Company leaders continue to grapple with a number of challenges regarding ethics and compliance (referenced throughout this article as “E&C”) that undermine a company’s ability to truly demonstrate its commitment to achieving the high standards that it espouses.

A principal difficulty facing companies is that many leaders miss the distinction between individual and organizational integrity.  They assume that because the company hires good people, ‘ethics will manage itself’ as employees unerringly make responsible decisions. This perspective avoids the fact that organizations are complex social systems where employees are subject to peer expectations, supervisors’ authority, performance incentives, pressure from customers and additional stakeholders and many other dynamics.

Thus, leaders also need to focus on organizational integrity – how systems managed by good people ensure responsible decisions.

If these are not enough challenges, today regulators and other company stakeholders are more aggressively pushing companies to demonstrate, or at least provide a reasonable assurance, that they can achieve and are meeting their lofty standards of conduct.  These external watchers are holding companies to their commitments.  We see this in the increased regulatory standards regarding compliance systems and boom of corporate responsibility reports posted on company web sites.

In short, stakeholders are holding companies to their many commitments, and many of them do not have effective means to systematically meet them. 

A central solution to these challenges lies in effective process management, both of a company’s E&C core activities and in the way E&C figures into a company’s other business activities.  Process management involves the means by which a company can provide reasonable assurance that an activity will meet its objectives by methodical development, management and improvement of the way the activity is carried out.

Where E&C breakdowns may lead to severe regulatory fines and other sanctions, loss of customer loyalty and business, decreased employee morale and a company’s reputational damage, the stakes could not be higher to ensure that E&C processes work.

Some basic principles for process management include the following:

• A process should be focused on creating value for its customers, whether they are purchasers of an end product or internal employees who are served by a process’s outcome.
• Process development should engage with those constituents who are likely to be involved in the process or are closely affected by it to ensure that the process’s design does not miss key needs.
• To be managed, a process must measured.  Metrics are central to process management.
• A process is interdependent in that it typically relates to or is integrated in other processes, so it should be designed to work with these processes.
• All processes can be improved upon and so continuous improvement is an expectation of process management.

This article is available in full at Corporate Compliance Insights.