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Compliance & Ethics

Why Leadership is Crucial for Compliance & Ethics Teams

Employees need more context and support with compliance and business risk management issues; in response, compliance teams should demonstrate stronger leadership

Corporate compliance and ethics functions have become more influential and wield more authority than they did a decade ago, but the effectiveness of the function still often depends on its senior managers’ leadership abilities.

This is because, for the function to do its job, line managers and their teams must understand why they should work with compliance and follow the advice it provides. And for that, it certainly helps if the function’s leaders are well known, well respected, and listened to across the whole firm.

Ronnie Kann spoke at a recent Compliance Week conference about what Compliance typically does well and where it tends to fall short. He shared preliminary findings from ongoing CEB Compliance & Ethics research on how the function can earn greater influence and what it should do with it when it has it.

A Story to Set the Scene…

A man is flying in a hot air balloon when he realizes he is lost. He reduces his altitude and spots a man in a field below. He lowers the balloon toward the man and shouts to him, “Excuse me, can you help me? I am late to meet a friend, but I don’t know where I am.”

The man below says, “I’m happy to help. You are in a hot air balloon, hovering approximately 30 feet above this field. You are between 40 and 42 degrees N. latitude, and between 58 and 60 degrees W. longitude.”

After a brief pause, the balloonist declares: “You must be a compliance officer. I know this because everything you have told me I am sure is technically correct, but I have no idea what to make of your information, and the fact is I am still lost.”

The man below responds, “Indeed, and you must be a business leader. I say this because you don’t know where you are, or where you are going. You have made a promise which you have no idea how to keep, and you expect me to solve your problem. The fact is you are in the exact same position you were in before we met, but now it is somehow my fault.”

…and the Point of the Story

The business leader wants assistance that Compliance can’t provide, and Compliance feels like it must unfairly bail the business out of difficult situations.

Resolving the Dissonance

If compliance teams want to demonstrate stronger leadership and prevent this kind of discord, they should focus on three things:

  • Reduce risk, efficiently.
  • Make it safe for employees to speak up and report wrongdoing.
  • Help the business reach its goals as quickly as possible.

With these goals in mind, Kann asked the audience, “What can we do to get there?” A portrait of what employees want from compliance leaders and what the workforce views as weaknesses emerges from responses collected from the CEB business alignment tool, which has surveyed more than 500 non-compliance staff that had familiarity with or had worked with the compliance team in their organization.

The survey asked 40 questions across three major categories:

  1. Core compliance and ethics activities (e.g. regulatory training, cultural assessments, and comfort speaking up).

  2. Service design and delivery (e.g. enforcement consistency, collaboration, investigation transparency).

  3. Compliance and ethics staff skills (e.g. conflict resolution, role modeling, compliance expertise).

This provides data on what the line are looking for from Compliance and where the function most needs to work to improve.

  • What employees want: 

    • Be a role model: Compliance should be at the vanguard of upholding the organization’s values, standards, and rules. This means not just telling others what to do, but conspicuously following the rules yourself; action speaks louder than words.

    • Comfort speaking-up is integral: Employees want to feel like they can report misconduct and non-compliance without risking their jobs.

    • Maintain a high level of compliance expertise: If you don’t understand the relevant law and regulations that affect the business that you work in, or the contexts in which they’re applied, it is unlikely that anyone in the business will. Business partners look for this kind of guidance.

  • Areas for Improvement:

    • Employees feel like they are fighting on the back foot: They want their compliance leaders to be better at anticipating issues before they affect the business.

    • Avoid jargon: Your colleagues will either misunderstand or just get bored and not listen. Always communicate in a way that everyone can understand.

    • Don’t act ignorant of business needs: Your fellow co-workers want you to demonstrate a better understanding of business-specific compliance needs and/or difficulties.

More On…

  • Leadership in Compliance

    Risk Clarity research and findings on managing business risk and minimizing misconduct at work.

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