Creating A Strong Corporate Culture That Begets Compliance

Sean Thompson, President & Chief Operating Officer, NAVEX

A positive corporate culture is one of the most important competitive advantages a company can have. Not only does a strong culture promote better employee performance and engagement, but it also lays the foundation for a stronger compliance program—a key pillar to a healthy and well-run business.

Conversely, the consequences of a poor business culture are a narrow pipeline of top talent and a lack of compliance with company guidelines, laws and regulations and social norms, which heighten overall business risk. Yet, as few as 12% of organizations feel they’re driving the “right culture,” one that promotes communication, inclusivity, frequent training and high business values.

Corporate culture is, therefore, an excellent indication of the strength of a company’s risk and compliance program. And, as certain aspects of culture are improved (such as ethics), lower risk and stronger compliance will naturally follow. To be successful in this progression, organizations need to conscientiously build the kind of corporate culture that begets compliance.

Identify elements of culture that are important to risk and compliance.

Leaders need to identify which elements of their corporate culture are the most important to them and then ensure these elements are implemented and practiced across the organization. This is a natural first step as it lays the foundation for what defines a strong culture: its values.

When these values are explicitly shared and well understood, they drive the behaviors expected within the organization. For example, if acting with integrity is a core value, it’s important for employees to understand what that means, which behaviors are rewarded and which are not tolerated. Building a strong speak-up culture where employees feel empowered—and comfortable—speaking up against misconduct will also bolster company culture. The strongest speak-up programs are those that are transparent, don’t act with impunity and where employees feel compelled to speak up internally against wrongdoing.

Training is also essential to promoting organizational values, as it gives employees the knowledge to act. I recommend training that encompasses not just laws and regulations to reduce liability risks but also corporate values, both during onboarding and throughout employees’ tenure at the organization. When training is done thoroughly, it promotes a healthy workplace culture and can often mitigate potential problems before they arise.

Encourage collaboration between HR and risk and compliance teams.

It’s in an organization’s best interest for HR and compliance to team together, as both are essential to ensuring a compliant, safe and inclusive workplace. While having an ethical culture on paper makes a business compliant, organizations need to think bigger and create an environment where they are acting with integrity because they want to (not just need to). There’s a big difference between these motivations and it is felt by employees across the company.

Let’s look at diversity initiatives as an example. Last year, the U.S. Securities and Exchange Commission (SEC) approved a new listing rule from the Nasdaq Stock Exchange. It mandates that all companies trading on Nasdaq must have at least two diverse directors on the board. This is one of the first official listing rules that require organizations to prioritize diversity and has since been a driving force for organizations to rethink their corporate culture. However, organizations shouldn’t be hiring more diverse candidates just because the law requires it.

It’s well-researched and documented by companies like McKinsey, that “the most diverse companies are now more likely than ever to outperform less diverse peers on profitability.” And from a cultural perspective, Catalyst, a nonprofit whose goal is to build workplaces that work for women, finds that diversity and inclusion have been shown to improve employee recruitment and retention, grow innovation and reduce groupthink, among other benefits.

This is where HR and compliance teams can work together, as it’s up to compliance teams to educate the business on the benefits of a more diverse workforce (and comply with relevant laws) and for HR teams to help source the talent. And, like every other risk and compliance initiative, there needs to be reporting metrics and protocols in place so businesses can see whether they are successfully moving the needle on their cultural objectives, which will, in turn, inform progress toward prescribed compliance objectives.

Promote culture from the top down.

Lastly, but perhaps most importantly, a strong corporate culture is an organization-wide initiative, which means that leadership teams and board members must lead by example. Oftentimes, workplace culture falls on the shoulders of HR, and while supported by HR, they are not who solely define it. In fact, strong corporate culture must be a C-Suite-level discussion where leaders determine what the organization stands for and the type of environment they want to create.

When executive teams set the tone for a strong culture, organizations will find that it translates into long-term value creation and risk mitigation. During meetings, for example, leaders should behave in a courteous and respectful way toward employees to show what kind of professional behavior is expected. This can include anything from showing genuine interest in teams’ accomplishments and milestones to gaining employee input on existing and future company operations. Putting forth this level of respect and transparency creates an environment where employees follow suit in their own roles and responsibilities, which helps mitigate bad behavior and potential risk in the long run.

There are many benefits to boosting corporate culture that go beyond just making the work environment a fun, collaborative place to be. While both are important qualities to have, a strong culture rooted in business values that are shared and acted on will find companies reducing their risk, increasing compliance and, most importantly, building a business that attracts strong talent, customers, partners and other important stakeholders.

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