“Device giants shed integrity agreements” read the 9/27/2014 StarTribune business section headline.
As explained in the article, an integrity agreement is a signed commitment that a corporation will, while the agreement is in force, obey the law.
Temptation is, for us Sarcastics Anonymous members, so, so hard to avoid. After all, we natural persons have to obey the law even when we haven’t signed an integrity agreement.
But it turns out that while integrity agreements really are evidence corporations aren’t people, too, this isn’t why. U.S. government agencies make use of integrity agreements, not to give corporations an obligation to obey the law, but in recognition that just because its CEO and board of directors want a large corporation to do something, that doesn’t mean it will.
Integrity agreements specify that signing corporations will implement organizational structures and processes designed to ensure they do obey the law — a compliance officer and committee; written standards and policies; a comprehensive employee training program and so on.
They’re recognition that corporations are different from us “natural persons” in a deep and fundamental way. Our brains don’t need committees or organ training programs to get our bodies to do what they’re supposed to do.
A few billion years of evolution have resulted in systems that let the brain control things because for us natural persons our tissues and organs all share a common set of interests. More or less.
Anyway, unlike us the “organs” and “tissues” that make up a business … its departments and employees and please don’t push the metaphor! … have very different versions of what self-interest means. Reducing the gap is one of the most important responsibilities business leaders have, and reducing the extent to which employees and departments act on the gap that remains is one of the most difficult.
What’s the solution? Processes and organizational structures, according to the federal agencies that require integrity agreements. Were we to be unkind we might call it bureaucracy, or perhaps the Compliance Police.
Not that we should sneer. In the turn-executive-intent-into-organizational-action game, business pundits and consultants of all stripes tend to converge on these answers, usually adding metrics as a critical element.
And all of these, with the possible exception of metrics, are important. They just aren’t the lead story. But first, a few words about the futility of metrics, in the form of a question: How exactly might a corporation measure its current level of law-breaking?
Not the number of lawsuits, indictments or prosecutions. These measure the number of times the company got caught, and even there the metric will lag the infractions by years.
Internal Audit? It has its hands full looking for accounting irregularities.
We’re talking about something that’s difficult and expensive — choosing a random sample of decisions and actions in all parts and at all levels of the company and digging into them to see which ones fail to adhere to the letter and spirit of all relevant laws and regulations.
Good luck with that.
Which gets us to the lead story: Culture change. It’s the lead story for most business changes — your takeaway from this tale of superficial absurdity.
Culture change is usually relegated to business change management — a follow-on complement to business process change whose role is reducing resistance to the desired change, whatever it is.
Business leaders need to change their thinking on this (me too). Culture is “how we do things around here.” According to ethnoscience it’s “the learned behavior people exhibit in response to their environment,” as my anthropologically-educated business partner explained it to me.
It’s a set of unwritten, socially enforced rules that determine how executives, managers and employees make decisions and act on them. It’s the lead story for most change, or should be.
Some companies rely on controls. But controls mean the answer is always no until you can persuade the controls committee (the word is “governance”) to change the answer to yes.
Controls are why corporations are slower than entrepreneurships. They’re why “I’d rather ask for forgiveness than for permission.”
In a very real sense, controls exist to prevent the corporate culture from taking charge of things.
How sad is that?
But what’s the alternative? In the case of obeying the law, it’s to bake compliance into the corporate culture. This make compliance the lines painted on the pavement and not the guardrails at its margins.
Which do you prefer to rely on to keep your car on the road?
*corporations aren’t people*
Not the first time you have slipped this in.
Problem with liberal thinking are the inherent contradictions, e.g. ‘corporate greed’ (Wot’s that??? They ain’t even human…)
Have you ever read the phrase “corporate greed” in KJR? It’s only appeared once, when I said, in a column about outsourcing:
Myth #1: Outsourcing is a manifestation of corporate greed. Corporations, of course, feel no emotions – they’re organizations, not people. Corporations try to maximize profits, execute strategy and tactics to succeed in the marketplace, and increase shareholder value. Good management requires obtaining the optimal balance between quality and price in the acquisition of all goods and services. That includes decisions about whether to have employees or contractors provide various corporate functions.
The notion that corporations are just like people only bigger is flawed thinking, as was pointed out in this space long before the Citizens United decision.
“choosing a random sample of decisions and actions in all parts and at all levels of the company and digging into them to see which ones fail to adhere to the letter and spirit of all relevant laws and regulations.”
This sounds a lot like the standard activities of an ISO 9000 assessor.
To change a culture, my experience is that it is a two-step process of a two management changes. First a management is brought in to replacing people who do not have the right culture. If you leave people where they were, why expect something different. After the bad apples are removed, another management team is brought in to nurture the new desired culture. After all, you need to change first brought in management to keep all the people from losing their jobs and put on a face that the company is going in the right direction.
Is “obeying the law” merely governmental reporting requirements, or does it refer to the commission of a felony? One is serious, the other not so much.
My understanding is that these are mostly in response to civil actions, but quite serious ones.
“This make compliance the lines painted on the pavement and not the guardrails at its margins.
Which do you prefer to rely on to keep your car on the road?”
Well, we use both, don’t we? And they work, the majority of the time. We use the lines nearly all the time, and the guard rails at particularly tricky or dangerous places. Sounds like a good metaphor – mostly you want culture of integrity and law-abiding; and then in places where there is strong temptation or especially difficult challenges to navigate you put in controls. Is that what you are getting at in this column?
Right on the money.
For the first time in quite a while, you column didn’t quite deliver on the promise of its title. I was REALLY ready to find out, in a one page article, how to get an organization to do what I wanted it to do.
Maybe it’s like that old Monty Python sketch, “How to Do It,” when explaining how to play the flute.
“Well you blow in one end and move your fingers up and down the outside.”
Perhaps my expectations were a little unrealistic. 😉
Thanks for the always interesting and insightful articles!
Sorry I disappointed you. In my defense, whole books have failed to deliver on this promise!