Mar 19, 2017

What Does the “Good News Cocoon” Mean to Business & Compliance?

Recently, I had the pleasure of engaging with compliance and business leaders in Europe and Asia. It’s an honor to be traveling again, and to hear about ethical and compliance challenges from those who work in the middle of risk, as well as from leaders who are tasked with supporting the commercial workforce in how they address issues of ethics, integrity and values.

Over a nice walk along the Neckar River (pictured) in Germany, I thought about the need for business leadership to take a more active role in what we think of as “ethics and compliance” issues. And that’s more than just intranet quotes and wall posters – what I am speaking of here is dialog, engagement and action. It’s about business leaders making sure that commercial teams understand the “definition of success,” which addresses not only compliance issues, but matters around commercial objectives, strategy and incentives.  Furthermore, when I reference “business leadership,” I mean executives with P & L responsibility.  In this context, compliance needs and issues are addressed and embedded through business leadership and action, as a part of strategy, objectives, and incentive planning, as opposed to ‘compliance from afar.’

It’s a call for leadership dialog and engagement, not only in how goals get executed via a disbursed commercial workforce, but also around how leaders demonstrate care for their teams, as individuals, who might work in places where ‘culture appears to conflict with the rules,’ and where there could be risk that people start to look at their environment for behavioral cues, as opposed to corporate leadership.

If you are a business leader, and like the concept, but not sure where to start, or if you’re a compliance leader looking for some coaching, there’s a great article in the Harvard Business Review’s March-April 2017 issue, Bursting the CEO Bubble, by Hal Gregersen (link here). But don’t be dissuaded by the title, as the CEO challenge which he addresses is “every leader’s dilemma,” and those issues surround what happens when there are “too many layers between yourself and the front lines of business.” And what lies among those layers is ‘what you don’t know,’ and hence my challenge to business leaders, CEO’s included, to get there.

While I often speak about the “cocoon of corruption,” as discussed in a prior interview with Jamie-Lee Campbell, Gregersen talks about the “good news cocoon,” which business leaders often encounter where they don’t receive news of challenges, problems, and shifts in the environment, because they haven’t demanded it, or “because they don’t know how to ask for it.” So back to where to start? It’s that image of vulnerability, humility and humanity, where business leaders are willing to acknowledge that they might not always get it right, even with good intentions, and acknowledging that their ‘definition of success’ might look confusing in some regions. But that vulnerability needs to be coupled with a call to the workforce that where confusion reigns, to speak up about it.

In many parts of the world, there’s going to be some inevitable tension between objectives, ethics and compliance, and that discord needs to get untangled. So, as Gregersen shares, by “projecting an approachable attitude that inspires other people to speak up,” leaders will be exposed to a wide variety of constituencies and differences of opinion. That reduces the power and probability that employees will attempt to unpack those conflicts on their own, and instead will reach out to their leadership for solutions. And that’s true teamwork, as always attacking what might be weak points in the system.

I ask, when was the last time a business unit leader in your organization met with the commercial workforce, especially those working in remote, thinly supervised locales, and asked “if you were in my job, what you be focusing on,” or Gregersen’s call to probe, “what’s broken?” He shares the work of one CEO who goes with his senior leaders on “global listening tours looking for weak strategic signals.” When leadership sets out to “be on the lookout” for times when they are wrong, and embrace the “notion of being wrong,” then instead of transmitting messages, they will “switch over to receiving them.” That’s getting to what you don’t know, and demonstrates leadership that not only embraces ethics and compliance practices, but is willing to dig into how that all looks from the people who work in the middle of risk, and where trouble is most likely to occur.

Gregersen makes a great point, most executives generally don’t get paid “for being mistaken,” and when “leaders are determined to have all the answers, they stay within the bounds of what they know.” Thus, I think business leaders would be well advised to follow Gregersen’s simple solution to “get out of the office,” and “spend more time being wrong, being uncomfortable, and being quiet.”  If you do, “the odds quickly decline that you’ll stumble upon what you didn’t know” and just as important, “before it’s too late.”

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  1. Thank you for this great post Richard. You opened my eyes to yet another frontier. I have been telling my leaders that they need to ask the “how” question when they receive dubious “good news.” So I like the concept of being vulnerable – and proactive – and asking others to point out the weaknesses in our program.

  2. Many execs prefer not to know what is happening in remote locations or how the business is done, thinking their outsource the decision making to local reps. Having worked with many Western senior management in Russia, I have witnessed this behavior many times. Indeed, when crises occurred, special teams arrived to mop up mishaps and worse, thus leaving the management intact and their cocoon unperturbed. But the result was always the same: business hurt or lost and all those nice projects booked as promising evaporated. Lessons learned were swept under the rug not to revisit again. Some of those managers still made their careers and some of them are leading world greatest firms now. This gap seems so wide – compliance officers these days still struggle to bridge it because the mentality is still there and is not ready to depart. Your observations and analysis are very important to, at least, begin to shine light on such practices that cannot go on in our lean and challenging times. The resource base to support such attitude of execs is no longer there.

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