The LRN ethics and compliance risk management practices report

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DISCUSSION continued... and compliance. “Another advantage of interactive gaming is that it provides a mobile element to learning,” notes Marsha. “In the world of iPods and iPhones, learning can’t always take place at a scheduled time. By using it for critical risk areas, it allows you to tap into employee time with greater frequency and shorter bursts, which breeds more effectiveness and greater retention.” Another change is that corporations will need to tilt enterprise learning from passive to engaged. While 74 percent of survey respondents use offline education, which may have a degree interactivity in it – such as simulated exercises from a live instructor, or watching a video-based vignette, followed by discussion – the deepest level of interactivity, says Marsha, “is when you can simulate being in that person’s shoes, making the decisions.” Leveraging interactive learning tools allows companies to simulate that decision making. As a result, companies are tapping into new types of ethics and compliance products, such as experiential learning games. Companies are discovering that Boomers and Millennials come from two worlds of learning, but in some cases they can help each other. Marsha notes that some companies have initiated “mentor” programs where experienced Boomer workers mentor Millennials on institutional knowledge transfer, while Millennials mentor Boomers on how to use new technologies. Says Ershaghi, “You have to be creative in how you educate employees and facilitate engagement and activity, and appeal to different learning styles. Education today has to be entertaining and story-based; it must also be localized when you’re dealing with multinational companies. The good news is companies are finally waking up to these changes. The path beyond providing “just” compliance education to employees depends extensively on disseminating a sincere message that the company’s future is invested in its culture. Employees at every level must feel inspired to be part of that culture and to take personal responsibility to protect it. An element of trust and mutual loyalty is necessary to drive people’s buy-in that their learning the rules and living the values of the company truly matters. Employees must feel in their hearts, not just understand in their minds, that their ethical conduct will help drive the company to better performance and thus greater rewards. “Doing the right thing” then becomes meaningful not to simply comply with some distant, faraway regulation, but to obtain competitive advantage, job satisfaction, and personal achievement. Detect Detecting violations is perhaps the Achilles heel of the ethics and compliance industry. Many ethics and compliance breaches remain undetected for long periods of time, often because people are reluctant to report them, but sometimes because the regulations are so gray, it is not clear that a violation occurred until it is too late. For this reason, the entire workforce must not only be cognizant of the rules, but also trust that the company’s professed values of transparency will welcome disclosure with no threat of retaliation or adverse repercussions. Companies therefore need to maintain as many channels as possible to encourage employees to talk, to inform themselves and evaluate their knowledge and understanding of the laws and policies and, as necessary, to formally report violations. Companies must establish clear policies about which channel for reporting violations is best used first, and why. This may vary among a company’s regional offices, because of logistical constraints or cultural differences, but it should aim to be as consistent as possible across the entire organization, even in global companies, and demonstrate the same commitment to zero tolerance of ethics and compliance breaches. The greater understanding employees have about the detection process, the more likely they will use it. One of the most effective channels to encourage discussion is line management. Employees need to feel they can go to their manager or supervisor as soon as they believe something contrary to the law or company policy is occurring in their work area or among people with whom they conduct business. This is especially true in global cultures where companies need to spell out very clearly why they offer an anonymous helpline, what situations are appropriate for calling it, what level of confidentiality will be maintained when employees call it, and what will happen to employees who report violations. Based on the 2007 survey results, companies seem to have the reporting channels in place. Nearly every company has an anonymous helpline, as outlined in the U.S. Federal Sentencing Guidelines, and nearly 9 out of 10 companies offer at least three channels for reporting. That may explain why one-half of respondents say they have no significant challenges about detecting. But for the other half, having the detection mechanisms available is not removing two fundamental barriers to accurate and complete detection. Companies have built the infrastructures, but the audience is not showing up. In nearly 8 in 10 companies having a single location, the respondents report that their employees fear retaliation; in nearly 7 of 10 of those companies, they say employees are not motivated to report. The results are slightly better among multinational companies, but both barriers still challenge close to half of global companies. LRN | 2008 Ethics and Compliance Risk Management Practices Report | 20
