Scary tactics

Politicians do it all the time. They use fear to gain votes, dividing countries that would be greater if united.

E&C professionals should avoid these short-term gimmicks. They should instead seek to inspire and to unite employees. Dangling the possibility of massive FCPA fines in front of a foreign manager is unlikely to eliminate corruption in their country. We have a better shot if we show them that ending corruption can lift people out of poverty and save millions of lives.

As you sit down to create your next communication, consider whether you want to scare employees into good behavior or inspire them.

Walking the talk

The recent US college scandal only revealed the end of a long bribery scheme.

The same type of parental behavior exists with preschoolers. After all, the best way to get into Harvard is to first get into the “right” prep school. And for that, you need to get into the “right” middle school. And so on, so forth. Bribes are paid at every stage.

In your corporation, what “clubs” are employees dying to get into? A rotation program? Expat assignments? Executive ranks? What are they willing to do to get in there?

I’m sure the parents involved spent a lot of time telling their children about the importance of telling the truth. Just like corporations spend a lot of time communicating their values. But did any of them really mean it?

The questions analysts aren’t asking

Larry Fink is at it again in his 2019 letter to CEOs. His message is clear: there is more to corporations than profits.

BlackRock is not alone. Big investors are now demanding more from issuers because they finally agree that purpose and planet positively impact the bottom line.

We need one more group to get the message: the analysts. For one hour per week, you can run an easy experiment for the next month or two. Listen to an analyst call each week and count how many times they ask a question about “doing the right thing.” I can give you the answer right now: zero. If a company is announcing the opening of a factory in a developing nation, analysts want to know if there will be enough skilled workers and whether the infrastructure is sufficient. The fact that corruption is rampant in that country seems to be irrelevant.

Companies take analysts’ questions seriously. When analysts finally become concerned with how things are done (i.e. with the culture), we’ll see a new wave of progress.

Training options

There are different ways to train employees. Depending on the risk we face, some ways are better than others. Here are a few options (among many others):

  • Onboarding training – That’s the one-and-done approach. It should be reserved for no/low-risk activities, like “Here is where the corporate policy manual is.”
  • Basic training – Also for one-time training events, and recommended for low/medium-risk activities, like “Careful Email Communications”.
  • Refresher training – The training we repeat every year or every other year, for specific groups of employees. Best for medium/high risk activities, like “Discrimination and Harassment”.
  • Task-based training – This is when the training is baked into the actual tasks of the high-risk activity. Ideal for significant risks like antitrust, corruption, or trade sanctions.
  • Simulated-risk training – I call it War Games. A common example today is phishing your own employees to test their alertness, awareness and decision-making skills. When used for high-risk activities, repeatedly failing these exercises could lead to disciplinary actions.

On making connections

Later today I will have the pleasure to visit with Richard Bistrong in New York City.

I first learned about Richard via LinkedIn in 2015. His personal experience with corruption was both dramatic and fascinating. I started to follow him on social media and eventually sent him a direct message asking if we could meet in person. He immediately said yes, we met for coffee, and we’ve stayed in touch ever since.

The point of this post is to encourage you to reach out to those you can learn from. I have done this with authors, business leaders, compliance executives, podcasters and many others. Most of them will gladly engage with you, especially when you can provide value in return or, even better, first. They can become allies and cheerleaders. They can open doors and provide opportunities. They can make introductions that lead to more allies, cheerleaders and opportunities. And not simply opportunities for you to receive but more importantly for you to contribute. It’s a virtuous cycle that starts with a simple click of a “follow” button.

Who would you like to connect with today?

Keep your fingers

In many countries, manufacturers are required by law to place instructions and warning labels directly on their products. This is why our lawn mowers have a label like this one:

Image result for lawn mower warning label

How did it start? With courts finding manufacturers liable for the injuries caused by their products. Courts realized that most people don’t read the instruction manual that comes with a product, and that those who do read them don’t always remember the warnings they contain six months or two years later. Courts essentially told the manufacturers that they could escape liability if they copied the warnings in the manual directly on the product, near the dangerous area.

