Compliance and human resources have always had a love-hate relationship. Now some companies are finding that getting them aligned can yield large benefits for both functions and improve the organizational culture.
That's no easy task, however. At many companies, gaps in communication and collaboration between compliance and human resources continue to persist. “In general, there isn't a consistent, strong link between the functions,” says Alex Weisgerber, a senior consultant with global professional services firm Towers Watson. “The two groups simply haven't found many opportunities to collaborate in supporting organizational performance.”
Shanti Atkins, president and chief strategy officer for ethics and compliance advisory firm NAVEX Global, has observed similar trends. HR is responsible for implementing compliance-related processes—training and investigations, for example—but doesn't always have a seat at the table to inform how to roll out those processes, Atkins says.
Without communication and collaboration between compliance and HR, the company lacks a unified view of several processes that are important to building a strong, ethical culture. “That can lead to duplication of efforts, which wastes resources,” says Andrea Falcione, senior vice president of client services and chief ethics officer at SAI Global.
Companies that do tend to have strong cross-functional working relationships are those where both compliance and HR equally have a seat at the table, Falcione says. “An organization where you don't have silos and have people working together to solve problems is generally a healthier organization than the opposite.”
So how, then, can compliance and HR foster a better relationship?
The first challenge to overcome is the “deeply held stereotypes that legal, compliance, and HR typically have of each other,” says Atkins. “It's important to talk about those if we are to get past them.”
The perception that the HR function is not a strategic player in the company—that its central function is to manage paperwork, schedule training sessions, and mediate mundane spats such as who hogs the best space in the parking lot—is far from reality, says Atkins.
Getting employees to function as a coherent, engaged unit has to do with people, not policies—and people issues are exactly where HR excels, or course. HR has its finger on the pulse of employee culture, Atkins says, because it is the primary channel employees use to complain when there is a problem—and those problems are usually a warning sign of wider compliance-related issues.
“In general, there isn't a consistent, strong link between the functions. The two groups simply haven't found many opportunities to collaborate in supporting organizational performance.”
“Research shows that people issues are among the most significant risk factors organizations face,” says Weisgerber. “They are also among the least well managed under current enterprise risk management practices.”
Following the completion of an enterprise-wide risk assessment, it's important to involve HR early on in the process of developing a plan to mitigate risks, and to specify what role HR will play in that process, advises Atkins. “It's a very simple point, but one that is missed over and over again,” she says.
“Boards are increasingly asking their executive teams to identify and address major people risks,” says Weisgerber. “The HR-compliance partnership can help anticipate this request and set the organization's human capital risk management agenda proactively.”
HR isn't the only department saddled with misperceptions of its goals. The idea that the compliance and legal departments care only about “checking the box,” says Atkins, ensuring the company remains in compliance with laws and regulations, and don't care about people issues is also unfair. These labels are “exacerbated by a lack of cross-departmental communication,” she says.
Both compliance and HR would go a long way to engage in routine, formal dialogue about their respective roles. “They should start by looking at processes where their efforts overlap and think about opportunities to partner, rather than work in parallel,” says Weisgerber.
Even though compliance and HR are better off when they work well together, “there is—and should be—a clear separation of duties and objectives between the two functions,” says Falcione. “Collaborate, but separate.”
“Both HR and compliance should evaluate governance practices for the programs they manage and understand where and how much the other could be involved,” says Weisgerber. For example, he says, “be very transparent about process and decision rights, so that there are fewer missed opportunities to collaborate.”
Molding Corporate Culture
When compliance and HR align, they can better assess the company culture and fine tune how compliance and HR practices can evolve that culture in a positive direction. “These functions should engage in conversation about how employees, and the actions they take, can create risk and opportunity for the organization,” says Weisgerber.
A survey of employees, for example, can reveal ethical concerns and also measure engagement, providing an opportunity for compliance and HR to collaborate. “More of our clients are recognizing the value of doing surveys to help mold corporate culture, and to help figure out where there may be problems within the organizations from a cultural or compliance perspective,” says Falcione.
ALIGNING HR, ETHICS, AND COMPLIANCE
Below is an excerpt from NAVEX Global's “Five Key Steps to Aligning HR, Ethics, and Compliance.”
