Compliance can be a profit driver and at least a mitigator of risk (even in Port Elizabeth)

Compliance is a major concern for many businesses as it has so many facets. just like the mythical Hydra, it just keeps appearing with new heads, which all appear to be equally menacing. The general trend in Port Elizabeth businesses, appears from initial interviews to be very piecemeal.  Various managers are tasked with aspects which relate to them.

On the face of it, it makes logical sense to approach compliance this way, after all you have subject experts dealing with their particular areas and that should solve the problem. What is evident is that compliance and risk, share many of the same attributes. They both are constantly evolving and they both have the uncanny skill of working their way around silos and matrix systems which do not have a clear co-ordinated approach which is approached strategically.

I have have many times addressed this with clients, who initially confidently professed full compliance and then later were found to have areas were compliance was incomplete or in some cases completely lacking. Compliance in such cases becomes a risk and in a business environment, which is increasingly unfriendly to business, this could be a element of the business, which should not be neglected.

The case of Walmart's latest big hire, as head of compliance is a golden example of the need of not only having 'boots on the ground on site', having specialists in place in key areas and having a compliance and risk system in place; but you also need a central lynch pin which can bring it all together into a working whole.

The future looks to be increasing compliance driven and Walmart have taken a vital step in ensuring that co-ordination and strategic alignment of the compliance and risk functions.

Responsible leaders build sustainable businesses

Item 2 of Chapter 1 of the King 3 report stipulates the following:

Responsible leaders build sustainable businesses by having regard to the company‘s economic, social and environmental impact on the community in which it operates. They do this through effective strategy and operations.

The tone of this point is clearly set from the outset. The drafters clearly make mention  of "Responsible leaders" which shows that they are referring to not only wanting these individuals to be responsible, from which can be inferred accountable, but also that they want them to be leaders. It may be stated that referring to the various persons as leaders implies a more leadership driven approach which includes the collaborative nature of that relationship.

It is valuable to consider that these leaders are to be found throughout the business. It will be interesting to see to what degree lower level leaders may be help to the values espoused in the report.

The key point is that businesses need to be sustainable and by inference long term commercial citizens of the country; with rights, duties and obligations; which accompany that privilege.

The clause also highlights the fact that the business needs to be responsible not only in its business dealings as a business but it also needs to heed its expanded responsibilities such as its environmental impact and its social impact on  society. This expanded view of a business's responsibilities has become a global phenomenon. The importance of this expanded view of corporate responsibility has triggered a whole new view of what good governance is.

The report's drafters clearly mention that 'operations and strategy' should serve these lofty aims and that these should operate as the channels through which the above mentioned objectives must be achieved.

It may be noted that in the spirit of a completely aligned organisation, that these aspects and values shall need to form part of mission statements etc because only through inclusion will this provision truly be taken on board and not merely be seen as a beautifully word craft. It is through incorporation and alignment that these values can truly become inculcated in the very fibre of the organisation.

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Thinking - have we decended into 'Group Think'?

Innovation unlikely

Einstein once said that: "We cannot solve our problems with the same thinking we used when we created them."

In business we often lament about lack of innovation and our corporate sounding mission statement's flowery tributes to our forward change orientated culture. But at the same time we hold onto our existing structures and organograms while chanting the mantra of "We have always done its this way" or its modestly better sounding variation "This is the way we do things." 

It is good to have stability and its natural to aspire to a state of stasis for these are normal and natural human tendencies. Why should be invite change? Why should we even allow a dissenting voice who questions everything we hold so dear? Why should we encourage the new?


If we go back to Einstein's sage words we learn one important lesson; unless we shake the tree, unless we add a measure of agitation, unless we invite an element of chaos and different view we will always get the same outcome and never will the result be worse; but neither will it be better.


But 'Group Think' is a natural outcome of homogenised hiring processes ('We only hire from within") and teams that are together for too long, who have in most cases been sourced from the same pool of employees, who have all been subjected to the same policies and procedures and whose thinking is all very much in line. The question is how different is their thinking really going to be?


Which brings me to 'Competitive Advantage' it is often seized by entrepreneurs who break the mold who disrupt the industry, but as time progresses these businesses begin to do the same stuff every one is doing, the net result cultures begin to mingle and apart from the logo everything begins to be the same.


But what if you allow some room for alternate views, make outside hires into key positions, change the status quo and even if a process is working, why can it not work better of be done more efficiently? Can we not save costs by rethinking? Innovation comes from agitation and disrupting the comfort zone.


Practically, I have found that 'Group Think' can be far more insidious, it allows potential to go unrealised, it hides risk, it threatens the very vital soul of innovation within the organisation. 


