Five Tips for Measuring Compliance Success

The volume of calls to the whistleblower hotline merely scratches the surface when it comes to gauging how successful a compliance program is.
Lucy SkeltonNovember 10, 2014
Five Tips for Measuring Compliance Success

Whistleblower hotlines are an essential component of any compliance program. They provide an anonymous process for reporting unethical issues and have led to many very high-profile investigations and prosecutions.

Obey imageBut when it comes to determining the success of compliance programs, too many company executives make the mistake of looking solely at the number of reports coming into their whistleblower hotline. These numbers alone provide organizations with little insight into how successful their compliance programs really are.

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In fact, less than 10% of incident reporting occurs through company hotlines, while more than 65% is reported to managers, according to a survey conducted by corporate research firm CEB. But these numbers do not explain changes in the volume of hotline calls or reported incidents. For example, say you have a dip in the number of hotline calls made. Did that number drop because employees started acting more ethically, or because employees stopped reporting unethical behavior?

In order to gain a truer and broader understanding of the impact of your organization’s compliance programs, executive leaders need to look beyond the basic metrics. Here are five tips to better evaluating the success your company’s ethics and compliance program.

Consider the impact of training and campaigns. Companies should look to see if there is a correlation between the number of incidents filed and when training sessions or compliance campaigns take place. For example, the number of company bribery reports or inquiries may suddenly rise shortly after your company’s ethics and compliance department completes a bribery training session. Executives should consider how training and educational campaigns influence their metrics, then decide if there has been an ongoing problem or if there are just more questions due to the campaign. Also, note whether any code, policy and procedure updates were made and how these changes were communicated to employees, as these factors may also affect your metrics.

Conduct and analyze employee surveys. Surveys can serve as key performance indicators for executive leaders by gauging how compliance messages are understood and perceived by frontline employees. Annual behavioral risk surveys are a great way to ask employees if they’ve observed misconduct among employees. This can identify if there is gap between what employees are seeing and what they’re reporting. An annual survey on the company’s ethical culture can also provide valuable insights into how employees feel about the company’s culture, their knowledge of its code of conduct, and if they would speak up if they witnessed behavior contrary the company’s values. Such annual surveys also provide the company with benchmarks allowing year-to-year comparisons.

Tap resources outside the ethics and compliance office. Consult with other areas of the organization to see if they have any metrics that might provide insights into the effectiveness of the ethics and compliance program. For example, the HR team could add questions regarding ethics and compliance into their entry/exit interviews and performance evaluations. Furthermore, the number of sick days taken, workers’ compensation complaints, accidents and thefts also hint at the state of your organization’s ethical culture and current compliance programs.

Empower managers. Since more than half of all incidents are reported to managers, organizations should not only take the time to train managers on how to have conversations with employees, but they should also implement a process for managers to capture and report incident information. Doing this will provide the company with more clear and consistent data on compliance. Furthermore, take the time to provide managers with the tools needed to make compliance decisions and listen to their feedback and concerns. Keep in mind that due to their daily visibility and impact on employee careers, managers often have more influence on employee behavior than compliance officers.

Take an integrated view of your program. Make sure you look at all aspects of your organization’s compliance program, including metrics on everything from policy to training and even your code of conduct. Evaluating as many data points as possible will provide a greater level of insight into your program’s effectiveness. Have your ethics and compliance officers measure what they’re doing and keep records of all investigations undertaken, inquiries addressed and issues managed. Decide what specific metrics you will measure each year and then analyze data for trends.

Using a variety of metrics also can help CFOs determine the ethics and compliance program’s future budget. Although measuring the program’s success may not be as straightforward as doing so for other areas of business, organizations can gain a truer measurement by looking at a variety of company data.

Lucy Skelton is CFO of The Network, which provides solutions and services addressing governance, risk and compliance.

Image: Robelan Borges, CC BY-ND 2.0. The images is unaltered from the original.