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Why Forgiveness Should Be Part Of Your Compliance Strategy

May 16, 2018 • STRATEGY & MANAGEMENT, SUSTAINABILITY & ETHICS, People Management, David De Cremer on Management, Editors' Pick, Team Managment

By David de Cremer

Compliance strategies are integral in creating a trustworthy, high performing and innovative work culture. As such, it is imperative for companies to evaluate the effectiveness of their compliance especially in today’s complex business world. In this article, the author highlights the advantage of putting forgiveness a part of the compliance strategy as implemented by China’s giant telecom Huawei.

 

In the last two decades, the importance of having a compliance team in office has increased significantly. Several ethical failures that took place at Tyco, WorldCom, Enron, Royal Dutch Shell and Volkswagen – to name just a few – all have been widely publicised and discussed. Consequently, the existence of these numerous international scandals pushed towards a rise in regulatory requirements across industries. Despite the enormous number of articles published on the need for effective compliance in today’s business world, it is somewhat disappointing to notice that most organisations are nevertheless only undertaking minimum requirements to maintain compliance.

As many will say, compliance activities usually involve a tick box approach with the aim to leave a paper trail behind. Looking at compliance this way unfortunately reduces it to an activity relying solely on the use of laws and rules but never going beyond it. The result of such an approach is that work cultures are created in which employees are fearful to undertake any risky legitimate action and shy away from using sound ethical judgments – “better to be safe than sorry” (De Cremer, 2014). If anything goes wrong, the dominating response is one of blame rather than support and efforts to prevent wrong behaviour in the future. If these descriptions fit with how compliance works in your organisation then realise that your company is missing out on many opportunities to create a trustworthy, high performing and innovative work culture.

Compliance efforts thus must go beyond exercising monitoring whether legal requirements are met and shift employee’s goals to improving the quality of their work and considering its impact on the different stakeholders involved.

Rather than treating compliance as an exercise in running down a tick-box list, I advocate a view that endorses compliance as way to help all people in the company to understand the values the organisation wishes to pursue and how those values relate to recognising the difference between “right” and “wrong.” One should not forget that even today many employees work with incomplete information under time pressure, making that they look for advice. Compliance efforts thus must go beyond exercising monitoring whether legal requirements are met and shift employee’s goals to improving the quality of their work and considering its impact on the different stakeholders involved. This way, organisations will be able to make the shift from a rule- or legal-based compliance system only to a value-driven compliance approach in which legal requirements are explained in terms of – and provided meaning by – the values the organisation aims to achieve. All of this may sound simple in theory, but reality proves that accomplishing such a work culture is more complex than one may realise. As a case in point consider the response of Jamie Dimon, CEO of JP Morgan, who said that since 2012 his bank hired an additional 13,000 people to work in compliance. In addition, the company spend an additional $4 billion on compliance and recruited extra 5,000 employees.



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About the Author

David De Cremer is the KPMG professor of management studies at the Judge Business School, University of Cambridge, UK, a co-founder and co-director of the One Belt One Road center at the University of Cambridge and a visiting professor at Peking University HSBC Business School. He has published more than 205 academic articles and book chapters and is the author of the book Pro-active Leadership: How to overcome procrastination and be a bold decision-maker and co-author of Huawei: Leadership, culture and connectivity.

 

References

1. Ariely, D. (2009). Predictably Irrational: The Hidden Forces That Shape Our Decisions. Harper

2. De Cremer, D. (2014). Why ethics is often grey and not white: Business ethics challenges in a global world. The World Financial Review, January/February, 23-25.

3.De Cremer, D., & Lemmich, B. (2015). Compliance alone won’t make your company safe. Harvard Business Review, May.

4. De Cremer, D., & Tian, T. (2015). Leading Huawei: Seven leadership lessons of Ren Zhengfei. The European Business Review, September/October, 30-35.

5. McCullough, M.E., Bellah, C.G., Kilpatrick, S.D., & Johnson, J.L. (2001) Vengefulness: Relationships with forgiveness, rumination, well-being, and the Big Five. Personality and Social Psychology Bulletin27(5): 601–610.

One Response to Why Forgiveness Should Be Part Of Your Compliance Strategy

  1. Worked all my career with two rules. Never allow money nor self-interest to drive the agenda, jJst a little common sense, good customer service and one rule never lie to a customer, give them a choice based on your ablity too deliver and if you cnnot due to things beynd your control, do not wait for the customer to complain, tell why you cannot diliver on time. . Then use innovation and collaboration to do what closed mines executive should be doing,But allowing money and self interest . Based on short-term gain, but always long-term expensive problems., Made for an interesting career.

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