We all know that “tone at the top” is a critical component of a successful compliance program — it’s mentioned as a hallmark in the Resource Guide to the U.S. Foreign Corrupt Practices Act and you see it in headlines, white papers, keynote speeches and panel discussions just about every other day. But as Amy Much, Director of Global Compliance at Under Armour, noted in a recent interview, “They all say tone at the top is very important, but you can’t find something that says how you infuse the tone at the top, how you change it, how you affect it.” (That’s why Amy is attacking the tone at the middle and hoping to push up).
With all this talk about tone at the top, it’s easy to forget that 1) it’s hard to truly influence what others do and if you’re relying on the actions of others for the success of your program you’re taking a pretty big gamble; and 2) the tone in the middle (your compliance directors, front line managers, etc.) is just as important to the day-to-day success of a compliance program.
Now let’s be clear, I am in no way diminishing the importance of tone at the top. Consistent buy-in from executive management and the board of directors is exceptionally important to a compliance program and you should never stop encouraging active participation from the top. But as they say, putting all your eggs in one basket is just asking for trouble. That’s why it’s important for CCOs, compliance directors and managers to simultaneously encourage the appropriate tone from the top while they actively work to set the right tone from the middle.
While there may be some board members reading this blog (thanks!), our average audience is chief compliance officers, directors and managers — the people who eat, sleep and breath compliance. And while you can report on the importance of compliance, explain how proper compliance can save your company millions and boost its reputation, and encourage an active voice that preaches an organization-wide commitment to compliance, there is very little you can do to actually make those at the top become dedicated compliance fanatics.
If you’re unlucky enough to have a board that doesn’t yet recognize the importance of compliance and tone at the top, it’s especially important that you stress tone at the middle. You shouldn’t let a potentially disengaged board unduly effect the rest of program. Do what you can to continuously communicate about compliance and engage mid-level and regional managers to help you. Building a strong commitment to compliance at the base level of your company (amongst the employees who are in the trenches and face compliance risks everyday) can go a long way to preventing incidents of noncompliance, regardless of tone at the top.
Besides, messages (both stated out loud or quietly implied) often have more impact on your average employee when they come from director supervisors rather than company-wide missives.
- 48% of middle managers report that they’re only “somewhat active” in ensuring that daily decisions and behavior are in line with company values
- 31% report that ethics and compliance aren’t considered during their performance reviews
These numbers are significant because while there may be appropriate buy-in at the top, the message of compliance clearly isn’t trickling down the business ladder in a meaningful way (which ultimately results in a less successful compliance program).
This can have a bigger impact than you may realize. At the end of the day, your average employee largely lives within the bubble of their department or location and may not be very plugged into corporate messaging. This can result in the tone at the top being simply an abstract message from on high with little true meaning or value. From Corporate Counsel:
“According to Marsha Ershaghi Hames, practice leader of education solutions at LRN, companies would be smart to consider that influence from the top is important, but it’s not everything. ‘The research shows that the most influential role in an organization for an employee would be their direct supervisor,’ she said. After all, while it’s unlikely the average employee is having frequent conversations with the CEO, it’s pretty certain that they are interacting with the managers who supervise them on a daily basis.”
Your average employee isn’t interacting with the executive board. It’s their direct manager, their manager’s manger, the HR department and maybe the compliance team that the employee deals with on a regular basis. These are the people setting the employee’s goals, the ones an employee is most likely to go to to report an issue or suspected noncompliance and, at the end of the day, the one that might fire the employee. This holds especially true at large enterprises, where the E-staff might be thousands of miles away while a manager is just down the hall. If your managers don’t have the right mind-set with it comes to compliance they could easily push employees into unethical practices for the sake of hitting goals or deadlines.
This is why tone at the middle is so critical, whether your board is amazingly dedicated to compliance or a little bit lacking that that department. Companies aren’t dictatorships — employees are getting messages from many managers and peers. That message needs to be consistent and strong throughout (not just at the top).
With that in mind, I move that we expand the concept of tone at the top to just “tone.” The business directors at the very top of an organization need to be dedicated to compliance because they do set the tone for the entire company. But unless that tone is reiterated and strengthened at every level, compliance programs still won’t be successful. A board of directors being committed to ethical and compliant behavior will help the company as a whole make ethical strategic decisions. But it’s the middle managers committed to compliance who are going to influence ethical decisions on the daily basis and support a company-wide tone and dedication to compliance.