Welcome back to Sherlock Holmes week. It does look like I will got carried away and it will become 10 days of Holmes and compliance as I am rereading the first volume of Holmes, The Adventures of Sherlock Holmes, and I find them as great ways to introduce compliance topics. I have been using a Holmes story each day to illustrate a compliance lesson or issue. Today we use the Sherlock Holmes short story, The Adventure of the Noble Bachelor. In an odd way, the story set the tone for the Basil Rathbone-Sherlock Holmes movies from the late 1930s and early 1940s. In this tale, Holmes is asked to find a vanishing American bride, one of the many daughters of wealthy American businessmen who came to London looking to marry English nobles in the 1880s and 1890s. The story ends with Holmes having a pro-democracy approach and faith in the English-speaking peoples. Indeed, almost Churchillian.
In this tale, the American bride, Miss Hatty Doran of San Francisco, disappears after her wedding to Lord St. Simon. While it seemed to Lord St. Simon that Hatty was full of enthusiasm about their impending marriage, he noticed a change in her mood just after the wedding ceremony. The only thing out of the ordinary at the church was Hatty’s little accident: she dropped her wedding bouquet and a gentleman in the front pew picked it up and handed it back to her.
At the wedding breakfast, hosted by her father, Hatty claimed “a sudden indisposition” and retired to her room. A short time later, it was discovered that she had left the house. Her wedding dress and ring were later found washed up on the shore of the Serpentine. Holmes finds the strange man from the front pew, who it turned out was her husband who she thought was dead. He tracked Hatty to London and arrived at the church in time for the ceremony and she recognized him instantly. She had wanted to abscond without ever telling anybody, but Holmes had tracked them down and convinced them that it would be better to have the full truth. Needless to say, Lord St. Simon is not amused but Holmes counsel’s Watson noted, “I think that we may judge Lord. St. Simon very mercifully”.
I thought about this story when I read a recent Harvard Business Review (HBR) article, entitled How CEOs Can Lead a Data-Driven Culture, by Thomas H. Davenport and Nitin Mittal. The authors report bemoans the lack of acceptance around data in corporations believe it is due to “The lack of a culture that truly values data/analytics capability and the superior decision making that can flow from it.” They posit that it is “possible to create a data-driven culture and accrue the competitive benefits that result.” While their article focuses on the Chief Executive Officer (CEO) role, I have adapted it for the Chief Compliance Officer (CCO).
In business units with strong data cultures, “important decisions are informed by data and analytics and executives act on analytically derived insights rather than intuition or experience.” That is usually not true in the compliance function and the CCO chair which is usually populated by someone who began their career in the corporate legal department and had law school training, where, as we explored yesterday, data analytics is decided not valued.
Clearly, a data-based compliance culture depends in large part on the orientation of the CCO. A CCO’s own reliance on data or failure to embrace it in decision making and improving the compliance function sends a powerful message to the rest of the organization. Yet CCOs can be moved into “the data domain through coaching, either by an internal champion, such as the chief data officer, or by outside experts.” By linking compliance data and analytics to issues critical to the compliance function, it can prove persuasive on having a data-based decision meeting compliance program requirements. While the CCO should become a visible champion of the new data-based compliance culture, you will require an operational partner. A logical candidate is the chief data officer, a role that is growing in prevalence, visibility and scope.
How can a CCO lead the change at their company? The authors believe in a couple of general steps. While these will not be new for the CCO or indeed anyone familiar with a best practices compliance program, it does emphasize how the basic framework of a best practices compliance program can be used to meet a variety of organizational challenges.
It all starts at the top, most particularly in terms of leading by example. This requires a CCO to be visible to the organization in the use of data analytics. Moreover, do not forget using internal marketing programs to spread the value of the approach across an organization. As the authors note, “Leaders’ exemplary behavior can also include modeling the desired attitude about data and analytics in meetings; leaders should frequently ask, “Do you have data to support that point?” and encourage others to do likewise.” Another approach can be in forming internal communities of practice around analytics and artificial intelligence (AI) as other ways to publicize positive examples.
A second way is through education, communication and training. This should be pushed beyond the compliance function, throughout the organization. You can move towards “Experiential programs such as design thinking exercises, group problem-solving, and hands-on hackathons tend to be more effective than talking heads. Position-appropriate exercises for staff at different levels can illustrate the benefits of analytics and data-based decisions; for example, executives can focus on framing the problem, and front-line employees can interpret the implications of analytics for customer relationships.” The bottom line is, “Education should focus not only on attitudes and knowledge about data, analytics, and AI, but also on skills for finding and manipulating data at every level.”
The authors pointed to the example of Eli Lilly and Company. Here are the common themes which were successful for Lilly:
- Highlighting successes by early adopters and enlisting help to get others engaged;
- Forming cross-functional teams that combine people with backgrounds in data analytics, business, and technology and combining computer science, applied math, engineering, and behavioral economics perspectives to bring diversity and innovate thinking to projects; and
- Launching programs across the organization, including open houses, forums, communities of practice, educational initiatives, and a leadership council – in effect, building marketing capability for analytics and AI within the company that helps create advocates and ambassadors.
Just as compliance is properly seen as everyone’s job, a data-driven compliance culture should be seen as the responsibility for the entire compliance team. In creating a data-driven compliance culture, “there’s no rest for the weary. From boards of directors to CCOs to analytics and AI leaders, everyone who believes in this focus should work to persuade others to adopt and maintain it. No one should assume that software and hardware alone will lead the organization to the cultural promised land.”
[View source.]
