Strengthen your ethics and compliance efforts with these four steps

The 2016 presidential campaign will keep business ethics and compliance front and center. Meanwhile, many competitors, activists, regulators and prosecutors remain eager to turn your individual and firm reputation into roadkill on their highway to success.

Don’t be caught unaware or unprepared.  The time for ethics and compliance spring cleaning is now.  It begins with four key steps.

1. Make ethical decisions in a way you can explain and defend

Ethical decisions typically involve simple rules: Obey the law.  Do unto others as you would have them to unto you.  Don’t take the benefits while pushing the costs onto the unaware or unwilling. But even a “correct” decision can draw criticism.  Good intentions are not enough; your company must be able to explain and defend its decision-making processes.

In any group decision, always appoint a devil’s advocate to challenge assumptions and to voice potential criticisms.  For sensitive or complex problems, consider bringing in an expert from the “other side” under a nondisclosure agreement to help you think through the substance and optics of your decisions.

2. Hard-wire accountability into your processes

Admiral Hyman Rickover, father of the nuclear navy, wrote, “Unless you can point your finger at the man who is responsible when something goes wrong, then you have never had anyone really responsible.”  Without individual accountability, an organization will not act ethically.

Executives go wrong when they confuse a good policy on paper with one that actually works in practice.  For real-world impact, flowchart your processes, clarifying information requirements, decision-making responsibilities and performance metrics.  Push decision making down the organization, using a hotline for unofficial, bottom-up disclosure.  Escalate decision making only where higher-ups have more information or expertise.  Otherwise, accountability will diffuse rather than focus.

Where compliance gets involved, it must show colleagues with line responsibility an empathetic, “can-do” attitude.  Not everything will be permissible, but line employees will ultimately ignore or circumvent back-office colleagues who fail to recognize and assist with the line’s business needs.

Supervise.  In addition to regular reporting, executives should have a “directed telescope” allowing them to randomly spot-check lower-level performance in detail, as well as to hone it when and where problems arise.

3. Create and sustain an ethical culture

Warren Buffett notes that “culture, more than rulebooks, determines how an organization behaves.”  Leaders set culture by how they act, not what they say; by what they reward, not what they praise.  Culture arises from face-to-face contact and propagates through stories.  Make time for informal staff interactions and for the telling – and retelling – of stories that promote ethical behavior.

As casino magnate Steve Wynn has stated, as a CEO, a “culture that makes people responsible in terms of their own self-esteem…makes… me sleep good at night.”

4. Defend your reputation by going on the offense

It’s not just business competitors that benefit from damaging your reputation.  Many bloggers and activists base their vocations, or avocations, on a “business is evil” narrative.  Don’t expect them to be understanding or fair.  So protect your reputation preemptively.  One Fortune 50 retailer, long subject to social-media criticism, has begun reaching out to communities, politicians and potential critics.  It runs sustainability and minority/women-owned-supplier programs while ramping up communications.

Such steps should constitute more than window dressing.  In an organization of any size, isolated compliance or ethical issues will arise.  Goodwill and a supporter network will reassure the public that such issues are indeed isolated and that remedial measures will be swift, sincere and effective.

Robert Zafft

March 25 - Robert Zafft (348x400)Robert Zafft practices of counsel with Greensfelder, Hemker & Gale, P.C. ( in St. Louis, Chicago and Belleville, Illinois. He teaches business ethics at Washington University’s Olin Business School and previously served as an Associate Principal with McKinsey & Company, a Senior Advisor for Tony Blair Associates and as a Senior Expert for the Organization for Economic Cooperation and Development (OECD). He can be reached at [email protected]. Follow him on Twitter @RJZafft.

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