Legal

Hotline Turf War: Compliance or HR’s Territory?

By Mark Pastin

Nov. 24, 2015

As an employer, what would you have if you could train 100 percent of your employees? Or if a direct line of communication with your employees was always open, or if every employee could sincerely attest to the values and principles of your organization?
 
Besides a highly engaged, informed and knowledgeable workforce, you would have an unequaled opportunity to strengthen your organization’s culture. But enhancing culture also takes an air of cooperation.
 
And at many large organizations, the relationship between human resources and the compliance function hasn’t exactly been a cozy one. Yet that connection is crucial to building a successful corporatewide culture. 
 
Every organization involved in health care, defense contracting, publicly traded equities or international trade is required to have a corporate compliance program. While the source of this requirement varies, the recipe for an effective compliance program is a constant. This recipe includes annual training for all employees, an anonymous hotline and attestation to a code of ethics. 
 
Sometimes known as the ethics or integrity function, responsibility for the compliance program usually falls to this team. While compliance functions were rare 20 years ago, they’re now an entrenched part of most large organizations. 
 
If compliance and HR were to work together to meet the requirements of an effective compliance program, there would be a unique opportunity to advance the organization’s culture. But instead of working together, there’s an uneasy peace at best.
 
Accepting this tenuous relationship locks HR out of the organization’s largest sustained culture effort. Compliance is left leading the organizational culture effort with little direct knowledge of how to do so.
 
The antipathy between compliance and HR starts with the handling of hotline calls, many of which concern HR-related issues. Nonetheless, compliance often wants to investigate the reported concerns. 
 
And, of course, HR views this as encroachment, planting the seeds of a bad relationship. In one large organization, the HR staff routinely referred to the compliance department as “Fortress Compliance.” The compliance staff paid them back by referring to “Fortress HR.”
 
No matter who is responsible for the uneasy turf war between compliance and HR, it’s in human resources’ best interests to take the lead in lowering the barrier. It is only by getting a consistent message across to employees that HR will be able to develop the organizational culture. There are three important strategies to bring HR and compliance together. 
 
1. Work Together on Compliance Training.
 
Compliance departments often struggle to meet the requirement that there be (the equivalent of) at least one hour of compliance training annually. Compliance professionals often have backgrounds in audit, law or law enforcement. 
 
The skills that make them successful in these fields ordinarily do not include the design and delivery of training. Even though they often lack training expertise, compliance professionals seldom seek help. They often develop a set of slides emphasizing that employees face dire consequences if caught breaking the rules.
They hope to motivate employees using fear as their primary tool. What they are actually cultivating is a don’t-get-caught mindset. This approach is not likely to promote compliance or the organization’s overall culture, which, hopefully, is not a culture of fear.
 
Because compliance struggles with the annual training, an offer of assistance from HR is likely to be welcome. Were there consultation between compliance and HR and potentially the learning and development department, this universal training could be used to build the organizational culture, including its compliance component. 
 
The first step is to set clear objectives for each year’s training. Too often the only objective for compliance training is to meet the requirement that the training be given. Once it’s clear what you want to accomplish, a training module can be designed that incorporates the organizational culture while conveying key compliance messages. Corporate compliance will make more sense to employees as part of what the organization is about. 
 
The Council of Ethical Organizations has conducted published survey research on compliance programs since 1986 (Editor’s note: the author is the CEO of this organization). This research shows that close to 90 percent of employees of organizations with compliance programs recall participating in annual compliance training six months after participating in the training. However, only 34 percent recall key themes of the training.
 
2. Cooperate on Hotline Calls.
 
No part of a compliance program stirs more controversy than the ubiquitous compliance hotline. This is a toll-free number that employees can call anonymously to report concerns. And they do call. Our data show that the number of hotline calls per year in large organizations is equal to about 3 percent of the total number of employees. And no one disputes that the majority of these calls address HR issues. 
 
A key goal of the hotline is to encourage employees to report concerns internally instead of becoming external whistleblowers. There are huge financial incentives for employees who become external whistleblowers in many industries. 
 
In a recent case, a whistleblower received $2.2 million for blowing the whistle on NuVasive Inc. allowing the government to recover $13.5 million. Some whistleblowers have made tens of millions of dollars by revealing their employers’ misdeeds, raising the stakes for keeping compliance concerns inside the company.
 
So the job is to engage employees in an internal process until you can determine if the concern is real. HR is used to working through issues with employees and can usually do so without turning employees into whistleblowers. If HR can persuade compliance that it can investigate calls to the hotline on HR issues, a great burden will be lifted from compliance. And HR can handle issues reported to the hotline in a manner likely to prevent external whistleblowing.
 
3. Create a Positive Code of Ethics.
 
Another component of a compliance program is the code of ethics. Most organizations require that all employees attest annually that they will read and comply with the code. The reason to have employees attest is to show that everyone is aware of the rules. 
 
However, this attestation is often a meaningless gesture. Why? In many cases, the reading level of the code exceeds the reading level of most of the employees to whom it applies.
 
Council of Ethical Organizations data reveal that while nearly 100 percent of employees acknowledge receiving the code of ethics, fewer than 20 percent actually read it. The document is often long, filled with legalese and HR jargon and contrary to the organization’s culture. 
 
The belief is that if you tell people that they are supposed to follow a few dozen laws, the company cannot be blamed when failures occur. Example: “We told them to follow the Dodd-Frank Act right there in the code of ethics.” A frivolous thought. A signed document that the employee cannot have understood is an ineffective legal excuse.
 
If HR and compliance collaborated on the code, it could be a useful document that fits the organization’s culture. For example, most HR professionals know that you bring a document to life with illustrations of situations that employees may actually encounter. And a code that fits the values and culture of an organization is more likely to make sense to employees.
 
It is time for HR and compliance to get on the same page. Both functions are trying to influence employees in areas that pose risk to the organization. In many cases, compliance approaches its domain of risk in ways that can potentially undermine efforts to develop the culture of the organization. 
 
Compliance gets away with this because there are certain things it must do every year to satisfy external regulatory requirements. It needs to do these things — but it need not do them poorly. Everyone wins when the silos in which compliance and HR so often exist are torn down. 
 
Compliance and HR professionals can also collaborate on internal investigations. Compliance is required to follow up on all credible reports it receives by means of the organization’s hotline or through direct reports to the department. This can be a heavy burden as the number of reports received annually is approximately 3 percent of the total employee population. 
 
Many of these reports — typically more than half — focus on HR issues. Employees try to achieve through the hotline what they cannot through traditional organizational processes. Compliance tends to want to investigate all of the reports, including the reports on HR issues. This is because those who report to compliance are entitled to do so anonymously and to have their concern investigated on a confidential basis. 
 
Compliance is fearful that HR will not honor these reporting conditions if allowed to investigate the HR concerns reported through compliance. But this assumes that HR cannot understand the unique conditions under which compliance reporting operates.
 
If compliance and HR can get past this issue, there is much to be gained on both sides. Compliance professionals often have forensic investigative skills not represented in a typical HR department, and HR often has more insight into the organization’s culture and processes and is also usually more knowledgeable than compliance when it comes to employment law. 
 
Even more important, HR knows how to investigate the many HR reports compliance receives. When compliance insists on investigating these reports on its own, it often creates more issues than it resolves. If compliance focuses on genuine compliance issues, it can do a better job addressing these issues while allowing HR to handle its own domain of concerns professionally.

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