In our latest piece on compliance fundamentals we focus on the need to balance the discipline "stick" with incentive "carrots".
Discipline is always a delicate topic. However, it is one that organizations must grapple with in order to ensure that standards are upheld and the compliance program has credibility.
One of the objectives of a robust compliance program is to prevent misconduct. Unfortunately, violations of the law, the code of conduct, or policies and procedures can happen within any organization. A transparent disciplinary procedure in place to reinforce the message of zero tolerance for misconduct and inform about the consequences of misconduct is a “must have”.
Disciplinary measures need to be proportionate, needless to say, in accordance with local law and must be applied consistently; similar disciplinary measures apply to similar acts of misconduct, regardless of the employee’s seniority or performance. Some organizations have found that publicizing disciplinary actions, when possible and appropriate, and opening a dialogue within the organization on these topics can have beneficial effects by deterring potential future misconduct. In any event, organizations should use data from disciplinary actions to analyze trends, periodically review the risk assessment and put in place actions to prevent similar misconduct from happening again.
An effective compliance program also needs to incentivize ethical behaviors . These can take the form of rewards for employees exhibiting ethical conduct with a promotion, a financial bonus, or public recognition. Management’s communication about a particular example reinforces how ethical behavior can contribute to the company’s long-term financial success. More advanced companies include a component reflecting ethical and compliance standards in the employee performance appraisal process.
In sum, don’t shy away from the difficult challenge of ensuring discipline is appropriately calibrated and consistently applied, regardless of rank or contribution to business results. Think too, about opportunities to reward behaviors you want to encourage by providing suitable incentives.
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