Earlier this week we covered the motivation and thought behind Philip Morris International’s (PMI) new approach to conflict of interest disclosure management. (If you missed it, you can read Part 1 here.)
PMI’s former method resulted in disclosure gaps and a heavy load on compliance administrators to document information rather than spending time on more productive tasks, like ensuring every disclosure gets a timely review.
In the second part of A New Approach to Conflicts of Interest, we’ll look at how Convercent worked with PMI to create an innovative new solution specifically designed to manage the constantly-changing nature of conflict of interest disclosures—giving PMI (and other users of Convercent’s Disclosure Manager) a system that is easier to use for both employees and compliance admins, collects better information and provides richer analytics for deep organizational-trend analysis.
Building for success
PMI and Convercent collaborated through the course of 2014 to build a disclosure management solution focusing on two critical, enhanced capabilities in order to provide a more robust and practical solution to the market:
The solution was built to capture categorized information alongside rich text. By doing so, we empower users to get deep metrics and analytics from the standardized data that the picklists yield, on top of the rich details for individual disclosures provided in the descriptions. This creates a very rich type of analytics that go beyond a single disclosure and managing each individual piece of information in a very reactive, short-term way, allowing the company to extend analysis into the broader cultural and behavioral aspects of what’s going on within the organization.
Most existing disclosure solutions serve a one-time purpose, where the tendency can be to file it and forget it. We wanted to provide employees and compliance teams with living documentation that they could access, update and manage on a day-to-day basis. That way, as employees’ relationships, affiliations or professional responsibilities change—as they so often do—they can make any updates needed to their disclosures in real time instead of waiting on the next annual disclosure process. As Marc Leu, Global Head of Ethics and Compliance Risk Management at Philip Morris International, noted, “Disclosing, updating as things change over time and keeping the status up to date is each and every employee’s responsibility. It’s really giving employees the responsibility on this journey of disclosure, and then making sure they get input and responses on what they need to do.”
Building for employees
The ultimate goal was to provide a very welcoming, easy-to-use and non-threatening environment to really encourage employees to record their conflicts in a very forthcoming and honest way. We really wanted to help employees engage in a conversation with the compliance department about the challenges—both existing and potential—that they face within their organization.
“Make it clear to employees that the issue with conflict of interest is not for someone to be in such a situation, but for someone not to disclose and stay in that situation,” advised Leu. “It’s identifying and removing the drama for people who think, ‘Oh, I’m in a conflict of interest situation, and I’m in trouble.’ No, the trouble is if you stay there, and you don’t get out of it.”
This motivation, and close collaboration with PMI, lead us to focus on a few key features that would take away the “threat,” put control back in the employee’s hands and ultimately collect better information.
It’s the employee’s disclosure, in his record, in his native language. And he has one place to go whenever he has new disclosures or updates to make.
“The clearance conditions apply to the employee and most of the time to the manager of the employee,” said Charles Pare, Manager of Compliance Risk & Planning, Philip Morris International. “The liability is with them. Their accountable for adhering to the conditions, and for updating the disclosure if the situation changes. That way, even with a great volume of disclosures being received, the focus [the compliance team] has is really just on putting those clearance conditions in place.”
Defining the Problem
The first question the Disclosure Manager asks is, “How is the other party related to the company?” If employees can’t answer that question or the answer doesn’t fit, they simply don’t move to the next window because it isn’t necessary: If the third party isn’t related to or can’t impact the company, there isn’t a conflict.
By more clearly defining the problem, and making it easier for employees to discern problematic relationships from others, the goal is to reduce the number of unnecessary disclosures completed, reviewed and cleared.
“The design that we worked on with Convercent makes it easy for an employee to disclose,” shared Pare. “It’s guiding him, and it’s not a lengthy questionnaire.”
“The earlier approach was really focused on a series of questions which got cumbersome, and people were just trying to answer them to get to the end of the form,” reflected Leu. “Now, we deliberately changed the questionnaire to mirror the triangle and the three aspects of a conflict. Bottom line: There are only six fields to click in.”
By reducing the number of questions employees have to answer, and providing them with a better user experience, the goal is ultimately to encourage more disclosures containing more robust information. We guide disclosing employees through a short questionnaire to make it as easy (and repeatable) as possible.
Universal Questions, Local Languages
“The questions are universal, regardless of the jurisdiction,” shared Leu. “You don’t have to tailor them to a specific country or a specific business, but they really get the people thinking about their situation.”
