A Dash Home for the Ages – Using Start-Up Techniques to Further Compliance

Congratulations to the Kansas City Royals for winning the World Series on Sunday night. Watching a franchise that has never won such a championship, I can certainly understand the elation of a team that had not been to a World Series in 30 years. There were a couple of things in the 9^th inning that I found interesting. The first was Mets Manager Terry Collins decision to keep starting pitcher Matt Harvey in the game. Actually what I found interesting was that anyone would think Collins would bring Harvey out of the game. Any starting pitcher who had gone 8 innings and was winning the game, would not only want to stay in the game but has earned that right in my book. However after an open batter walk, Collins should have done his best Captain Hook imitation and pulled Harvey immediately.

The second item was the tying run scored by Royal Eric Hosmer, who dashed to home from third base on a routine infield grounder after Mets shortstop threw the ball to first for the sure out. Unfortunately Mets first baseman, David Wright, could not make a decent throw back to home to make the play even close at home plate. Hosmer was quoted in Sports Illustrated, ““It was realizing that at that point of the game, you have to take a chance,” Hosmer explained after the game. “You have to be aggressive. That’s how we’ve been all year. We don’t play the normal style of baseball, according to most people.”” While many have called this play reckless, if you consider that the Royals ended last year’s World Series with a runner stranded on third by an overly cautious third base coach, Hosmer’s dash becomes clearly ordained. Hosmer’s run tied the game, which the Royals then won with a five-run 12^th inning.

I thought about the difference between recklessness and overcoming past deficiencies when I read an article in the Financial Times (FT), entitled “How to borrow some of the start-up genie’s magic”, by Richard Newton. His piece dealt with how companies could work with accelerators and incubators to help more established businesses. I thought it had some interesting implications for the Chief Compliance Officer (CCO), compliance practitioner and the compliance function in an organization.

Newton wrote that many companies are now turning “their attention to understanding and replicating start-up magic. The intention is to convert it into a formula for their global clients” because of what start-ups can teach big organizations. He said, “So far has the wheel spun that the blue-chip management consultancies now take an active interest in how they might capture the start-up genie, which appears to summon at will the qualities of innovation, speed, passion and efficiency.” Newton identified four areas which he said, “bear close attention: size, culture, structure and people.” I have adapted his thoughts on each of these to the compliance function.

As the compliance function grows in an organization “the ability to maintain the culture and purpose that the founders originally represented diminishes.” Here Newton quoted Peter Hinssen for that “even small companies, find themselves transforming through growth from a “superfluid state” to a frozen, inward-looking state.” Clearly compliance must not look inward but can do so if the organization gets too large without new blood or even new input.

A culture of compliance not only has to be driven into the DNA or fabric of an organization but it must be maintained. Unfortunately many organizations equate this stasis with additional costs. This is where incentives can be baked into your company through employee evaluations, discretionary bonus components or other mechanisms that demonstrate how an employee who does business in compliance with such laws as the Foreign Corrupt Practices Act (FCPA) will move forward in their career.

The structure of a start-up can be quite flat. As Newton notes, “analysing the flat and collaborative structure of start-ups needs little more than the observation that when the entire company is sitting around the kitchen table there is not a great deal of hierarchy. Unless your team can sit around a table you cannot replicate that.” This is obviously difficult to replicate for any CCO or compliance function yet it is a laudatory goal. If you can get out in the field to your troops you can enhance the compliance experience for any group of employees. Yet vertical does not mean negative if there is responsiveness. It is absolutely mandatory that any company compliance function be responsive to the business unit around supply compliance guidance and hopefully compliance solutions going forward. For even in a flat organization, if you are Dr. No from the Land of No, you will go NO further in garnering support for your compliance initiatives.

Newton’s item number four was to focus on the people in an organization. This is equally true, if not more so in the compliance function because, at the end of the day, it is the company employees for which compliance is all about going forward. Newton cites to the examples of large corporations such as Barclay’s, which puts its employees through “intensive boot camps” with accelerators and incubators. Newton noted, “This, I suspect, is the right direction of travel because it addresses the fundamental component of businesses, the people. And people have different natures. It is ever easier and more normal to work in a start-up team, but not everyone does. This suggests that many of those who stay inside the company walls have made a deliberate choice to do so because to them the company life is preferable. To try to make them behave as if they were in a start-up is to push against the grain.”

Newton concluded that he believes companies can transform themselves through “an evolving relationship” with some type of start-up. I find this to be an excellent analogy for the CCO or compliance practitioner. As Newton concluded, “then more of the innovation will happen outside the company walls. The corporation’s task will be creating and maintaining a long-term vision whose meaning and story aligns and directs the work of any team, whether it is an internal skunk works or an external start-up”. A compliance function can use these same techniques to not only spread the message of compliance but also to evolve your internal compliance program as your company and business evolve.

And a tip of the hat to the 2015 World Series Champions, the Kansas City Royals. To the Mets fans, all I can say is you had a great playoff run and I know what it is like to see 25 players from the other team celebrating a World Series win on your home turf.

To see at YouTube video of Hosmer’s dash home to score the tying run in the 9th, click here.

Visit FCPA Compliance and Ethics, hosted by Thomas Fox, for more commentary on FCPA compliance, indemnities and other forms of risk management for a worldwide energy practice, tax issues faced by multi-national US companies, insurance coverage issues and protection of trade secrets.

This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.

© Thomas R. Fox, 2015

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