So not only can the same thinking not solve our problems we have now its suffocates an organisation and creates the semblance of security and comfort, while the organisation's culture is sacrificed and team members are transformed into mindless clones.

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Ethical Leadership and Corporate Citizenship: Principle 1.1: The board should provide effective leadership based on an ethical foundation (1.1.3)

What follows are some personal insights into the provision of the code set out in the King III report on corporate governance; how it affects business and how it transforms business not only into lighthouses of virtue, while maintaining the purpose of business; but it also stirs business into becoming model corporate citizens which are able to conduct their business in an effective, responsible and in a sustainable way.

Principle 1.1 of the Code : The board should provide effective leadership based on an ethical foundation:

Item 3:

"Responsible leaders reflect on the role of business in society. They consider both the short-term and long-term impact of their personal and institutional decisions on the economy, society and the environment."

It is interesting that the Code's constant emphasis on "responsible leaders"; in today's challenging times, leadership is not enough, leaders need to be responsible.
What does it mean to be responsible?

The Oxford Dictionary defines "responsible" as:

1. liable to be called to account (to a person or thing);
2. morally accountable for ones actions; capable of rational conduct;
3. ...

It should be noted that responsibility, not power is emphasised, accountability not boundless scope for action, stewardship not dictatorship or oligarchy of the board. When one moves away from stewardship mindset to the mindset that decisions made by the "dictator" or "oligarchy" the way of thinking is ultimately flawed because the context has been radically changed; as will be the perception of what is constitutes a "good" decision and what possible consequences will follow.

The call for "responsible leaders" to  "reflect on the role of business in society" likewise a wonderful point. It is often not enough for people to know what to do, they should be constantly reminded, sometimes they should be expressly told that this is what good stewards do, they reflect on the consequences for the broader community. Reflection is more than just thinking, reflection which indicates a deeper meditation or thinking upon an issue. In this case, taking into consideration the greater impact of the action or decision. This once again reiterates the stewardship role of leaders, even more so when one refers to "responsible leaders".

To this laudable call to reflection is added not limiting considerations to the short term but also to the long term; forecasting, which although near impossible calls to mind the need for making sure that leaders are skilled in so far as possible to ensure that at very least educated guesses are avoided.

It also catches ones eye the choice of including "personal" to "institutional decision" when one looks at the interpretation of the item as a whole.

Without taking the matter too far, it does appear that the authors of this item, do not just want skilled and experienced leaders of the highest ethics and virtue leading business; their personal lives must likewise meet this strict rule; truly great stewards who lead not because of greed or twisted egotistical views of the apparent power that they wield through their position; rather great men whose greatness is not theirs because of their position but rather a product of their selfless, wise and reasoned leadership; which makes them not just leaders of industry but also pillars of the community.

Why Doing the Ethical Thing Isn’t Automatic - NYTimes.com

Why Doing the Ethical Thing Isn’t Automatic - NYTimes.com

This article written in the New York Times, shows just how fragile our ethics really are. It shows that we are more likely to judge others while doing the same ourselves and that often gradual erosion of morals or standards are a sure fire way of eventually breaking all the rules. In South Africa, many of us will nod knowingly, when we see ho corruption, which would have been exposed, now is quietly tolerated.

In the light of the code set out in the King III it may be worthwhile to set one's ethically deviation indicator to 0% tolerance when it comes to deviation, because it becomes apparent from the research in this article that we highly overate our moral compasses and that even sub-consciously we even change North, so as to maintain our own image of our moral superiority, while clearly having breached moral rules.

Even here is sunny Port Elizabeth, South Africa businesses of all sizes struggle on a daily basis with the compliance, risk and management issues posed by this this insidious creep of darkness.

There are many ways to deal with and counter this plague, but it needs us all to face our "dark sides" and to embrace the fact that we are not all perfect and that given that realisation; let us all commit our selves to a dedicated and committed ongoing battle against the erosion of our institutional morals, by setting higher standards and putting policies, procedures and people in place to actively seek and eliminate any signs of its occurrence or things that facilitate its spread. This is a war without end and we need to follow the fighting spirit of the words of Sir Winston Churchill when he stated in hi "We Shall Fight on the Beaches" speech delivered in 1940, to the House of Commons, Westminster on 4 June 1940.

We shall fight corruption and unethical behaviour in our country, in boardrooms, across IT systems and paper trails, we shall fight it as business, companies, departments, projects teams, employees, directors and most importantly as citizens. We shall fight it in our businesses, we shall fight it in our society and we shall fight it in our very homes; most of all we shall fight in our very own hearts and minds - we can never surrender.