Providing those universal questions in an employee’s local language ensures the most consistent, accurate information possible is collected from each disclosure.
Encouraging legitimate disclosures
One of compliance teams’ frequent concerns (or complaints) about disclosure management is the sheer volume of reports they could (or do) receive, many of which potentially aren’t legitimate conflicts but create a burden on the team to have to review nonetheless.
“From a definition perspective, I don’t think that we at PMI define conflicts of interest very differently from any other company,” shared Leu. “What we decided to do is actually more focus on the source of the conflict, and make employees better understand that aspect of the definition.”
We fine-tuned the number and logic of the employee questions to help employees focus on what could create a conflict in the first place—that is, the potential to unfairly influence, benefit or share something that could adversely impact the company—instead of trying to gather every minute detail about the relationship itself. Typically, where most compliance teams see extraneous reports are for relationships that don’t actually present a conflict. Our aim of enhancing the quality of legitimate disclosures coincided well with a goal of reducing irrelevant reports.
The value of a better way
Many companies are very interested in establishing or improving their conflict of interest programs, but some of them struggle to actually define the benefit of it.
First and foremost, one of the key benefits is the increase in transparency and organizational justice. Employees who trust in the fairness of the decision-making processes can have a very positive and widespread impact on the culture of a company.
“[Managing conflicts of interest is] not only to prevent risk or to help employees and foster a culture organizational justice,” said Pare, “but it’s about just doing the right thing in the right way.”
Indications from Convercent’s Disclosure Management customers are that they not only increase the number of legitimate disclosures they receive per employee, but that they’ve noticed a surge in employees returning to the platform after their initial disclosure to make additional disclosures.
“The average number of disclosures per employee raised by one third in just three months,” noted Pare. “This is a good indicator that people are stepping back and starting to think about conflicts of interest from a global perspective.”
“We see employees more and more coming back the day after and disclosing another situation, because it got them thinking,” shared Leu.
This shows an increased level of understanding of what a disclosure is, more willingness to come forward and additional time spent thinking about additional relationships that have the potential to create a conflict.
Convercent Disclosure Manager customers have reported not only an uptick in the number of legitimate disclosures they receive, but in the quality of employee assessment provided in the disclosures.
“We see the quality of employee assessment changing,” reflected Pare. “As well as our ability to understand the situations and react.”
Richer detail from employees increases the compliance teams’ abilities to understand and manage situations that may present conflicts.
“When you read through the disclosures that we are receiving currently, the way the situations are described are more detailed,” shared Pare. “We get less information about the nature of the relationship—which we don’t really want to know—but we get quite good analysis about the influence of the relationship. We were not getting that quality of assessment firsthand before.”
Reduction of Noise
As the system aims to more clearly define what a conflict is and guide the employee through an easy disclosure process, one of the immediate benefits as been a reduction in extraneous disclosures that don’t actually present a conflict.
“We didn’t completely reduce the bad disclosures, which are much more complex,” Leu said, “but there’s definitely been a shift.”
Increased Trust in Compliance
A culture of disclosure is one where your employees come to compliance for assistance in managing these situations, rather than trying to ignore them, manage them on their own or sweep them under the covers. The trust and accountability of this environment can have long-term impacts on employee confidence, loyalty and retention.
In addition, disclosures present an opportunity to build trust with employees immediately.
“There’s always less compliance people than employees, and you cannot be everywhere,” noted Pare. “But contacting compliance for a conflict of interest is much easier than reporting a misconduct. This first contact is easy, and that’s a huge benefit.”
Easier on Everyone
Focusing on a simpler user experience reduces the burden on employees as well as the compliance team.
“This is something that, in general, the compliance team is very much looking for these days: how to make it easy to comply, and also easy for us to manage,” shared Leu.
Having a system with structured picklist data enables the compliance team to easily run reports and get more comprehensive analytics, allowing them to address larger behavioral, organizational and environmental trends so that they can better understand (and ultimately address) the things that influence and enable conflicts.
“We started to run much deeper data analytics—and quite easily, actually,” noted Pare. “We started to create a norm and benchmark one market against the other, or one function against the other, or what the average number of PMI relations someone could expect of themselves. That enables us to target our communications, target our training. You don’t need to roll out the big global training programs to all employees, but we can see where we have hotspots, where we need to focus and more importantly the type of conflicts that we have in the organization.”