ethics and compliance in the 21 century - abbc and compliance in...ethics and compliance in the 21st...

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Ethics and Compliance in the 21st

Century

DAVID GREENBERGABBC LRN CORPORATIONSEPTEMBER, 2015

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A QUARTER CENTURY OF ETHICS AND COMPLIANCE PROGRAMS

4

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

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1990 - 2005 2005 - 2010 2010 - 2015 2015 - 2020

Program Dimension 1G 2G 3G 4G

Orientation

• Rules based

• Values ignored

• Command and control

• 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

Strategy

• 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”

Structure

• 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

• 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

Business

Integration

• 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

• 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

Social

Integration (Culture)

• Mention program in

employee onboarding

• Communicate periodically

with employees regarding

program

• Brand program

• Establish awards and

recognition programs

• Maintain frequent employee

communications

• 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 values-

based behavioral assessment

Evaluation(Effectiveness)

• Conduct ad hoc

assessments focused

mainly on program design

• Evaluate program periodically

as to its effectiveness in

preventing unethical as well

as illegal conduct

• Evaluate outcomes; design and

implementation of program

• Seek and apply predictive metrics

wherever possible

• Identify and leverage effectiveness drivers

• Regularly assess organizational culture

(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

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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?

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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

Measuring What Matters: The Global HOW Report

36,000 Employees, 2 Million Observations

Copyright ©2013 LRN. All Rights Reserved.

• 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.

Evolving to a human operating system

BLIND

OBEDIENCE

INFORMED

ACQUIESCENCE

SELF-

GOVERNING

• Rigid Hierarchy

• Dictatorial

• Coercion

• Command & Control

• Carrots & Sticks

• Rules

• Success

• Connect & Collaborate

• Values

• Inspiration

• Significance

Three Archetypes of Culture

47

34

24

Misconduct

Copyright ©2013 LRN. All Rights Reserved.

BLIND OBEDIENCE

INFORMED ACQUIESCENCE

SELF-GOVERNING

38

4642

67

80 82

92 9299

Loyalty Satisfied CustomersInnovation

BLIND OBEDIENCE


SELF-GOVERNING

25

45

33

48

73

84 8174

97 99 9893

Recommend

as employer

Financial

performanceAdopt ideas Good

reputation

BLIND OBEDIENCE


SELF-GOVERNING

3%54%43%

BLIND OBEDIENCE


SELF-GOVERNING

27%

27%

46%

39%

3%

4%

84%

7%

CEO

Average

“We areself-governing”

“We inspireour people”

“We usecoercion”

“We reward values-based behavior”

Trust

Mission

Values

Likelihood of

outperforming

competition

1.5X

1.8X

1.9X

BLIND

OBEDIENCE

INFORMED

ACQUIESCENCE

SELF-

GOVERNING

Trust 1%

Values 1%

Mission 8%

Behaviors (percentage high)

3% Horizon

2% Collaboration

2% Information

1% Speaking up

1% Inspiration

5% Resiliency

4% Operational efficiency

Outcomes

25% Good Ideas are readily accepted

47% Observed unethical behavior

27% Unethical behavior reported

28% No retaliation for reporting unethical behavior

46% Will be working here in next 12 months

46% Willingness to put in extra effort

33% Willingness to recruit friends to work at the company

42% Company takes community responsibility seriously

37% Company invests in the community

42% Company has satisfied customers

45% Company has a good reputation with customers

49% I try to inspire others

48% Better financial performance than competition

38% Higher level of innovation than competition

Blind

Obedience

BLIND

OBEDIENCE

INFORMED

ACQUIESCENCE

SELF-

GOVERNING

Trust 14%

Values 6%

Mission 44%


9% Horizon

21% Collaboration

18% Information

6% Speaking up

18% Inspiration

33% Resiliency


Outcomes















Informed

Aquiescence

BLIND

OBEDIENCE

INFORMED

ACQUIESCENCE

SELF-

GOVERNING

Trust 88%

Values 78%

Mission 100%


49% Horizon

94% Collaboration

94% Information

75% Speaking up

89% Inspiration

57% Resiliency


Outcomes















Self-

Governing

• Workplace • Customers • Supply Chain • Community

HOW Freedom Works

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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

x x x

3.4x4.6x

6.6x

10.7x

20x 20x

Long-term

success

Financial

Performance

Innovation

Copyright ©2013 LRN. All Rights Reserved.Copyright ©2013 LRN. All Rights Reserved.

Freedom From / Freedom To Boosts Business Performance

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

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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.

Partner Example #3

To be the bank that

grows great

communitiesVision Where We’re Going

ValuesWho We Are

Respect

Embrace

difference

Integrity

Do what’s

right

Empathy

See things

from

another’s

perspective

Courage

Challenge

thoughtfully

Speak up and

be candidBe authentic and

transparent

Admit when you

don’t have the

answersNo one can it alone

Help others

succeedGo above and

beyond to support

each other

Listen without

judgingUnderstand then act

Seek out new

perspectivesChallenge what’s

possible

Find a better wayTackle real issues

and innovate

Make it your

problemTake ownership and

follow through on

your commitments

Balance risk and

opportunityAchieve long-term

success over short-

term gain

Unite to serve our

customerBreak down barriers

and over-deliver

Engagement Impact Loyalty Service

Behaviors How We Do Our Work

Outcomes Why

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.

