However, in our experience, what is not often factored into compliance programs is close consideration of the profile of a company’s employees, particularly their age and experience (or lack thereof) with compliance concepts.
Recent entrants to the workforce in non-Western markets, or those about to enter, are the first generation to grow up in a world of truly global headlines, legislation, and active enforcement focused on combatting corruption. They have not witnessed these developments from afar, as ethical practices in business and government have increasing become a priority in less developed countries as well. Data collected in a 2014 collaborative study by the World Economic Forum titled “The Impact of Corruption: Perspectives from Millennial Voices” supports the premise that opportunity exists to create allies out of Millennial workers in developing markets in the pursuit of more transparent business environments habituated to unethical practices persisting under the pretext of cultural and expected norms. According to the study, a majority of the youngest generation of workers see lost opportunities for themselves and their countries caused by corruption. Despite prevailing stereotypes, only a small minority of the younger generation in developing countries feels corruption is a “necessary part of functioning society” (see data sidebar).
All of this research points to a generation gap, with a younger cohort that should be uniquely receptive to compliance concepts compared to their parents. To turn the thinking of the new generation into a compliance opportunity requires a paradigm shift in how programs approach these younger workers. In discussing how to make this work in a real-world compliance context, we’ll refer to a market that remains extremely challenging to implement an effective compliance program—China. However, we have seen success with these strategies with some cultural adjustments across developing markets.
What does this look like?
The next time you have a staff meeting in China, ask your local employees this question: “How many of you have parents who worked for a foreign company?” We would guess that the answer would be close to “zero”. Your employees are the first generation of Chinese people who have worked for foreign companies in China, and the first generation to experience foreign business practices, including compliance requirements. They didn’t grow up in an environment where they overheard their parents talk about a compliance training they had to go through, or getting approvals before giving a client a small gift.
This points to a second element of the generation gap: youth in some places are the first generation to work for and under developed-country compliance expectations. We have found that factoring in this generational gap is critical in assessing compliance risk and designing effective risk mitigation plans. The gap most often expresses itself in two basic ways, both of which must be considered in compliance:
“I don’t know what you mean”: No matter how much we try to define compliance terms in a global business context, your local China employees will always have a slightly different cultural foundation for interpreting such terms. Take conflicts of interest, for example which persist in significant numbers across businesses in China. We’ve done dozens of investigations where family relationships occur across channel partners, vendor and supplier affiliations. In a recent engagement, we interviewed a procurement manager who contracted with his cousin’s company as a key supplier at better-than-standard pricing and terms. When confronted with the conflict, the manager asserted: “This is not a conflict of interest because I’m doing it for the company. If we have a problem, my mother talks to his mother and straightens it out.” From his cultural context – where doing business with family is preferred – there was no conflict. In fact, in his mind, the company benefited because he was able to communicate to his cousin the pricing he would need to offer to win under the company’s competitive bidding process.
“We’ve always done it that way”: Most often when confronted with an allegation of giving a bribe to get business, an employee will push back saying, “Well, that’s just how business is done here. What do you expect me to do, refuse to do it and lose the deal?” Until very recently, there were no external rules regulating behavior in China – FCPA and local anti-bribery enforcement have become common only in the last 10 years. On the other hand, one can argue that Chinese business has gone on for thousands of years using differing ethical standards from the West. Your China employees will certainly understand that there are “new rules.” However, they will have no idea how to comply with the rules and, at the same time, be successful in their jobs. This can be particularly acute in hierarchical business environments where managers expect employees to do as told. We’ve seen this play out with more junior employees asked by their managers to perform a myriad of “favors” for customers, from arranging lawn cutting services to airport transportation. To them, there is no other option if they want to keep their jobs.
What can be done?
Too often, compliance professionals are left shaking their heads when confronted with behaviors by employees that to them seem clearly wrong. When we raise the gap phenomenon with them, their Western or developed country perspective that the company’s policies clearly prohibit such behavior often gets in the way of solving the problem. While we all certainly hope that succeeding generations will find modern compliance concepts more “natural,” we know that more than time and zero tolerance policies are needed to make a difference. We’ve found four strategies to be particularly helpful in starting to close the compliance generation gap, and help younger workers bring compliant practices to difficult markets:
- Teach resistant strategies, not the rules
The world over, traditional compliance training most often consists of outlining the rules and telling people to obey them. If the rules are commonly accepted in the business environment, this approach works. However, in places where bribes and kickbacks are a cultural norm in the market, your employees need to know much more than the rules. They need to be taught the behaviors and words to broker compliant business.