There is a lesson here for those us responsible for ethics & compliance training. We all know that the standard model of classroom or online training is not the most effective. Plenty of employees who were trained on a specific policy end up violating that policy later on because they didn’t connect the dots between the training and the real situation they faced.

The solution offered by product liability law is to embed the training in the business activity itself. An online anti-corruption training is fine but it should be supported by an automated gift workflow that explains to the giver who is a government official, what can be gifted, what is the maximum amount permissible and who needs to approve the gift.

I do realize that there is real value in providing risk-based training. Employees need to understand the “why” behind our policies. But in the end, if we want compliance, we need to provide task-based training, i.e. training that is embedded in the activity that contains the risk.

This way, no one gets their fingers cut off.

Trust and risk appetite

The CEO of Petrobras recently said that his employees are reluctant to make decisions and take risks in the aftermath of Operation Car Wash.

This should be no surprise. The corruption scandal has led to prosecutions, divestitures and reorganizations. Trust levels are at an all-time low. Why would any employee take a risk if they don’t feel safe?

What the CEO needs to expect next is stagnation. An organization that is unwilling to take risks cannot innovate and is soon taken over by competitors.

The ethical leader understands that building trust is the foundation of a successful business. No stakeholder wants to engage with a untrustworthy partner. And perhaps the most important stakeholder to be trusted by are the employees. They are the ones taking care of all the other stakeholders.

Trust leads to risk-taking, which leads to innovation, which results in superior performance.

This rings true to everyone but those looking for a short-term gain.

Data and fear

There is a difference between data security and data privacy.

When I purchase something online, I want my debit card number to be secure.

However, I don’t have great expectations of privacy. The store knows what I bought. My bank knows it too. (Same as 20 years ago.) The information is on numerous servers and on my web browser’s history. So when an ad pops up for the same product during my next Google search, I don’t freak out.

But many people do. They do because they imagine the worse, however unlikely. And the media picks up on the fear because it sells. And because it generates visits to their website where they collect our information to sell it to advertisers. {Suckers}

When it comes to data, the ethics & compliance officer will team up with an IT security expert to create secure vaults. She will also team up with a privacy officer to comply with the myriads of laws and regulations. But like all things, the work should be motivated by positivity, not by fear. Dangling the risk of heavy penalties and reputational damage never did much to fight anti-competitive behaviors, corruption or safety risks. If all you do to drive your GDPR/privacy agenda is freak out about the penalties that the European Union might impose next year, you’ll want to reconsider that strategy.

True compliance progress is made when organizations decide who they want to be.

Who wants to reduce corruption?

China has punished one million public officials for corruption (including tens of thousands in jail or under house arrest).

India recently demonetized two popular bank notes to curb illicit payments and exchanges.

Saudi Arabia arrested 200 princes and billionaires accused of corruption, saying it cannot afford to allocate 10% of its government spending to corrupt payments.

These countries have taken bold steps  because they understand that it is in their best interest to reduce corruption.

Yet, too many P&L owners bemoan the fact that their compliance office requires gift approvals and third-party vetting. They call it red-tape and claim it will kill the business.

Anyone else here sees a disconnect?

Al Capone and cover-ups

The American gangster Al Capone was convicted of income tax evasion today in 1931.

One could say that it wasn’t his original crimes that put him behind bars but his attempt to cover them up.

Many employees follow this pattern. They break a rule and try to get away with it by breaking another. That cover-up usually gets them terminated.

An interesting difference between Capone and our employees (there are many, of course) is in the comparative seriousness of the original violation and of the cover-up. For Capone, it was almost comical that he was sentenced to 11 years for tax evasion rather than for life for corruption, racketeering and murder. For our employees, it is often sad that they get terminated for covering up a minor conflict of interest or mistake, one they could have easily survived had they simply admitted to it.

Our policies, training and communications should aim not only to prevent mistakes and violations but also to prevent cover-ups. Cover-ups only make things worse.

Unless you are Capone.