Corporate Change: How Does It Happen?

by Michael Volkov
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changeco6What does it take for a company to embrace change?  How does change in an organization come about?

Companies do not just wake up one day and embrace change.  To the contrary, companies grow into change in several different  ways – sometimes business necessity leads to change, sometimes companies proactively embrace and seek out change, and sometimes change comes from a government enforcement action.

The easiest road to change is when it coincides with financial needs.  A company is growing and is profitable.  It needs to grow in order to increase profits and take the company to the “next” level.  Change is quickly embraced and adaptation is expected of all participants.  It is imperative to the company’s future for change to occur.

When financial interests coincide with change interests, compliance and other “support” functions, defined as non-income producing operations, should grow with the increase in corporate operations.  Often there is a lag since no one pays close attention to the support functions when financial and operational needs dictate an expansion or change through organic growth or acquisition.

At the other extreme of the change continuum is government intervention or enforcement.  In those cases where an enforcement action occurs, the government often prescribes changes to compliance programs, resources and policies.  It is not just limited to FCPA enforcement.  If you look at a Corporate Integrity Agreement used in HHS enforcement matters, you will see detailed compliance requirements, far beyond those required in a “typical” FCPA enforcement matter.

The government can impose a range of requirements, stretching all the way to a compliance monitor.  While companies vigorously oppose the appointment of a monitor, if you ask companies how their compliance programs look after the monitor leaves, they will candidly tell you they like the new compliance program and the improvements required by the government and the monitor.changeco5

In the end, the government can bring about change – but this is change on the government’s terms, with some resistance and input from the company.

The middle ground – which is vast – encompasses a range of situations.  Change from an external requirement – market conditions, environment, enforcement environment or other issues outside the control of the company – to internal organic change which is the result of actions taken by corporate leadership.

In the middle ground, corporate leadership, particularly the CEO, is going to dictate whether and how change is going to occur.  This is where the rubber meets the road – is the CEO a visionary?  Is the CEO willing to embrace change based on how he or she weighs various internal and external factors?

changeco7A CEO can lead a company or he or she can manage the company by resisting change.  I am not advocating change for change’s sake, but all too often we are hearing about CEOs who failed to recognize the need for change or reacted too slowly to change.  It is easy to understand how a CEO can lose touch with an organization and fail to see the issues which need to be addressed to move the company forward.

Risk is not good just for risk sake.  But calculated risks are how people survive and achieve.  God CEOs recognize that leadership in many respects boils down to calculated risk and subjective judgment calls.  That is the way of the world.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Michael Volkov, The Volkov Law Group | Attorney Advertising

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Michael Volkov
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