Partner Example #4

Summary of LRN’s Model for ACME

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• 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.

INNOVATES & ADVANCES

Adapts easily

Challenges status quo

Creates space for new ideas

Improves continuously

Takes risks

Provokes constructively

RESPECT

Engages meaningfully

Communicates openly

Extends trust

Speaks out

Embraces diversity

Responds promptly

innovation

speedexecutionCUSTOMER LOYALTY

Delivers excellence

Builds continuity

Puts customer first

Initiates action

Anticipates needs

Envisions solutions

TEAM SPIRIT

Seizes responsibility

Commits thoughtfully

Seeks feedback

Looks for synergies

Supports others

Promotes accountability

EXAMPLE: Core Architecture Model incorporates 4

core values supported by 24 behaviors and oriented

around 3 guiding principles

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Innovates & Advances RespectIs adaptable and willing to embrace change.

Does not hold on to old ways of doing things out

of fear.

Adapts easily Engages meaningfullyIs 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

quoCommunicates openly

Communicates with openness and integrity:

Presents the same truth to all parties and

promotes shared understanding.

Is not complacent; takes action to change the

status quo if a process is inefficient or

duplicates other efforts.

Creates space for

new ideasExtends trust

Trusts team members to deliver what they say

they will deliver.

Seeks to continuously improve oneself: Looks

for learning opportunities in project work,

relationships with colleagues, and formal

training and development.

Improves

continuouslySpeaks out

Speaks out when faced with behavior that is

inconsistent with CA's Core Values.

Takes and shares risk to develop new ideas. Takes risks Embraces diversityRespects colleagues' work styles and

commitments; helps team to look at differences

as a potential asset.

Is a respectful agitator: Pushes team to come

up with new ideas and make time to explore

them.

Provokes

constructivelyResponds promptly

Responds to others in a timely fashion;

communicates back in an attentive way.

Customer Loyalty Team Spirit

Delivers superior quality, services and support

in all he/she does. Strives for excellence,

irrespective of constraints or deadlines.

Delivers excellence Seizes responsibilityTakes responsibility for mistakes and is able to

learn from them.

Earns customers' trust: Consistently meets

expectations and delivers on time.Builds continuity Commits thoughtfully

Is thoughtful about the way he/she commits:

Plans ahead, perseveres in the face of

obstacles, and always follows through.

Displays a service mindset; seeks ways to help

even when not expected or required to.Puts customer first Looks for synergies

Proactively looks for ways to create and/or

leverage synergies across the company.

Takes ownership of emerging problems; does

not wait for others to make decisions, nor uses

others' inaction as an excuse not to act.

Initiates action Seeks feedbackEncourages feedback and seeks out other

people's point of view.

Is invested in fully understanding his/her

customers; aims to anticipate their needs, rather

than react to them.

Anticipates needs Supports othersHelps colleagues achieve their goals and offers

practical support in tough times.

Thinks in terms of end-to-end solutions rather

than standalone deliveries.Envisions solutions 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.

Negative Tendencies and

Behaviors That Can

Counteract Them

Politics /

Favoritism /

Managing up

Information

hoarding /

Opaque

information

sharing

Diffusion of

responsibility /

Lack of

accountability

Low trust in

leadership's

commitment

to ACME

Skepticism

of new

initiatives

Fear of

failure

Expectations of

negative

consequences

Low trust /

Micromanag

ement /

Blame

Lack of

agency

Silos /

Inter-team

competition

Respect

Engages meaningfully x x x x x x

Communicates openly x x x x x x x

Extends trust x x x x x x x

Speaks out x x x x x x

Embraces diversity x x x

Responds promptly x x

Team Spirit

Seizes responsibility x x x

Commits thoughtfully x x x x x

Looks for synergies x x x x x x x

Seeks feedback x x x x x x x x x

Supports others x x x x

Promotes accountability x x x

Customer

Loyalty

Delivers excellence

Builds continuity x x

Puts customer first x x

Initiates action x x x x x

Anticipates needs x

Envisions solutions x

Innovates &

Advances

Adapts easily x x

Challenges status quo x x x x x

Creates space for new

ideasx x x x

Improves continuously x x

Takes risks x x x

Provokes constructively x x x x x

Mapping to LRN’s

Governance, Culture, and

Leadership Framework

Accountability CollaborationInformation-

SharingInspiration

Operational

EfficiencyResiliency Significance

Speaking

OutTrust Values

Respect

Engages meaningfully X X

Communicates openly X X

Extends trust X

Speaks out X

Embraces diversity X

Responds promptly X

Team Spirit

Seizes responsibility X X

Commits thoughtfully X X X

Looks for synergies X X

Seeks feedback X X

Supports others X X

Promotes accountability X

Customer

Loyalty

Delivers excellence X

Builds continuity X X

Puts customer first X X

Initiates action X X

Anticipates needs X

Envisions solutions X X

Innovates &

Advances

Adapts easily X

Challenges status quo X

Creates space for new

ideasX

Improves continuously X X X

Takes risks X X

Provokes constructively X X

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ETHICS AND COMPLIANCE IN THE 21ST CENTURY

DAVID GREENBERGLRN CORPORATIONSEPTEMBER 2015

ethics and compliance in the 21 century - abbc and compliance in...ethics and compliance in the 21st...

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