Frank J. Navran - Society of Corporate Compliance and Ethics

Compliance & EthicsJuly/August2012Professionala publication of the society of corporate compliance and ethicswww.corporatecompliance.orgMeet Lanny A. BreuerAssistant Attorney General,Criminal Division,U.S. Department of JusticeSee page 1423What’s the bestway to documentthat training hastaken place?John Kleeman29The real“happy marriage”between the GC andcompliance officerDonna Boehme35Creating andmaintainingan authenticorganizationJohn Cross42Is yourworkplace culturehijacking yourvalues?David GeblerThis article, published in Compliance & Ethics Professional, appears here with permission from the Society of Corporate Compliance & Ethics. Call SCCE at +1 952 933 4977 or 888 277 4977 with reprint requests.

y Frank J. NavranThe King is dead.Long live the King!»»To focus exclusively on return on investment, or any other single key success indicator, creates a blind spot.Focus on all the measures of long-term, sustainable success.»»Nothing happens in business until somebody buys something, so attracting and retaining customers should bea prominent focus of any organization.»»Those who use our work product as input to their part of the chain of events that produce the final “product/service”are our internal customers.»»Our goal should be more than the mere absence of complaints. It should be a level of service that createsfiercely loyal customers—both internal and external.»»Integrity is the key to customer loyalty and building trust. Return on Integrity emerges as King. Long Live the King!NavranLe Roi est mort, vive le Roi!, was firstdeclared upon the coronation ofCharles VII following the death of hisfather Charles VI in 1422. In France, the declarationwas traditionally made by the Ducd’Uzès, a senior Peer of France, as soon asthe coffin containing the remains ofthe previous king descended intothe vault of Saint Denis Basilica. Thephrase arose from the law of le mortsaisit le vif—that the transfer of sovereigntyoccurs instantaneously uponthe moment of death of the previousmonarch. “The King is dead” is theannouncement of a monarch who has justdied. “Long live the King!” refers to the heirwho immediately succeeds to a throne uponthe death of the preceding monarch. 1For most of my 40+ years of experiencein the business world, I have been held to avariety of standards as indexes of my successand components of the formula by which thatsuccess was measured and rewarded. I’m fortunatethat for much of my corporate careerI was in a staff position where revenue andreturn on investment did not apply to how mysuccess was defined. Yet, in 35 years of consulting,nearly every client has been in exactlythe position where their single most significantmeasurement of success, the most equalof equals, was financial success. Return oninvestment (ROI) was king and created a blindspot in nearly every organization. And, formany, the return itself was too often viewedas being more important than the means bywhich that return was generated.Mid-way through my corporate career, Iwas given the opportunity to manage a groupof about 75 employees and a $5 million budget,serving a customer base of about 500,000. Priorto that, my experience in the company hadbeen as a staff manager. In my staff functions,I managed projects with relatively modestbudgets and very few, if any, tangible measurableoutcomes. My performance was moreabout the processes I employed and my abilityto meet project deadlines, than the more traditional,objective measurements that people inline positions usually faced.But, when I became a line manager, itwas all about the bottom line. The singlemost important measurement for me, andCompliance & Ethics Professional July/August 2012+1 952 933 4977 or 888 277 4977 www.corporatecompliance.org 55

