What's your approach. ethikos article

ethikos September/October 2016 3

What’s your approach?

BY JYOTI PANDEY

T ry telling a kid to eat something because it is good for them or because “we said so.” More often than not, the instant reaction is one of resistance. It is often puzzling to

human minds that despite knowing and understanding that break-ing a bad habit and complying with something for the greater good of the self often meets with resistance. It often appears that at its core, people agree internally but the outward acceptance is where we face maximum challenges.

Now try changing the approach to tell the kid to eat some-thing by describing the importance of each element in the food such as protein, calcium, magnesium, and several different vita-mins and their positive impact in our overall development. If a child is athletic, focusing on building more muscle to improve agility and strength will have a stronger impact. Similarly, if a child is more academically inclined, talking of the different roles vitamins will play in building gray matter will meet with a posi-tive response.

The behavioral pattern exhibits the mindset most of us operate from. It appears that qualitative words such as good, bad, excel-lent, etc. sound more prescriptive and we don’t like being told what to do. However, when we shift our approach and put the theory in a rational and scientific context, it is easier to implement. In her scholarly article, “Rethinking Resistance and Recogniz-ing Ambivalence: A Multidimensional View of Attitudes toward

This article appears with permission from the Society of Corporate Compliance & Ethics. Call +1 952 933 4977 or 888 277 4977 with reprint requests.

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an Organizational Change” (2000), Sandy Piderit, a Santa Clara University professor, writes that the definition of the term resis-tance must incorporate a much broader scope. She states that “a review of past empirical research reveals three different emphases in conceptualizations of resistance: as a cog-nitive state, as an emotional state, and as a behavior.”1

Notice the emotional piece. Compli-ance and ethics professionals feel the brunt of the emotional state of mind working with employees and the organizations at large in their change management efforts. I faced that challenge too. And after a thorough analysis, critically thinking through the sim-ulations, and reading scholarly materials on the topic, I figured out that the way to work with employees in the most efficient way is to adopt a dynamic approach vs. the traditional

approach. The dynamic approach needs to be more scientific (behavioral science), data based, and positive language based—remov-ing any fear-based language and emphasizing the positive aspects of change. There is also a target-based approach, the big picture view—senior leadership, operational data—middle management, and the personal development and growth of individual contributors. Let’s review them below.

Behavioral scienceOver the last 10 years, the role of a compliance and ethics officers has evolved significantly. Gone are the days when CCOs were merely responsible for writing compliance policies and rules, and reviewing transactions for com-pliance with laws and regulations. With the changing economy and with the introduction



of technology in every sphere of our business and personal lives, understanding that critical piece of business analytics is extremely import-ant. These days, CCOs mostly deal with knowledge workers. They are aware, smart and capable. In order to work with them and help them comply with best compliance practices that last longer and have meaningful impact, it is important that the compliance and ethics professionals bring more science to their work. As Andy Fastow, former Enron CFO (after serving his sentence for fraud in the biggest financial scandal in the country), stated that everything that he did was “legal,” in that it was approved by the respective departments it passed through for approval.2 Yet it was unethical. According to recent estimates, in one year corporate fraud by companies such as Enron, WorldCom, and Parmalat accounted for an estimated $37–$42 billion loss to the U.S. gross domestic product. Employee theft causes U.S. companies to lose approximately $52 billion per year. And fraudulent narcotic prescriptions, which often involve complicity by healthcare workers and pharmacists, cost health insurers up to $72.5 billion per year.3

Considering the environment we are dealing with, a report released by the Ethics and Compliance Initiative aims to provide a roadmap for companies looking to develop an ethics and compliance program that moves beyond the bare minimum requirements of the U.S. Department of Justice’s sentencing guidelines. The report was prepared by a panel of chief compliance officers, former regula-tors and lawmakers and other thought leaders in the area of ethics and compliance. The five key tenets considered the best and most

high-quality ethics and compliance programs in the proposal are described here.4

Data basedAlthough there is risk to relying too much on data, the resource draining risk of non-compliance far outweighs not bringing data into our discussion. As per sources, the U.S. spent $29.8 billion on compliance activities in 2010.5 In the healthcare industry, the impact of noncompliance on healthcare costs is significant. In the US alone, it has been put at $77 billion to $300 billion a year. An article published in the Wall Street Journal called, “Accounting Choices Blur Profit Picture” states that, “Just 29 companies in the S&P 500 index—or 5.7% of the total—closed their books for 2015 exclusively using U.S. Generally Accepted Accounting Principles, or GAAP.”6 The numbers are significant and create an impact when we incorporate them in our conversation. It appeals to our reason when we discuss cost and data in our conversations with our clients during risk management initiatives or change manage-ment approach.


