I was not going to write about it but when Aggies harass you for not writing about your team’s upset win over their arch-rival The University of Oklahoma (OU) in the Red River Rivalry, well that is beyond the pale. Yes, the University of Texas did stomp OU on Saturday, by a score of 36-20, but the game really wasn’t that close. It was complete domination in all phases of the game by Texas; offense, defense, special teams and, most especially, coaching. OU had been a two touchdown favorite but Texas beleaguered Head Coach Mack Brown and the ‘Horns came through and beat OU for the first time in 3 years. So “Hook ‘Em Horns” and let’s all enjoy the moment.
As I was pondering on the leadership of Mack Brown I saw a blog post in the Harvard Business Review HBR Blog Network, entitled “The Five Rules Every New CEO Should Follow”, by Roger Martin. Martin wrote the blog post because “an executive who was on the verge of being promoted to head his large global publicly traded company asked for my advice on how to be effective as a brand new CEO. I gave him a list and he was so appreciative that I was motivated to write a blog about it. There were five recommendations on my list”. Given Mack Brown’s leadership heading up to the stomping of OU, I have adapted it to leadership for the Chief Compliance Officer (CCO).
1. Grow the Pie
One of the things that I do not think is talked about enough is the role of a CCO in obtaining or retaining business. Certainly there is discussion about CCO independence and the ability to say ‘No’ when necessary. But lawyers and CCO’s can often find ways to do business that are (a) legal, (b) ethical and (c) will not embarrass the company. I often say that if the risk is high, the attendant management of that risk must be equally or more comprehensive. But the point is there are often ways to manage risk. They just take time and sometimes more resources.
As Martin said with Chief Executive Officers (CEOs), “Over time, as the revenues grow, the non-priority areas will become an ever-smaller piece of the puzzle and when the success of the priority areas has been made manifest, the CEO can shut down the non-priority areas without much hassle or fuss.” I think that the same can be true with CCOs. As a company becomes more mature in its compliance program, the sales force and business development teams will know what situations will violate company policy and anti-corruption laws such as the US Foreign Corrupt Practices Act (FCPA) or UK Bribery Act. The next step is that they will figure out a way to do business in a compliant manner.
2. Follow Due Process
I have written often about the Fair Process Doctrine. I think it forms one of the bases of the employment contract. Discipline must not only be administered fairly but it must be administered uniformly across the company for the violation of any compliance policy. Simply put, if you are going to fire employees in South America for lying on their expense reports, you have to fire them in North America, or other locations, for the same offense. It cannot matter that the North American employee is a friend of yours or worse yet a ‘high producer’. Failure to administer discipline uniformly will destroy any vestige of credibility that you may have developed.
Martin puts it more starkly when he says “it is critically important not to do that because everybody watches with a keen eye and wonders whether they will be objects of arbitrary decisions as well. Suck it up and suffer until such time as a manager who you would rather remove immediately can be given feedback and a fair chance to improve. That is a lesser evil than to establish in your team’s mind that you make up your own rules.” But the concept is still the same – avoid being arbitrary.
3. Consult Whenever Possible
Martin believes that is important to “Consult wherever and whenever possible with your team before making decisions, even if it drags out the decision-making. This is because your team needs to feel and function genuinely like a team. You can get away with these decisions without destroying the team dynamics, but only if you save it for very rare occasions.” I would add that to accomplish this consultative function, as CCO you first need to listen. I have found that not only helps bring consensus to any problem that you might face but it also provides a personal commitment to the team and facilitates responsibility to others on the team. I think that these concepts could be very useful to a CCO whether working internally within the compliance department or with business unit personnel. If consensus can be reached on any important compliance related decision, it can certainly change the perception that the Compliance Department is “the Land of No” populated by “Dr. No.”
4. Set High Strategy Standards
Martin writes that “The easiest thing for managers to do is to avoid making the explicit choices that are essential for quality strategy. But mediocre strategy results in lots of work for little reward.” Based on this I find it is critical for a new CCO to establish that direct reports have the responsibility for making logically consistent and unique strategy choices in their areas of responsibility. You need to signal that you will not create their strategy for them but will help if asked — because nothing is more important than having a high bar for strategy. Further, this technique is more powerful because if an employee is deeply immersed in the problem or the issue, that employee probably knows a lot more about it than you, as the CCO, are going to know about the nuts and bolts of the solution. While a CCO can provide some insights based on experience, and perhaps give a different view, most probably the employee who brought the issue will be more intimately involved with the issue. The employee will have thought through a resolution to the potential issue as well.
5. Maintain a Big Tent
One thing that a new CCO needs to signal from inception is that the compliance organization will be a big tent that welcomes diversity, not a monoculture with only people who resemble the CCO. Martin writes that “It is much harder to find the requisite personnel for a monoculture and the reward if you do find them is that they are less effective.” Martin points to the example of “former Baltimore Orioles baseball manager Earl Weaver, who won multiple World Series Championships with rag-tag assortments of personalities that were arguably the most diverse that baseball has ever seen. He could always sign or trade for players to fit in his tent because of the breadth and inclusiveness of his definition of ‘fit’. My least favorite is Pete Rose who insisted that every player manifested the ‘Charlie Hustle’ persona for which he was famous in his former life as a superstar player. Rose traded away players who ‘didn’t fit’ and built monoculture teams that hustled their way to persistent mediocrity.”
It has been said that every compliance issue is, ultimately, a business issue. I agree. As I believe that compliance is another form of risk and, as such, you can measure, evaluate and then manage it. If the risk becomes too great to manage, that may create an unacceptable level of risk which your company will not tolerate. As CCO, one of your key roles is to reduce the number and level of risks which your company cannot or will not tolerate. This is a major mechanism by which you can demonstrate the value of compliance within the organization and ensure that your contribution is relevant.
