
accountability to ACME
sharing
Fear of
failure
Low trust /
Expectations of
Micromanag
negative
ement /
consequences
Blame
Lack of
agency
Silos /
Inter-team
competition
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
Respect
Speaks out
x
x
Embraces diversity
x
x
Responds promptly
Seizes responsibility
x
x
x
Commits thoughtfully
x
x
x
x
x
x
x
x
x
x
x
x
x
Looks for synergies
x
Seeks feedback
x
x
x
x
x
x
x
x
x
x
x
x
x
x
Team Spirit
x
Supports others
Promotes accountability
x
x
x
x
Delivers excellence
Builds continuity
Customer
Loyalty
x
x
Puts customer first
Initiates action
x
x
x
x
x
Anticipates needs
x
Adapts easily
Challenges status quo
Creates space for new
ideas
x
x
x
x
x
x
x
x
Improves continuously
x
x
x
x
x
x
x
Takes risks
Provokes constructively
x
x
Envisions solutions
Innovates &
Advances
x
x
x
x
x
x
x
Mapping to LRN’s
Governance, Culture, and
Leadership Framework
Accountability Collaboration
Engages meaningfully
InformationSharing
Inspiration
Operational
Efficiency
Resiliency
Significance
Speaking
Out
Trust
X
Communicates openly
Values
X
X
X
Extends trust
X
Respect
Speaks out
X
Embraces diversity
X
Responds promptly
X
Seizes responsibility
X
Commits thoughtfully
X
X
X
X
Looks for synergies
X
Seeks feedback
X
Supports others
X
X
Team Spirit
Promotes accountability
Customer
Loyalty
X
X
Delivers excellence
Builds continuity
X
X
X
X
Puts customer first
Initiates action
X
X
X
X
Anticipates needs
X
Envisions solutions
X
X
Adapts easily
X
Challenges status quo
Innovates &
Advances
X
Creates space for new
ideas
X
Improves continuously
X
Takes risks
X
Provokes constructively
X
X
X
X
X
ETHICS AND COMPLIANCE IN THE
21ST CENTURY
DAVID GREENBERG
LRN CORPORATION
SEPTEMBER 2015
39