Avoiding the Pitfalls of Detection An Interview with Marjorie Doyle, Global Practice Leader, Ethics and Compliance Solutions, LRN Marjorie Doyle has extensive expertise in building sound detection programs and avoiding the pitfalls that plague many organizations. She notes that “not enough resources” is a perennial challenge in ethics and compliance, but companies cannot rely solely on having an anonymous hotline and wait for the calls to come in. “Companies need to have a wide range of tools to implement robust and effective detection procedures, she says. “Most programs run out of resources by the time they get to auditing and monitoring, and they put their faith on having a hotline, without having thought about how to get people to use it.” As EVP and Chief Compliance Officer at Vetco, and Chief Compliance Officer at DuPont, she found that a company’s culture has a lot to do with whether employees will trust the hotline and be willing to use it. Companies need to be completely transparent, explaining in clear terms how reporting channels work, when employees should call, and what are the ramifications of reporting violations. In addition, Marjorie offers the following counsels: Look Ahead, Not Back: Too many risk assessment processes focus on past problems rather than on business strategies going forward. Some areas that require the most diligent detection simply don’t exist at the current moment, but will appear once the company enters a new market, completes a merger or moves a half-dozen back-office processes to an offshore outsourcing provider. Effective ethics and compliance risk management and detection procedures need to look as much forward as backward. Pay Attention to the Middle: Studies have shown that when most people are faced with an ethics or compliance decision, they consider three things, in this order: 1) how their immediate boss is behaving; 2) how their colleagues behave; and 3) their own moral compass. This places the largest responsibility on front-line supervisors, who need to recognize their role in effective detection. As a result, legal and ethics and compliance professionals need to effectively communicate with these supervisors. You have to win their hearts and minds to convince them that ethics DISCUSSION The keys to improving detection as companies mature their ethics and compliance programs require a dual-pronged effort. One prong must focus on clearer communications with employees about what, why, how and when to report, and the other prong is, yet again, to instill trust in employees that the company’s culture is based on self-governance, which means everyone must assume a role in watching over the ethical health of the firm. No one can be immune from taking responsibility to report violations. Clearly, to achieve this buy-in, companies must look inward and have honest discussions to fashion fair policies about reporting. If they are going to have zero tolerance for infractions, they must have zero tolerance for retaliations. Mutual trust will drive detection. Respond If detecting violations is the chink in the armor of ethics and compliance, investigating violations is the shield. Given that companies have had to investigate ethics and compliance problems for many years, they have built up the expertise to handle them correctly. Good investigation procedures are being followed in many companies: e.g., involving many functions, from legal to HR to Ethics & Compliance, and alternating the leadership of the investigation as necessary depending on the nature of the violation. 30% of companies report having no significant challenges in investigating violations. This is one area where team efforts clearly have a positive impact on success. Can responding to violations be improved further The keys appear to be in better training for investigators and hiring more of them. These two factors are tied in with the leading challenge: not enough resources, cited by nearly 1/3 of respondents. It is likely that when companies provide a greater commitment to an ethical culture, they will experience fewer violations, and resource savings can be made in responding activities. In short, a values-based culture and self-governance will yield savings that can be applied elsewhere. Evaluate When it comes to evaluating ethics and compliance efforts, companies must understand how successful their programs are in mitigating risks, reducing ethical breaches, improving employee conduct, and increasingly, in analyzing performance improvements that their programs contribute towards the company’s bottom line. Companies need to periodically measure how their programs are faring in their workplaces. These evaluations may be quantitative or qualitative, or both, depending on each company’s needs. The findings from evaluations are most valuable when they are used to improve the programs being offered, thus increasing understanding and establishing clear linkages between ethics and compliance programs and their improved business results. A key best practice is to share the evaluation results with the Board and senior leadership, ensuring that they stay in touch with the program’s results and, by extension, its value to the company. This should assist in reinforcing their support for the program, which then cascades back through their communications to employees that the company is making progress. In effect, evaluations are the corollary to risk assessments, bringing the cycle of activities full circle, demonstrating a return on investment. The 2008 survey indicates that nearly three-quarters of companies are making efforts at using evaluations to improve their programs. More companies perform annual evaluations than quarterly ones, but the frequency depends entirely on each company’s needs. On the downside, only 6 in 10 companies share the findings with their board, and almost 1 in 3 companies lack resources to conduct evaluations. Also down are the uses of qualitative and quantitative measures. Such results might indicate that some companies are not yet mature in their evaluation processes, and they will need to invest more to master this phase of the ethics and compliance process. LRN | 2008 Ethics and Compliance Risk Management Practices Report | 21
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