Compliance Alone Won’t Make Your Company Safe

Compliance Alone Won’t Make Your Company Safe

Many, if not all, business leaders would agree that knowing what happens within your company is a prerequisite for business success. Although this intuitively sounds true, it is worrying to see that many companies blame instances of failure or fraud on not knowing what was going on in their own departments.

But is this the case? Compliance relies primarily on controlling employees’ behaviors and decisions through a strict set of rules and laws. One executive recently described this as “a policeman culture.” The analogy is instructive. Would you tell a police officer that you had made a bad or wrong decision? Many probably would not. The same dynamic is at work in excessively controlling company cultures – leading us to believe that too much control can actually backfire and important information being concealed.

One shortcoming of compliance programs is that they assume misconduct comes from bad apples, rather than good people doing bad things. Only a few of us are really bad people, whereas most of us are good people who sometimes do bad things.

Research in the area of behavioral business ethics has demonstrated that most of the initial ethical transgressions in business go unnoticed, even for those committing the transgression. We rationalize our bad behaviors to such an extent that we do not realize we are crossing ethical boundaries until it is too late. We possess the ability to convince ourselves that we are not doing anything wrong, whereas at that exact moment we may have set the first step on the slippery slope.

So what are leaders to do? Acknowledging that slippery slopes are an inevitable fact of life, we need to know about them as soon as possible. At the same time, it is also clear that a “compliance only” system will primarily breed a culture where information about bad decisions will not be communicated. Control driven systems create a culture in which those who have transgressed will only act in self-serving ways to avoiding damage to their moral self-image.

What companies need instead is a forgiveness culture, a culture motivated by the goals of learning from failures and identifying slippery slopes as quickly as possible.

Slowly, companies seem to be learning that awareness is a better long-term strategy than compliance. The bottom line is that you should want to know what’s happening in your own company.

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