Compliance & Ethics Professional July/August 2012the people working for me, was work unitsper hour. We knew the cost and the marketvalue of hours worked. The key was to ensurethat the cost of performing our work was sufficientlybelow the price we charged for thatwork to allow us to make a profit. The bottomline was in fact “the bottom line”—a positivereturn on our investment.There were other objectives. We had toperform the work safely. We had to performthe work properly. But, when you cut to thechase, the motives for safety included both ourcare for the well-being of our employees andthe costs of lost time: having an employee onthe payroll being paid and producing nothing.And our concern for quality was also informedby concern for the bottom line. If we did not dothe work well, we had to go back and do it overor we created a maintenance nightmare thatrequired us to continually go back and fix whatwas wrong. And that costs money.The lesson I learned as a manager is that,while I was “leading” people, I was “managing”the bottom line. The investment in peopleand material and all the other things we didas leaders was only justified when the moneycoming in exceeded the money going out, sothat we could give an appropriate return toour shareholders on their investments. Returnon investment—in business shorthand, ROI.My position as a line manager was thelast time I had that level of responsibilityfor direct reporting employees and budgetmanagement. My next assignment was as aninternal consultant to the same organization.That led to my current role as an independentconsultant, focused on issues relating to ethicsand leadership.As an entrepreneur, I still keep an eye onmy costs and I still am concerned that revenuesexceed costs. But, of necessity, my focushas been on a different aspect of how successis measured—customer satisfaction or, to bemore precise, “customer loyalty.” Customersatisfaction may sometimes seem more difficultto quantify and evaluate than ROI. Butmy investment in customer loyalty does in factprovide a return, specifically, repeat businessthat lowers my marketing costs, reduces thetime spent trying to develop new business,and allows for a more efficient relationshipwith clients where we can spend more timeaddressing the immediate concerns and lesstime having to establish a relationship, learneach other’s idiosyncrasies, and build trust.To be clear regarding terminology, it maybe useful to borrow some language developedby a colleague of mine, Dr. Scott Simmerman. 2Scott was a consultant brought into a projectwhere the client needed some expertise inthe area customer service. Scott’s unique contributionwas to characterize three levels ofcustomer service:1. Process and handle—which he characterizedas the mechanics of a transaction.Consider the behavior of a typical checkoutemployee while you go through the processof finalizing your purchase. Scan-beep,scan-beep, scan-beep, all the while stuffingyour purchases into the iniquitousplastic bags. When all is said and done,the employee may or may not recite theprescribed, “Thank you for shopping at(insert store name here).” My local big boxhardware store has taken “process andhandle” to a new level. They have installedself-scanning stations where customersscan their selections, swipe their own creditcards, and bag their own purchases. Oneemployee can monitor four scanning stations,resulting in reduced costs while stillensuring that customers pay for every itemthat leaves the store.2. Customer service—where “process andhandle” is supplemented with a modicumof politeness, friendliness, and courtesy.56 www.corporatecompliance.org +1 952 933 4977 or 888 277 4977

In these situations, customers are often“greeted” when they enter the store. Rarelydo they have to scan and bag their ownpurchases. And, they typically receive asmile and a thank you as they leave. Ifcustomers have specific questions, they getanswers. And sometimes, they are even“pointed in the right direction.”3. Customer care—this is Scott’s term for thedeliberate effort to exceed customers’ expectations.This is when the customer receivesmore attention, help, support, information,courtesy, etc. than they expected, thuscreating a new, higher expectation. Thistypically results in acompetitive advantagein the customer’smind, because theyhave received a level ofattentiveness and supportthat differentiatesthat provider.Scott’s research wasclear. Customer care increases customerloyalty by eightfold or more. In other words,customers who believe that they are cared forwill not only go out of their way to do businesswith that service provider, but will bragto their friends about how smart they wereto have found such a wonderful place to dobusiness. They are eight times more likely tobecome “repeat” customers.As a result of adopting Scott’s model asa foundational element of my practice, I haveenjoyed a 90% repeat rate among consulting clients.Simply stated, nine out of ten of my clientscome back for more. The result is I have muchmore time to do the work that I love, becauseI have to spend so much less time scrabblingaround for new opportunities to do so. I somewhatfacetiously tell colleagues and clientsalike that my primary marketing strategy for…the bottom linein most of theethics work we docomes downto integrity.the past 15 to 20 years has been to answer thephone when it rings.With that as context, let’s shift the conversationto a redefinition of ROI. Over the years,a realization has been emerging that my focusis still squarely on ROI. The difference is thatalthough the acronym remains the same, themeaning is changed. In the ethics world “I”stands for “Integrity.” In 25+ years of organizationalconsulting focused on issues relatedto ethics and leadership, integrity has beena key consideration in nearly every engagement.Many clients are motivated by practicaland/or pragmatic considerations, rangingfrom controlling their costs to conforming toexternally imposed standards(such as the FederalSentencing Guidelines forOrganizations), but thebottom line in most of theethics work we do comesdown to integrity.To understand integrity,it can be useful to look atthe root word—integer.An integer is a whole number, a number thatis not a fraction. It is a thing unto itself.Integrity is about us being whole. It isabout us ensuring that our behaviors andactions reflect our values and beliefs. When webehave in ways that are consistent with whatwe say we believe in and what we have taughtothers to expect of us, then we are being“whole” and acting with integrity. That is notto say that integrity guarantees that what weare doing is always the right or, necessarily,the best thing to do; but we are being consistentand predictable, a known quantity.Several years ago, when I was a line manager,one of my colleagues was a gentlemanwith whom I had daily interactions. He wasuniversally seen as being an SOB. In fact, thatreputation was so firmly entrenched that oneof my employers refer to him as a “sphericalCompliance & Ethics Professional July/August 2012+1 952 933 4977 or 888 277 4977 www.corporatecompliance.org 57

