Barbara Tuchman and Compliance Programs

One of my favorite historians is Barbara Tuchman. One of the first large volumes of history I read growing up was “The Guns of August”, her Pulitzer Prize-winning book about the outbreak of World War I. The Library of America has recently released two of Tuchman’s works, the aforementioned “The Guns of August” and “The Proud Tower” which details the pre-World War I era, together with the personalities and events which led to the ‘war to end all wars.”

This love of history coupled with my interest in ethics and compliance was piqued by an article in the Saturday edition of the Wall Street Journal (WSJ), entitled “A Heroine of Popular History”, by Bruce Cole. The article discussed the work of Tuchman as a popular historian and contrasted the books she wrote with those written by historians with a more academic focus. He quoted the historian Catherine Drinker Bowen, who had the following quotation over her desk “Will the reader turn the page?” I thought this question had particular relevance in the arena of compliance programs; as compliance professionals continually try to get the message of compliance throughout a corporation. So here is some of the wisdom of writing history that Tuchman advocated and how it might help the compliance professional convey the essence of doing business in compliance across a corporation.

Get out in the Field

Tuchman stressed the importance of using primary sources and visiting the sites where ‘history was made”. She said that it was necessary to keep a historian from “soaring off the ground”. From this advice, I believe that the compliance professional needs to get out of the home office, wherever that is, and visit international locations. This is the best way to find out what is going on in the field. This ties to the second point of using primary sources. In the compliance arena, your primary sources are the employees in your own organization. Cole quoted Tuchman that you “arrive at a theory by way of the evidence, not the other way around”. This advice sounds like the guidance from the Department of Justice (DOJ) that your risk assessment should inform your compliance program, not the reverse.

Study Your Company Culture

In the field of history, Tuchman did not view nations or individuals as “helplessly swept along by forces of history beyond their control.” She viewed history as driven by human “foibles, flaws and occasional heroism, rather than by abstract systems.” This means that a compliance professional needs to understand how the cultures in your organization work and then create a compliance program to fit those needs. It does not mean a company can continue to do business with corrupt intent but if there is a culture of gift giving in a geographic area, you should determine a way to continue such courtesies, within the context of your overall compliance regime.

Write Your Policies for Everyone

This is probably Tuchman’s greatest lesson, for both the historian and for the compliance practitioner. Tuchman never received a post-graduate degree in history so she never learned to write like a professional historian, beginning with a “footnote-laden dissertation-written strictly to be read by other scholars.” Tuchman wrote for a wider reading popular audience. The same can be said for written compliance policies. In academia, a Professor’s progress is measured by the judgment of his or her scholarship by peers. Unfortunately, those peers are steeped in the same academic training and therefore judge scholarship on the same criteria as that used to judge dissertations. Tuchman believed that by not pursuing a PhD in history, she was a better writer. She was quoted in the Cole article as having said, “It’s what saved me, I think. If I had taken a doctoral degree it would have stifled my writing capacity.”

Many times compliance policies are written by lawyers and can only be read and interpreted by other lawyers. It is really not our fault as we were all trained in law school to “think and write like a lawyer” but out there in the real world, such language does not always work for the intended audience. This point is even memorialized in the UK Ministry of Justice’s Six Principles for Adequate Procedures which reminds compliance practitioners that anti-bribery compliance policies should be written in “plain English.” While many lawyers, particularly outside counsel who have never practiced as in-house counsel, write like lawyers for other lawyers to read, such writing style does not work for most business people. Therefore in-house counsel should work with a business unit representative, or several, to make the language in written compliance programs accessible to people in the field who are trying to read and understand it.

Just as the Library of America celebrates Tuchman in its recent release of two her greatest works, we in the compliance field should celebrate her for the guidance that she provides in our discipline.

This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.

© Thomas R. Fox, 2012

 

Banning Beer in the Clubhouse? How to Sustain a Culture of Trust and Integrity

Continuing our sports theme this week, I was interested in my friend, Jay Rosen’s former hometown team, the Boston Red Sox move to ban alcohol from the clubhouse. I found fascinating the commentary on this move, which seemed to me to break down into two categories: (1) Pro-supporting new manager Bobby Valentine, it was a good move and needed to instill some much needed discipline in the clubhouse, which had been lost under prior manager Terry Francona; and (2) Anti-dumb and useless PR move-supporting the prior manager Terry Francona, who broke the Curse of the Bambino by leading Boston to its first two World Series wins in 86 years. We should note that Valentine did not ban Buffalo wings from the clubhouse, which were also listed as evidence by the Red Sox front office as lack of clubhouse discipline.