In too many organizations there continues to be a lack of effective alignment between human resources and the ethics and compliance function. There are many reasons for this, but the fact remains that until the problems are fixed, gaps and inefficiencies will continue and companies will be more at risk than they need to be.
Carrie Penman, president of the ethical leadership group of NAVEX Global offers these concepts on how human resources professionals help break down internal silos and work toward better cooperation with ethics and compliance.
Recognize the stakes: There's no better way to get everyone on the same page than to have a frank discussion of the consequences of failure. Assess your current status. Identify the risks—legal, ethical, and reputational—that are increased by a continued lack of efficient cooperation. Also, understand that your board and government regulators will have little sympathy if your turf battles result in a compliance failure.
Assess the current structure: Best practice ethics and compliance programs have always relied on strong working relationships not only with HR, but also with legal, audit, security, and others. Identify and map all the various parties in your company that have assigned ethics and compliance responsibilities—it's probably more than you think. You can't improve the status quo until you know who the players are. Once you're done, ensure the structure promotes the ability to work in an integrated and coordinated fashion.
Learn the lingo: Every specialty has its own lingo and HR, ethics, and compliance are no different. Often times when it seems we are “talking apples and oranges” it turns out we both have the same fruit in mind. It's essential that all parties have a working knowledge of the key laws, requirements, and acronyms commonly used by each function. Start by creating a glossary. It's an easy way to avoid misunderstandings later and helps to ensure consistency across all related policy documents.
Leverage your communications and training expertise: In most organizations, there are a number of risk-based communications and training efforts that straddle HR, ethics and compliance. These include: harassment, discrimination, privacy, and recordkeeping. Consider developing a “curriculum map” for these key training areas. That is, a comprehensive training plan that defines appropriate target training groups, sequences the training to cover necessary topics, and ensures adequate refresher courses, while at the same time not overwhelming the learners or your resources.
Ensure there are multiple avenues for employees to raise concerns internally:The organization most likely has several avenues already in place for employees to formally raise concerns including the separate options of the hotline and human resources. Don't fall into the turf battle trap on “whose issue” it is. Instead, appreciate that the employee raised it internally and not to a regulator. What is most important is having a combined case management system that provides leadership visibility of cases from all of the available reporting avenues.
Penman believes HR Leaders who follow these five steps can be more effective and build partnerships between HR, ethics, and compliance.
Source: NAVEX Global.
At companies where HR owns the survey process, compliance can play a role by ensuring that the survey includes questions about corporate culture, about how compliance concerns are raised and addressed, and about the tone of management communications. Similarly, HR and compliance can work together to come up with key performance indicators. “Compliance should collaborate with HR to add compliance- and ethics-related performance metrics into the performance appraisal process,” says Falcione.
Employee training provides another area opportunity for collaboration between compliance and HR. This means not just training employees, but also middle managers to make sure that an organization is fostering an open-door environment so that middle managers know what to do if an employee brings them a report of a problem or concern. “HR can be really invaluable in terms of spreading that message and helping to educate management on what an open-door policy really means,” she says.
“It's important to create a speak-up culture,” says Atkins. Encourage employees to make complaints early, and give them multiple avenues to make complaints. It's also important to ensure that disciplinary measures are handled appropriately and consistently, she says.
Having a centralized incident management system is an essential part of this process, Atkins says. Without a centralized incident management system, employee matters are often tagged as either compliance related or HR related, depriving the company of getting a holistic view of its overall risks.
Compliance and HR should also have equal oversight of the company's whistleblower hotline. At SAI Global, for example, Falcione co-owns the hotline with HR, “so whenever something comes into the hotline, we both get visibility,” she says. By sharing the whistleblower hotline, Falcione adds, both departments also have a “sounding board for asking questions: ‘Here is how I would handle this. What do you think?'”
A chief compliance officer of a global energy holding company who preferred to remain anonymous, says the company's compliance function engages HR when investigating allegations obtained through the whistleblower hotline. In addition, weekly meetings are held between compliance and the head of HR on assigning tasks in connection with the investigations, he says.
In any company, effective inter-departmental collaboration “starts at the top,” says Falcione. If you have senior leaders that foster the importance of collaboration and are working together, the more likely you are as a company to break down barriers.