My earliest recall is Enron and Andersen Consulting (accused of obstruction of justice for shredding documents); many more since then where key authority figures are dealt a blow due to rampant risk taking either by them or others on their watch. More recently, News of the World, NZ’s Accident Compensation Corporation and now Barclays (accused of rate-tampering and falsifying information to protect its reputation). It is quite clear compliance regulations, audit protocols and top/down imposition of scrutiny does not work well enough. The cost? Sometimes hard to gauge. Barclays was fined $450 Mil.  GlaxoSmithKline has just been fined $3 billion, accused of health fraud. What about the hidden costs to the average business of non-compliance; people or groups of people doing their own thing. In the human body, a rogue cell is called cancer.

What all these situations have in common is a culture that allowed this to happen. Not a culture that strongly sanctioned the actions.  Disconnected cultures (where individual agendas are put ahead of the corporation) lead to risk-taking without care for consequences.

The UK Treasury Select Committee grilled Bob Diamond about “culture” but instead he  attributed the “reprehensible behaviours” (his words)  to a group of individuals. Given that he implied they were acting out of sync with the compliance protocols at Barclays, the question is what the correcting mechanism was to ensure no contrary sub-cultures developed.

Two questions:

1. What causes sub-cultures?
2. What causes  a self-correcting, high performance, minimised-risk culture.

Culture is the way things are done in a social system. They include norms of behaviour:  habitual ways of thinking and acting. Where compliance behaviours are enforced in a vertically-controlled or externally-audited regime, a culture of no care and no responsibility is bred. Vertical control is an oxymoron as you can’t see soon enough, wide enough and deep enough “down there”.

A top/down, externally imposed, punitive, compliance approach gives only the illusion of control. My view (and that of many others and the subject of an extensive body of research) is that it is even more susceptible to compliance issues. It is at best a game of chance and the odds are stacked in favour of the rascals.

Complying for “the boss” or the auditor is not true compliance. Approaching compliance that way  fosters a non-compliant attitude.  It’s a game you can’t win, as there will never be enough people or resources to keep on top of individual agendas and wayward behaviours. Authority figures will always be outnumbered, outwitted and outscored.

What is the alternative? What creates a vigilant, consistent, reliable culture where wayward behaviours are visible earlier, challenged sooner, prevented or eliminated at source?

Building a culture of mutual accountability and agreed risk prevention provides internal (self or peer-imposed) compliance checks………..People who are fully engaged in an aligned performance culture are constantly self-checking and welcoming scrutiny by peers who see far more than “management” ever would. It is far less likely that non-compliant behaviour would a) happen b) repeat.

There is not one example I know of where vertical control has produced self-correction and risk mitigation. On the contrary I was delighted this week to hear someone (close to the frontline) describe their engaged and accountable workplace, together with impressive revenue increases. When asked how this was achieved, the answer came with no hesitation: the MD; it is role modeled from the top. Open/quick communication, uncompromising performance expectations, an involving style and trust. So simple and predictable and yet too rare. In that open climate of shared responsibility, devoid of game-playing, condescending managers and alienated staff, rascals are quickly weeded out.

When you focus on creating the culture in which people:

• comply because they would not feel right otherwise
• contribute more and more because collective success counts
• confront those who put this at risk…….

…….then you find that the slips are earnestly prevented or fixed at source.

There really is no other way that works better or costs less.