Compliance & Ethics Professional July/August 2012SOB.” A sphere, as you may recall from highschool geometry, is the only figure that looksexactly the same no matter which directionyou might view it from. Shine a light on asphere from any angle and the shadow isalways round. And that’s the way it was withBill. He was an SOB no matter how you lookedat him. So, to be certain, consistency is not, inand of itself, a virtue, but ethical consistency is.This little bit of reflection has led meto conclude that, at least in my world, ROIis still king, but for me the acronym nowreads “Return On Integrity.” For 25 years,the bottom line of the work I do with my clientshas only indirectly…work done ethically,with integrity, has apositive impact on thefinancial performanceof every legitimatebusiness enterprise.been about their financialreturn. The directfocus was on raisingthe levels of integrity intheir organization. Wewere working together toestablish and sustain thesystems, processes, andleadership necessary toensure that everything they said and did contributedto increasing integrity and the ethicalwholeness within their organizations.Lest that sound unbusiness-like, let me tiethe “ethics” ROI to the more common financialROI. Although I do not contend that thereis a certain, guaranteed correlation betweenintegrity and profitability, I do believe thereare several arguments that support the thesisthat work done ethically, with integrity, has apositive impact on the financial performanceof every legitimate business enterprise.For those of us in the business world, nothinghappens until somebody buys something.That something may be a tangible productor an intangible service or, more typically,a combination of both. Irrespective of whatthe customer buys, there are promises thataccompany that purchase. If those promisesare not met, the customer will not be satisfiedand, given the opportunity, will choose to dobusiness with your competitors in the future.If those promises are met or exceeded, thenScott’s three levels of customer service comeinto play.At Level 1, the customer receives everythingthey were promised—nothing more,nothing less. They have nothing to complainabout. Neither do they have anything to feelgreat about. Nothing to brag to their friendsabout except, perhaps, the small price paid.The transaction was successfully completed.It is not that different from putting my moneyin a vending machine. I pull the lever. I get theproduct. These customerswill go to any reasonablyconvenient provider wherethe product or service canbe purchased for the sameprice or less.At Level 2, the customerreceives everything theywere promised, accompaniedby polite, friendly,and courteous service. I go into the store. Mydesired product is easy to find. I select it, payfor it, and the clerk smiles and says, “Thankyou” or “Have a nice day” and I leave. I gotthe product. The product was as expected.And the experience was unexceptional, notunpleasant, just unexceptional. These customerswill go to any provider who promisesto provide that same product or service, at acompetitive price, whenever the need arises,without a second thought.At Level III, the customer goes into theestablishment, is greeted by name, welcomedback with a smile, and asked howthey might be helped. They are given direction,guidance, or whatever other help theymight need to make a confident, informeddecision. The person serving them is attentivewithout being intrusive. They are offeredsuggestions on how to optimize the value58 www.corporatecompliance.org +1 952 933 4977 or 888 277 4977

of their purchase, realize all of the potentialvalue, and reminded that their patronage isappreciated. They leave feeling better for theexperience. They feel good about the purchase.They feel good about the interaction,if for no reason other than it was better thanit might have been had they gone somewhereelse for the same product or service. Thosebecome loyal customers. The research suggeststhat they will deliberately drive pastseveral competitors to get back to you becauseyou make the process more than merelypleasant. You make it about them. Level IIIcustomers become loyal customers. And, onaverage, brag to eight others about how smartthey were to do business with you.As a consultant focused on ethics and leadership,Scotts’ model played two roles in thematuring of my practice. The obvious first levelis that Scott taught me important lessons abouthow I need to treat my clients in order to earntheir loyalty. I continually try to apply thoselessons, and my customer repeat rate suggeststhat I am somewhat successful in doing so. Thesecond is the realization that, given my focuson organizational ethics, customer service is an“ethical model.” It builds on the notion of integrity.It builds on the concept of keeping andexceeding one’s promises—whether explicit orimplicit, contractual or understood—irrespectiveof their legal enforceability.In the majority of my ethics work, we findintegrity to be an issue. Integrity is almostalways either directly or implicitly a core valueof my clients’ organizations. It is understood ascontributing to trustworthiness. It is the fulfillingof promises. It is the expectation that onewill do what they say what they will do, everytime, without fail, without compromise, reliably,predictably, and to the best of their ability.It is an expectation I foster in my clients in twodirections: an expectation of how they shouldlook for me to act, and a strong recommendationregarding how they should act towards others.A significant number of my clients arepeople who have formal assigned responsibilitiesfor the management of an ethics initiative,or some portion thereof, within their organizations.Many of these people either report toor carry the title of ethics officer or ethics andcompliance officer. Some have legal training.Others are from the Human Resources field.And many are from staff or line managementpositions with limited or no formal training inethics as it applies to organizational managementor effectiveness.Irrespective of their background or levelwithin the organization, these ethics andcompliance officers have some things incommon. Most frequently they are taskedwith responsibilities for communicating theethical standards of the organization, ensuringthat employees are both aware of andcapable of meeting those standards, anddealing with those occasional circumstanceswhere the standards are either disregardedor violated.For line managers to be successful, thefunction they represent must be trusted by theemployees they are tasked to oversee and bythe leadership who are ultimately responsiblefor the end results. Going back to the earlierobservation that trust is the residue of promisesfulfilled, it is useful to ask, “What are theexplicit and implicit promises of an EthicsOffice?” I would suggest that the single mostsignificant promise is integrity.The word “integrity” is derived from thesame root as the word “integer.” In mathematics,an integer is a whole number, a thingcomplete within itself. Integrity has to dowith “wholeness.” Bringing this conversationback to Earth, we can simply say that integrityis the basis for trust. It is the belief that youwill get what you expect, and you will getall of what you expect. The promises that aremade will be kept. Thus trust, the residue ofpromises fulfilled, is the product of integrity.Compliance & Ethics Professional July/August 2012+1 952 933 4977 or 888 277 4977 www.corporatecompliance.org 59

