Compliance and human resources have been battling the same turf war for years, tussling over which function owns company culture. The truth is that they both have a crucial role to play.
At many companies, however, gaps in communication and collaboration between compliance and HR persist. “If HR and compliance could come together and realize and accept that they’re on the same team, and that each is really critical to identifying and managing, investigating, and responding to employees’ concerns, it could be a really powerful alliance,” says Carrie Penman, chief compliance officer and senior vice president of advisory services for NAVEX Global.
New research conducted by LRN finds a strong correlation between companies with highly effective compliance programs and the degree to which compliance officers in those companies use HR data to further their ethics and compliance goals. “There is a significant difference between less effective programs that don’t use that data nearly as much,” says Wayne Brody, senior knowledge leader for LRN.
Brody adds that companies with highly effective ethics and compliance programs are more than twice as likely than companies with less effective programs to use HR data when conducting an enterprise-wide risk assessment, or when assessing the efficacy of the program.
One example is employee turnover data, which can often be a powerful clue for compliance officers. “The places where you have very high turnover often suggests that there is a management issue that has to be dealt with,” Brody says. In that particular business unit, employees may not be speaking up, which may be contrary to the goal of the compliance function, he says.
“If HR and compliance could come together and realize and accept that they’re on the same team … it could be a really powerful alliance.”
Carrie Penman, Chief Compliance Officer, NAVEX Global
Without communication and collaboration among all departments (not just compliance and HR) the company lacks a unified view of several processes important to building a strong, ethical culture. As a former compliance officer, Penman says, “I used to meet every two weeks with audit, security, legal, and HR, and we used to review every case that came to us at the corporate level.”
By looking at issues together, Penman says, “we started to pick up patterns and trends a whole lot quicker that would help us identify if we have a location or business operation that might have had a management issue, a leadership challenge, some brewing problem, or hot spot that we needed to focus more corporate attention on.”
“Particularly in settings where you have less effective compliance programs, those functional silos create obstacles toward building an ethical culture,” Brody says. “Where you don’t have those obstacles, you see all kinds of meaningful results.”
The results of exit interviews also can provide a wealth of information for compliance officers, and even more so when compliance can participate in the design of the exit interview questionnaire, Penman says. Some questions to consider, for example: Did you observe any misconduct? Did you raise an issue without fear of retaliation?
Compliance and HR also have an opportunity to compare side-by-side their overall objectives and think about where they can cooperate rather than work in parallel. “Are they going after the same objective, but with a separate policy?” says Mike DiClaudio, director at Towers Watson. The opportunity is there, he says, to put both groups in the same room to understand what they’re trying to solve, what legislation and corporate policies they’re trying to comply with, “and come up with a shared view on how they’re actually going to achieve that,” he says.
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.
Both functions can take the same approach when it comes to their respective reporting requirements by understanding where overlaps might exist in that area as well, and finding ways to share data. “It helps illuminate the governance between these two functions,” DiClaudio adds. “It’ll give you a pretty good line of sight into where some opportunities might be to streamline that relationship and really define boundaries a little bit more closely.”
Training and development is another area where both functions share common goals. This means training not just employees, but also middle managers to ensure they know what to do when an employee reports a problem or concern. Furthermore, “a Code of Conduct course may have HR elements that would supplement some of the other HR-related training,” Penman says, so sharing feedback about employee training is helpful, she says.
Compliance and HR should also have equal oversight of the company’s whistleblower hotline, which often can be a point of contention. “HR is sometimes reluctant to share outcomes of cases, even cases that come directly from the hotline,” Penman says. That can put compliance in a bad spot, because employees are going to hold compliance accountable for resolving any issues that come into the hotline, “so they have to stay involved in the outcome,” she says.
Gaps in communication can also arise when employees approach HR with a report about retaliation. “That might not necessarily transfer over to the ethics and compliance team,” Penman says.
Compliance can be equally reluctant to share data of its own, such as in the case of internal investigations. As Debra Torres, chief ethics and compliance officer for PepsiCo, said during a panel discussion at the Compliance Week 2015 conference, “HR has wanted to get access to our system, but we’ve been somewhat resistant to that.”
The hesitation, she explained, is that “the majority of allegations are not substantiated. To protect the confidentiality of people who ultimately aren’t found to have done anything wrong, we don’t want people outside compliance to have access to that material.”
Monitoring for issues like retaliation, however, is one important objective that can be achieved if compliance and HR can learn to collaborate with one another, “because there’s an opportunity to get a much more holistic view of what’s happening in the organization,” Penman says. For example, what are the types of issues compliance and HR continue to see? Where are those issues arising? Do those issues collectively signal a leadership issue?
“It’s just going to take some hard work on building a relationship and understanding that there’s an organizational need for these two groups to get along,” Penman says. “We have to get over the turf battles and recognize that we’re working for an organization where we’re accountable for dealing with employee concerns and responding to them and investigating them—and we can do it together.”
“We can’t assume HR understands compliance, and compliance understands HR,” DiClaudio says. “The opportunity is there to put both these groups in the same room to understand what they’re trying to solve and come up with a shared view on how they actually do that.”