A comment on Adam Balfour’s bright new book “Ethics and Compliance for Humans.”

Joe Murphy

By Joe Murphy, CCEP

I have had the opportunity to read through Adam’s forthcoming book, and it is a valuable source for practical ideas.  I was especially struck by his coverage of incentives, which I’ll discuss here as an example of the approach of this book.  When it comes to using incentives in compliance programs, too many people in our field are still lagging behind.  To them it seems as if dealing with incentives is some exotic step, best left to last after everything else is done.  There sometimes seems to be an astonishing ability to ignore the reality that addressing incentives is not just a nice little extra but is in fact an essential element of an effective and credible compliance program.   But as Adam makes clear, there is no reason for this hesitancy. Incentives can be addressed quickly and easily, using the practical approaches he suggests. 

He provides assistance on the interesting issue of setting compliance objectives for managers, which then enables those managers to be evaluated on the subject of compliance and ethics.  In Chapter 9, “What’s in it for Me?  The Role of Recognition and Incentives,” he sets out some sample goals for managers.  Like other ideas he provides, these are suggestions to stimulate further thinking.  A company could pack all of them up and use them, or simply be inspired to come up with similar points applicable to that company. 

For example, managers could have an objective to ask one direct report each week if the person has any concerns or is aware of any wrongdoing. This follows the view that employees typically know more about what is happening than we realize, but may only tell us if directly asked.  Of course, executives could harangue or beg lower-level managers to seek out such input from subordinates, but how much more effective could it be if it were part of the manager’s personal objectives?  As this example shows, the incentive system can be a powerful tool for actually implementing policies throughout the company.

He also suggests having a reward-points program, where employees could earn points redeemable for merchandise.  One particularly intriguing concept, tied to the importance of peer pressure, is to give the employees points whenever their direct boss or another leader discusses the compliance tip of the month.  I could just picture the subordinates heartily thanking their boss for discussing a compliance issue. 

One general caution I would add about all incentive systems: over time people may learn how to game any system.  So incentive systems, like other management systems, need to be monitored and measured.  A system that initially works well may fade as the novelty wears off.  This is another advantage of a resource like this book, since you can work with an idea for awhile, and then shift to another idea that could help keep the momentum. 

With incentives, though, the first essential step is to make this area part of your ongoing focus and treat it as a core element.  Using incentives is key to being sure your program actually works in molding the culture, and also ensuring that your program is credible in case you ever need to explain it to a regulator or enforcer.  Thank you, Adam, for giving us some practical tools for making incentives part of our compliance programs, and for a manual of ideas for keeping humans at the center of the compliance and ethics program.

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