Compliance & Ethics Professional July/August 2012I’ve come to believe over the past 40 years inbusiness that trust is the single most powerfuland significant commodity. If I am not trusted,you’ll only do business with me under duress.If I am trusted, you will seek out the opportunityto do business with me if and when theproduct or service I provide meets a need. Asan internal manager who provides staff servicesto a captive audience, I was never told thatmy goal was to build trust in my function andin me, but it was. As an external resource, I didnot need to be told that my goal was to buildtrust with clients if I was to be successful bothin the short-term and in the long run. I hadalready learned that lesson. Ultimately what Isell is trust, and trust presupposes integrity. Ifmy clients do not believe I have integrity—thatI will meet or exceed all expectations and keepall promises—they will not trust me and willnot continue to be my clients.ROI—Return on Investment—is a result.It is measured and monitored as an indicatorof a business’s success. It is an indicator ofeconomic success.ROI—Return on Integrity—is also a result.It is perhaps more difficult to measure andmonitor but, in my experience, is an even moresignificant indicator of a business’s success. ThisROI is a long-term indicator of economic successto come. If you individually (as a function or asa company) are trusted, you will be more successful,all things being equal, than if you arenot trusted. For my colleagues in the business,for those with internal ethics management andleadership responsibilities, and for those whoare held to and/or hold themselves to high ethicalstandards, integrity is not an option. It is aprecondition for everything we do.Integrity is not a short-term indicator. It is alifelong pattern of a behavior and perceptions.It contributes to our individual and collectivesuccess in every aspect of our lives including,but not limited to, business. My simple propositionis that nothing matters more to you as aperson, as an employee, as a leader, as an example,than the integrity you demonstrate and thatyou instill in and require of those around you.It doesn’t matter if you are the chairmanof the board, a member of the board, aninhabitant of the C-suite, a manager, a leader,or an employee. Your integrity defines you.Integrity is the basis for whatever success youwill achieve, whatever respect you will earn,and whatever impact you will have on thosearound you. If you keep your focus on integrity,it may not guarantee your success. Doingyour job well will guarantee your success. Afocus on integrity will contribute to that successin that people will know that they cantrust you, trust what you say to be true, andtrust the promises you make will be kept.With integrity, you have laid the groundworkfor trust. People will believe that you willkeep your promises and do what you do as wellas you are able. And you will do all this, irrespectiveof job title, job responsibilities, level, orany other tangible aspect of your work.There is no greater investment you canmake in your own personal success, and thatof those you lead or the company you serve,than to bring the highest levels of integrity tothe work you do. For that reason, I propose thatROI be understood to mean Return on Integrity.It is time to overthrow Return on Investmentas the supreme goal. Return on investment is anatural byproduct of an organization and leaderswithin that organization who operate froma base of integrity in pursuit of their goals. Thebottom line is simply the bottom line. It is thegoal. Integrity is the path. Integrity is King.Le Roi est mort, vive le Roi!, The King is dead.Long live the King. Long live integrity! ✵1. Wikipedia: http://en.wikipedia.org/wiki/The_King_is_dead._Long_live_the_King2. www.squarewheels.comFrank J. Navran (frank @ navran.com) is the Founder and PrincipalConsultant of Navran Associates. Frank has worked with clients in morethan twenty countries and has authored five books and more than twohundred articles and book chapters.60 www.corporatecompliance.org +1 952 933 4977 or 888 277 4977