I thought about those questions in the context of a presentation made that the SCCE Utilities and Energy Conference here in Houston this week. In a presentation by Duane Woods, Senior Vice President of Waste Management, entitled “Sustaining a Culture of Trust and Integrity in Challenging Times”, he talked about the efforts of Waste Management to build and sustain a culture of trust and integrity throughout the organization.

Policies and Procedures

He began with Policies and Procedures, which he described as follows: Policies are used to set the rules of conduct and the desired behavior for employees; Procedures serve to provide a detailed set of uniform processes for employees to follow and they support compliance with the policies. He said that Waste Management tries to use these tools through four disciplines:

1. Regulatory – Those required by law, such as Sarbanes-Oxley;
2. Performance – The financial performance of the company;
3. Customer – They can provide guidance to the organization about customer relations particularly in the area of credit; and
4. Brand and Reputation – Letting employees know what the company brand stands for. Woods stated that this is usually set forth in a company’s Code of Conduct.

These are things that drive loyalty. Woods acknowledged that all companies make mistakes. However, his point was that the key was to rectify the error and then recover the relationship with the customer.

Metrics

Woods next turned to metrics as he believes that if you don’t measure it, you can’t manage it. Metrics are present to help measure and track the successful implementation of policies, procedures and performance. They can also be used to help govern and reward behavior and to help support a culture of compliance. Metrics are critical to defining required and desired behavior. However, even policies, procedures, systems and metrics will not sustain Compliance or Ethics if there is not the right culture of compliance within the organization. If metrics and incentives are poorly designed and implemented they will cause undesired behavior and help to make a confused culture. He also noted that even the “best compliance programs may not ensure right decisions in tough situations.” He emphasized the following points:

• Alignment – Metrics should align with Vital Business Functions and Values.
• Simplicity – Keep it simple. A common problem faced by managers is overloading of metrics.
• Good enough is perfect – Select metrics that are easy to track and easy to understand.
• Indicators – Use metrics as indicators. Key Performance Indicators (KPIs) are metrics. A KPI does not troubleshoot anything, but rather indicates something is amiss.
• Less is more – Use only a few good metrics as too many metrics, even if they are effective, can overwhelm a team.
• Metrics drive both good and bad behavior.  People do what you pay them to do, so choose carefully.

Character

Woods started off this section of his presentation by noting that Warren Buffett, when hiring people, looks for three things. “The first is personal integrity, the second is intelligence, and the third is a high energy level. But, if you don’t have the first, the other two will kill you.” Woods stated that he believes you should hire leaders with demonstrated character, who are capable of inspiring trust and confidence in others. It is more important that leaders be authentic, they must be sincere. Honesty and congruent behavior must be maintained in that you have consistent behavior. Of course respect for others and holding yourself accountable for your direct employees is paramount. Lastly, Woods noted that you should be constantly assessing character talent, are your employees living the values you want?

With these, Woods believes that you can build a culture of character in your organization and to do so starts with trust, which he believes comes from living the values and delivering the results. Trust works on several levels, these include: (1) Individual; (2) Relationship; (3) Market-customer base; (4) Community; and (5) Regulatory. With trust as the base, Woods next turned to building a culture of character within your organization. He emphasized these steps as:

• Set clear expectations.
• Train with focus on integrity, mission and values
• Coaching – The importance of role play circumstances for people.
• Mentor to reinforce behavior.
• Accountability for all employees.
• Engage your workforce – Survey to find out who the key influencers in the company are. Not necessarily the designated leaders.
• Communication – Here Woods emphasized that you should over communicate. The importance of using stories as teaching tools and lessons learned.

Woods concluded by listing the primary benefits that he sees from having the right culture at your company. They include that your organization will become more self-governing, with less need for management intervention in this area. There will be less employee misconduct and greater employee innovation. There will be not only be more customer loyalty but great employee satisfaction, and when a real crisis arises, the employee base should work together to resolve it.

So now on to question time: How about those Red Sox and their banning of beer in the clubhouse? Do you think that is evidence of a culture of compliance or should people, who are old enough to legally drink, be allowed to make that choice on their own? Does the move strengthen the Red Sox in any of their communities: themselves, their fans, the American League East Division or in the eyes of Major League Baseball? What about some of the benefits that Woods listed: will the Red Sox players be more productive or indeed even have greater employee satisfaction? Will the employees become more self-governing and impose discipline among themselves? What about those pesky Buffalo wings that were NOT banned; what role do they play in all of this? Alas, I do not have answers for the above, only questions, questions, and more questions…

This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.

© Thomas R. Fox, 2012