Analysis

Compliance must be lived*

Companies expend great effort training their employees in order to secure themselves legally against compliance violations. For sustainable change in behaviour, that is not enough.

The dangerous moment came for George M. without his having had even a slight chance of recognizing it. Casually, a friendly ex-colleague had inquired at a trade fair about details of a product launch. His questions appeared innocuous and were clad in the familiar banter of two industry colleagues who still met each other with respect, even if they were now working for competing employers. And so the conversation was soon forgotten.

The rude awakening came some months later. Then, friendly but determined prosecutors turned up in a number of companies in his industry and seized files by the basketful. His information from that time appeared as a classified transcript note in the papers of a competitor. For the Kartellamt the case was clear: between the two houses there had been cartel collusion to the detriment of consumers. The damage sum, payable immediately: ten percent of the turnover the listed company had achieved in one year in the affected division. George M. suddenly realized that he had made a big mistake and brought his company into enormous difficulties: the market price had come tumbling down, and the company’s reputation was heavily tarnished in the public and the media. At the same time he was extremely annoyed, because no one had prepared him for the danger of the actual conversational situation. Soon he was in internal investigations, with the feeling of being defenceless at the mercy of accusations.

Formally, in fact, everything was against him, because given the enormous effort his employer had made in order to prevent cases like these, such a situation should not have arisen at all. George M. had like all his colleagues been channeled through a comprehensive compliance programme. He had studied the code of conduct of his business, taken lectures on the law and passed special training on the PC - all acknowledged with his signature. Nevertheless, he was not able to recognize the significance of his remarks. But why had his employer’s complex compliance efforts proved ineffective for him?

Many employees in German companies are like George M. They are trained at regular intervals, supplied with brochures, know their contact persons and the number of the internal compliance hotline. Usually they complain about too much rather than too little relevant information. The impression is that the sometimes costly compliance communication in companies falls short at some crucial point: it has no lasting effect. It checks acquired knowledge. But obviously it does not succeed in achieving a sustainable, permanently durable change in behaviour anchored in the employees.

If this is true, the effect would be disastrous. Then the compliance efforts would be no more than a figleaf for management, which may feel a deceptive and dangerous false sense of security: having done enough to be protected adequately against legal liability claims, but clearly not enough to effectively prevent repetition and the resulting reputational damage for the company. Hadn’t George M. too confirmed with his signature that he had read and understood everything?

What’s going wrong with traditional compliance programmes?

The simple answer is: the communication. That may sound surprising, because obviously there’s already more than enough communicating. But where it gets stuck is the teaching method. Poorly prepared contents are usually conveyed in the wrong format. Often the internal presentations meet the needs of the speakers, but not those of their listeners. A legal lecture is rarely made into an exciting event close to the lived reality of companies and the actual daily work of employees. Conventional chalk and talk misses its effect because the students soon turn away, uninterested or bored. Thus compliance becomes an issue of necessity, and is completed with minimum effort.

What is to be done, then? Compliance communication needs in future to be aligned more closely on the expectations and needs of the target group. Employees will be attentive listeners and willing to learn if they recognize the reference to their actual daily work and responsibilities within the company. Training courses are not sufficient. Additionally there must be open and real-life exchanges of experience within the respective teams. When might I be running a compliance risk? What are the critical situations like? And above all: what is allowed? Good companies invest in this translation work, because it is the only way to make compliance also a contribution to business success. Only those who are not constantly stressing the risks, but rather illuminating the allowed range for employees, can make good, sustainable business possible. Nothing could be more counter-productive than an organization paralysed by prohibitions and monitoring that would rather not move at all than make a mistake.

How should a sustainable, effective compliance programme ideally be structured?

In practice, compliance communications programmes with the following basic features have proved useful:

1. Personally

Team discussions instead of anonymous screens: this open, trusting and personal communication helps employees to recognize the real stumbling blocks and to clearly articulate rule-compliant conduct and confidently present it to customers and suppliers.

2. Systematically

The communication of the programme must pass through the company with no gaps, in a sort of cascade.  It must always start at the top and be done clearly and unambiguously.  Depending on region, business and hierarchy level, the programme must be adjusted to the communication needs, expectations and work environment of employees.

3. Consistently

Compliance missteps must be punished promptly, consistently and visibly to all. The communication must occupy the subject, leaving no room for interpretation. The idea is to define the aims of the company and make its employees aware that rule violations will not be tolerated.

4. Productively

Lived compliance is increasingly becoming a differentiating feature in the marketplace and therefore a sustainable competitive advantage.  Communication plays a key entrepreneurial role here.  It must clearly explain and illustrate what is allowed, in order to promote good and sustainable business.

Conclusion

Robert Bosch once said, “The most honest form of management is also the most durable in the long run.” That rule-compliant conduct offers a competitive advantage is currently just being rediscovered by companies. This stance, however, places new and higher requirements on communication, for technical legal presentations or the anonymity of an on-screen dialogue do not yet create compliant conduct. Whoever wants to anchor compliance in the minds of employees and make it effective needs to promote openness, sharing in teamwork and an uninhibited approach to the issue.  Classic compliance communication programmes currently hardly do justice to this important goal, since they often focus on prohibitions, risks, monitoring and control. Accordingly, a change of heart is overdue: companies need to transfer more responsibility back to their employees, and more clearly emphasize the path to good, sustainable business. Advice and support rather than threats and prohibitions are the appropriate policies for this. It is  the only way in the long term to secure commercial success, lawful conduct, and reputation with both customers and employees.

*Dr. Hartmut Vennen is Managing Director of Strategic Communications Practice at FTI Consulting in Frankfurt, and heads the Corporate Communications sector. Markus Weik is Senior Executive on his team. Both advise companies in mission-critical situations, on all relevant fields of corporate communications. They specialize in communication in a crisis and in legal disputes, as well as in the implementation of compliance programmes.