FCPA Compliance and Ethics Blog

January 27, 2012

Why How We Do Anything Means Everything

Filed under: compliance programs,Doug Cornelius,Ethics — tfoxlaw @ 1:04 am
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Doug CorneliusEd. Note-I read the following post in the January 24 edition of Doug Cornelius’ Compliance Building. I was so impressed with the article that asked Doug if I could repost it in its entirety, which he graciously allowed me to do. 

An acquaintance in the compliance field sent me a copy of Dov Seidman’s How and I let it sit around  for months. (My “To Read” stack has grown very tall.)  I assumed How was vanity book and would rattle on and on about Seidman’s company: LRN. I recently moved and my “To Read” stack was tumbled around in a plain cardboard box.  How resurfaced in the stack and I noticed the forward was by President Bill Clinton. That was enough to catch my eye.

Seidman spends the first half of the book talking about transparency, trust, reputation, and the new inter-connected world. He does a fine job with these topics, but I’ve seen them handled better elsewhere. The second half of the book, which focuses more on Seidman’s philosophy of business, is when the book becomes more valuable.

Seidman highlights an empirical study about reputation using eBay’s seller reputation information. Chrysanthos Dellarocas used eBay as an experiment. In a study selling the same product, in the same way, through eBay sellers with different levels in the site’s reputation scores, the researchers found a measurable difference in price. A seller with a high reputation on average would get a measurable price premium over a seller who did not.

As you might expect, the book is full of stories as examples. One that really caught my eye was the description of four factories as examples of four types of corporate culture. The factories are to be toured and the measuring stick is the use of hard hats. At the first factory, one of lawlessness and anarchy, the factory tour guide does not offer hard hats to the visitors and many workers are seen without hard hats. At the second factory, an example of blind obedience, all workers wear hard hats and the tour guide says everyone has to wear one or they get fired. The tour guide admits that he doesn’t know why he needs to wear it or why the boss also makes him wear blue pants.

The third factory is the next step up the corporate culture ladder as an example of informed acquiescence. Hard hats are there for everyone with big signs saying everyone must wear one. But when one member of the tour group asks to be excused from wearing one, the tour guide scampers off trying to find a higher-up to approve the lack of a hard hat.

At the top of the corporate culture is the fourth factory, an example of Seidman’s self-governance. The tour guide insists that everyone wears a hard hat and when that same member of the tour group asks to be excused the tour guide says no. “I take personal responsibility for what happens to you. I don’t want to offend you, and you can call my boss or the owner if you like, but I believe your safety and the safety of everyone are paramount. “

The how of culture is broken into five parts: how we know, how we behave, how we relate, how we recognize, and how we pursue.

One common theme in the book is an indictment of a rules-based culture. Rules-makers “chase human ingenuity, which races along generally complying with the rules while blithely creating new behaviors that exist outside of them.” The example that caught my eye was the clerk who insisted on wearing ties with cartoon characters. His bosses fought him and finally insisted that he obey the rules on permissible neckwear. The clerk acquiesced and showed up the next day with Tasmanian Devil suspenders.

Ultimately, a rules-based governance focuses on the things you can’t do, while a values-based governance focuses on what is desirable.

This ends up with Seidman’s Leadership Framework. I think that is better left for more to readers of the book.

If this sounds interesting to you, I ended up with a second copy of How. Rahter than have it sitting on my bookshelf, I want to share it with one of my readers. If you are interested, leave a comment on this blog post or send an email to compliancebuilding@gmail.com. I’ll pick a winner on February 1.

============================================================================================Episode 28 of This Week in FCPA is out. Howard and I continue our 2012 discussions of all things FCPA and compliance including the SFO remedy in the Mabey and Johnson enforcement action and the O’Shea acquittal.


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