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Positive results–based approachHumans don’t like fear-based language. We build resilience to fear over a period of time. Gradually, at certain levels, employees implic-itly start reasoning, “Why should I care?”

Many industries approach the subject of compliance talking about how many things can go wrong by not complying with the laws and regulations. That tactic prevents us from gaining widespread approval and cooperation from across the organization. It is critical that everyone, companywide, agrees to take an initiative for change because it is important not because they are forced to do so. As Phil Cotter, Managing Director, Risk, Thomson Reuters states:

“We have seen an ongoing rise in compliance leaders expressing regulatory fatigue as they are being held to increased accountability amidst an ever-escalating volume of regula-tion, the expectation of being knowledgeable, and the added pressure of being exposed to record fines for non-compliance. With heightened scrutiny and accountability, it has never been more vital for boards to continue to support the compliance func-tion and senior leadership with the budget, resources and tools to help ensure a culture of transparency, trust and adaptive-change in behaviors throughout firms.”

Such an objective can be achieved effec-tively when we highlight the positives of compliance vs. negatives of non-compliance. We need to highlight the examples of compa-nies that are doing everything right and how that adds to their bottom lines and make them

look good—which, in turn, helps them hire the best talent and earn the best resources.

Target-based approachEach level of the organization, by its unique position, has its unique objective. It is often beneficial to understand the entire business environment before designing the best compli-ance and ethics program.

§ Understand the market the company operates in;

§ the business needs;

§ the competitors;

§ future outlook and growth strategies;

§ unique strengths and weaknesses;

§ the products;

§ the vendors;

§ the suppliers; and

§ the compliance and business environment of their strategic partners.

Don’t follow a formulaic approach. Talk to the employees at each level to understand what motivates them and what they fear the most. Develop emotional intelligence (EI) to be able to connect with employees at each level. Research has demonstrated that emotional intelligence has a strong impact



on organizational performance. Sanofi, the French pharmaceutical company, focused on the emotional intelligence skills of its sales force, which resulted in boosting their annual performance by 12 percent.7 After Motorola provided EI training for staff in a manufac-turing plant, more than 90 percent of those trained saw a boost in productivity.8

The big picture view approach is mostly conducive for the senior leadership of the organization Financial metrics such as ROI and cost efficiency measures for middle management, and approaching the topic from the standpoint of personal growth and advancement for individual contributors are useful. Last but not least, using language with forward focus helps grow participation and desired outcomes. Transparency and account-ability further help to build credibility. When Anthem’s data breach happened, the company came out in the open talking about it and advising measures for further safety. Same with Home Depot. Transparency and accep-tance go hand in hand.

It is about time, the compliance and regu-latory professionals become true advisors and

trusted friends whose goals are not merely to keep the companies out of trouble but to also help them become the market leaders and the best out there. n

Jyoti Pandey is a Management Consulting professional

helping clients with Risk, Ethics & Compliance, and

Regulatory needs.

ENDNOTES

1 Author: Sandy Kristin Piderit from Case Western Reserve University. Academy of Management Review 2000, Vol. 25, No. 4, 783-794. https://goal-lab.psych.umn.edu/orgpsych/readings/18. Organizational Change and Development/Piderit (2000).pdf. “A review of past empirical research reveals three different emphases in conceptualizations of resistance: as a cognitive state, as an emotional state, and as a behavior” (page 3).

2 Published in Fortune Magazine. Confessions of Andy Fastow by Peter Elkind, Published on July 1, 2013. 9.00 am EDT http://fortune.com/2013/07/01/the-confessions-of-andy-fastow/

3 http://ecoaconnects.theecoa.org/resources/blogs/blogviewer?BlogKey=74d5f282-a536-4f6a-a7b7-cade1d12bc1c

4 http://blogs.wsj.com/riskandcompliance/2016/04/25/how-to-create-a-top-notch-compliance-program/

5 Governance , Risk and Compliance spending not Focused on Technology. Published by Linda Tucci, Executive Editor, in searchcompliance.techtarget.com on December 1, 2009. http://searchcompliance.techtarget.com/news/1375707/Governance-risk-and-compliance-spending-not-focused-on-technology

6 http://www.wsj.com/articles/accounting-choices-blur-profit-picture-1467086625

7 See the research by S. Jennings and B.R. Palmer in “Sales Performance Through Emotional Intelligence Development,” Organizations and People, 2007. http://static.genosinternational.com/pdf/Jennings_Palmer_2007.pdf

8 Bruce Cryer, Rollin McCraty, and Doc Childre: “Pull the Plug on Stress,” Harvard Business Review, July 2003. http://www.dce.harvard.edu/professional/blog/emotional-intelligence-no-soft-skill


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