All Posts in Business Ethics

|In: Business Ethics|Last Updated:

I fell in love with a client’s CEO a couple of weeks ago.

Platonically, that is. He’s an immensely successful entrepreneur, and we were discussing the value of his instincts for the business. “I don’t believe in instinct,” he told me. “I believe in evidence.”

Which brings up the recurring subject of Sarbanes-Oxley, why so many implementations spiral into out-of-control fiascoes, and what you can do to avoid that fate if you’re on the hot seat for bringing your company into SOX compliance.

At the KJR Conference last March, Jeff Sakamoto, then-CFO of Cyanotech Corporation, and Danielle Stariha, Director of Internal Audit for Gander Mountain Company shared their thoughts on the subject. Since they both managed to bring their companies into compliance on time and within budget, their thinking was well worth hearing.

I’m not going to try to summarize everything they said. They provided too much valuable content to easily summarize in a column or two, and much of what they had to say is similar to what’s been published elsewhere on the subject. Here are a few points you might not have encountered before, that will help you through your own efforts to become and stay SOX compliant:

  • It’s basically a good idea — having clean books and effective controls. What SOX requires of publicly held companies are practices they should already have in place. If you start your SOX program with that philosophy you’ll make much more progress much more smoothly than if you start with the attitude that it’s something you’re doing for the Feds.
  • It isn’t a good implementation of a good idea. Regrettably, like so many good ideas voted into place by our elected representatives, the good ideas were turned into a furball of documentation requirements. With SOX, if it isn’t documented it isn’t happening. Live with it.
  • It’s a project. Scratch that — it’s a program, which is to say it has multiple threads of effort (initiatives) each of which consists of multiple projects, each of which must be managed well, just like any other project. It’s banal, it’s obvious, it isn’t worth saying … except that it must be, because one reason many SOX efforts go bad is a failure of basic project management.
  • Master the subject. Your audit partner or some other SOX consulting experts will do a lot of the heavy lifting for you. That makes it an outsource, and like any other outsource, if you don’t know what’s going on you deserve whatever happens next. Another name for Sarbanes-Oxley is the Full Employment for Auditors Act. That doesn’t mean you have to be the one providing them with full employment.
  • Your CEO’s attitude tells the story. If your CEO is like our client, preferring evidence to instinct, you have a chance. The starting point for SOX compliance is a CEO who uses the accounting system as a tool to help understand What’s Really Going On Out There.

We have Sarbanes-Oxley because too many CEOs consider their company’s shares of stock to be a product, and their financial reports to be a marketing tool for that product. Marketing is about persuasion — about spotlighting the most favorable facts, de-emphasizing the least favorable facts, and describing those that are open to interpretation from their most favorable angle.

The other reason for Sarbanes-Oxley is that many CEOs make it known throughout the enterprise that Bad News Isn’t Welcome Here. Never mind shareholders and the Wall Street Analysts shareholders listen to. Their desire to hear what they want to hear instead of what they need to hear is overpowering. They trust their gut, believe in their instincts, and if the facts say otherwise then you’d better adjust the facts to match their reality.

The question is what to do if you work for a CEO like that (and here I’m going beyond what Jeff and Danielle presented: Neither described their CEOs this way).

Being responsible for SOX compliance doesn’t empower you to fire the CEO, much as you might want to. Your choices … your choices if you want to be effective, at least … are limited to one: persuasion.

Start with the first tool of the effective persuader — empathy. Say, “I don’t like it either, but we have to do it the SOX way whether we like it or not, and SOX doesn’t have a lot of wiggle room. We might as well be as efficient about it as we can.” And if you don’t feel any empathy, that’s okay — you don’t have to.

Pretend.

Comments

|In: Business Ethics|Last Updated:

Is the controversy over the supposed “War Against Christmas” relevant to working IT managers? Absolutely.

One reason, discussed in last week’s column, is direct. The December holidays are a focal point for the difficult challenge managers face whenever the religious or cultural differences of a diverse workforce collide in the workplace … which is, and must be, a social environment as well as a place work gets done.

Here’s another reason for you to pay attention. Step outside your personal opinion regarding the issue’s validity. Instead, consider politics as a sport and the effectiveness of the War Against Christmas as a tactic. You’ll find strong similarities to a stratagem popular in office politics — making people angry so they’ll make decisions without thinking.

To be an effective executive you have to be an effective politician. The word has taken on ugly overtones, deserved by some politicians but not all of them. The word itself, though, is (or at least should be) neutral. The perfect politician is someone who can maneuver — manipulate isn’t too strong a word — people with competing interests into following a common direction without ever being manipulated by other politicians.

The first part — manipulating people — isn’t very hard.

Politicians manipulate people by engaging their emotions. The extent to which they succeed is the extent people stop thinking analytically, because when people stop thinking analytically they’ll accept any proposition they want to be true. The more powerful the emotion the more likely their acceptance.

And you’re in the middle. Think of the situation as a large, multi-player chess game. Everyone is both a piece on the board and one of the players. You’re a player when you persuade someone else to move from one square to another. You’re a player when you decide which square you should move to. But if someone manipulates you into making a move that isn’t in your best interest, you’re just another piece on the board.

The most powerful emotion politicians have at their disposal is probably anger, and just about everyone is susceptible. The only challenge is finding each person’s hot button. This is easier in office politics than national politics because in national politics the propagandists have to engage in mass marketing — a hit-or-miss affair. In office politics the politicians understand each of their targets personally.

Here’s how it plays out. You’re the CIO and budget season has rolled around again. You’ve prepared a rational budget: Start with last year’s spending, add budget for new programs, the maintenance increment for newly delivered software and inflation; subtract for programs scheduled to complete, maintenance on software scheduled for decommissioning, and your continuous improvement target.

A corporate politician — one of your peers, who wants more budget but has no logical argument to give in its favor — chooses a hot-button topic for the CEO, CFO or both, and maybe for some of your other peers in the company too:

  • It’s all technology for technology’s sake,
  • IT projects always cost too much and take too long.
  • We keep spending and have nothing tangible to show for it.
  • Gartner says PCs cost $13,000 each per year and isn’t that awful.
  • Paul Strassmann says there’s no correlation between IT spending and business benefit anyway.

The politician knows who is susceptible and doesn’t try to push a button that isn’t there among any of the others. All it takes is three or four executives grumbling about IT and how its budget always seems to be increasing. You’ll find yourself on the defensive, where it won’t matter how good your math is.

The defense against this kind of backstabbing is preventive: Strong relationships among the company’s executives. People are most vulnerable to those they trust, ideas they’re already predisposed to agree with, and, when it comes to anger, targets they don’t know or already don’t like.

You aren’t immune either. The same politician, or a different one, will try to make you angry too, only at different targets — probably the “bureaucrats in Human Resources” and the “bean counters in Accounting.” If you know and trust the politician, and don’t know or already don’t like Human Resources and Accounting, you’re as vulnerable to this manipulation as anyone else.

So remind yourself constantly: If (1) someone you know and like (2) says something that fits your biases that (3) starts to make you angry at (4) somebody you already don’t like, turn on your adrenal-gland suppressor.

You’re being played.

Comments