This challenge is why we recommend teaching “resistant strategies:” how to say no to a request for a bribe and still have a good chance of winning the business. Training needs to focus on changing a culture, which means teaching a different language. “What words can I use so as not to offend the counterparty and yet give me a chance to change the conversation?” We teach people to negotiate price and terms – why not teach them to negotiate a compliant relationship? Roleplaying of various scenarios of what could happen before it does, and formulating ready responses, allows employees to be prepared for difficult conversations. Just like the shock we all experience when moving into another culture, there is also shock when people start operating under a new “compliance culture.” The only way to entrench the new culture is to have multiple opportunities to practice.
Patience has also proven a worthy resistance strategy. We often see byzantine and highly bureaucratic licensing and regulatory processes in developing countries where paperwork “gets stuck,” and unsticking it with a payment would be the normal route to solving the problem. Compliant companies need to either start early, remove a sense of unneeded urgency from such circumstances, or both, to communicate to employees that time is a viable alternative solution. Escalated questioning of officials for the reason for a delay can also often create movement, as even in markets where bribes are common officials seek to minimize the impression that they are not doing their jobs or might be taking bribes.
- Give them a voice
In the aftermath of compliance investigations, we’ve seen that non-compliant behaviors are often not closely held, and were generally known throughout the employee base. This raises a question: if management wasn’t involved, why didn’t they or compliance know what was happening? Despite non-retaliation policies, many employees still don’t feel empowered to raise ethics issues without fear of losing their jobs. While conducting risk assessments workshops or training for clients, we often find ourselves approached by employees with questions. These questions almost never surface during formal sessions, but rather take shape during coffee breaks or other social settings. The importance of providing avenues for discussing concerns or asking questions without an audience of senior professionals should not be underestimated. It takes courage to ask questions in a group setting, and in many cultures (including many places in the developed world!) speaking up when you don’t understand something as a junior staff member is not encouraged. Peer training sessions can be an effective tool to tease out behaviors occurring in global operations that would otherwise go unspoken.
It is equally important to make sure when concerns are raised, whether informally or using a compliance reporting channel, that employees know the company is responding. If employees who report are left without information, or wondering if anything was ever done, they will be demotivated from reporting future issues.
- Get granular
One of the greatest failings of global compliance programs is a lack of understanding of risk to the business. We understand that many companies don’t have the resources or budget to have local compliance resources across global operations.
Nevertheless, getting a picture of that risk based on the way business is done, which can vary widely from country to country, is difficult if not impossible to accomplish from a distant global headquarters. Conducting regular in-country risk assessments of ongoing operations where risk is discussed with employees across roles and levels is the most effective way to increase understanding of attendant compliance risk. If regular compliance reviews seem difficult to manage, we have also seen effective localization of risk assessment procedures, and development of compliance goals within performance review procedures, effectively employed to inform compliance programs. Both mechanisms essentially ask in-country employees to take time to consider existing compliance risk to the business, and to determine ways to meaningfully mitigate that risk. From these procedures we’ve seen innovations in risk management that have been rolled out across a company’s operations and become powerful tools in combatting corruption.
- Speak local and current
Compliance is quite often criticized by employees for its “foreignness.” A simple “copy and paste” of a headquarters’ compliance program will hardly prove effective in local operations. Literal translations of compliance policies and procedures could read awkwardly to local staff, undermining the credibility and perceived relevance of the documents, as well as the “tone from the top” organizations are trying to communicate. Certain compliance terms do not translate well into Chinese, and even for terms such as “facilitation payment” and “conflicts of interests” that have comparatively well-acknowledged Chinese translations, people still need examples in local context to fully understand the concept. Similarly, if your training and rules do not include reference to local laws and regulations when applicable ones exist, but merely refer to foreign legislation, you will not compliance requirements to local staff. Organizations need to invest to localize their compliance documents, incorporating the local cultural context and language habit, and should quote local examples when communicating concepts and requirements.
In addition, it is equally important for compliance professionals to speak current, which arms them powerful tools against the “We’ve always done it this way” excuse. Speaking to the first generation living with modern compliance concepts, it is pivotal for compliance professionals to emphasize to employees the evolution of compliance trends, so as to remind those burying their heads in the “old norms” why behavioral changes are needed to adapt to a “new normal.” Compliance messages will no longer be foreign once people realize things in their own country are changing, as well.
Affecting cultural change is not an easy task. To shape a new generation of business leaders with compliance ingrained in their corporate language and culture requires reaching them early in their careers. This new generation of employees arriving into the workplace around the globe is more aware and open to the need for a more transparent business culture. Compliance professionals would be remiss not to try and reach them.
About the Authors:
Michele Wiener is a Senior Partner at Control Risks, where she leads a team that specializes in conducting investigative assignments for legal counsel, boards of directors and senior management of public and private corporations.
Susie Wang is an Associate Director in Control Risks’ Shanghai office where she focuses on advising clients on developing and implementing ethics and compliance related risk management solutions.