It is hard to remember a time when CNN was not a part of the now 24 hour news cycle, yet before it premiered there were three major networks with trusted anchors that gave us the news at 5:30 CT each night. The news came either before or perhaps with dinner. But all that changed on this date in 1980, when was CNN launched. Originally monikered the Cable News Network, CNN was the brainchild of Ted Turner, the “Mouth of the South” who was a proponent of the Superstation TBS, which broadcast across the country, making many non-Southerners huge Atlanta Braves fans. CNN really came into its own during the first Gulf War when it became the leading new source for most Americans.
I thought about Turner’s brilliance in first his creation of the Superstation and then the 24 hour news network when reading a recent Harvard Business Review (HBR) article, entitled “Eliminate Strategic Overload”, by Felix Oberholzer-Gee in which he posits that to have initiatives with greater impact you should select fewer initiatives. He believes, “by selecting fewer initiatives with greater impact, companies can make their strategies more powerful.” He calls such initiatives “values-based strategies.” A strategic initiative is worthwhile only if it does one or more of the following: (1) it creates greater profitability, (2) it creates greater value for employees; or (3) it creates value for other stakeholders, such as suppliers. This trichotomy should be at the heart of any strategic decision made by a Chief Compliance Officer (CCO) or compliance function.
Greater Profitability. I posit that more effective compliance equates to more efficient business processes to greater profitability. If the corporate compliance function finds ways to innovate or to improve existing processes then that greater efficiency should lead to greater return on the compliance function investment (ROI) and thereby greater profitability. While in the consumer world, “Apple gets to charge a price premium because the company raises the customers’ WTP by designing beautiful products that are easy to use” and “Gucci increases customers’ WTP by creating products that confer social status.” For the CCO, the key is increase efficiencies for each part of a compliance process, which can include third party risk management life cycle; gifts, travel and entertainment expenses or the internal reporting process, from initial report to investigation and remediation and closing.
Here the author pointed to the example of Best Buy which made a major strategic shift in 2012. Previously, Best Buy had seen its website and internal competition for its bricks and mortar concept of the big box store. It was losing sales to consumer products leaders such as Amazon and Walmart. But Best Buy moved to using the website as a marketing tool to consumers, giving them information about products, sales and delivery times which drove them into the stores in far greater numbers and leaving with the product in their hands. This type of change created greater business efficiency. How can your compliance function better use your corporate website or phone app to deliver compliance solutions?
Creating greater value for employees. While the view is certainly lessening, compliance can still suffer from being the Land of No. The initial goal was to move compliance to be seen as a ‘Trusted Partner” but now, compliance needs to move to being seen as a business enabler. By creating greater value for employees through compliance, this next iteration of compliance can be achieved. A value-focused initiative will “think holistically about the needs of their employees” so companies can move much more rapidly toward this next phase of compliance which will drive improved financial performance.
Value drivers for employees can serve as innovation engines for attributes that describe your compliance product or service. This has two advantages. The first is that value drivers are useful for analyzing the existing compliance process. It can well be a “straightforward task to link a given value driver to operating models and KPIs and to compare performance.” Equally important, such an approach “can be helpful in thinking about opportunities, because they don’t specify in any detail how you will meet a particular” compliance need. This will enable a CCO to explore new ways to improve compliance services to employees. Finally, by “focusing on value drivers, rather than patterns of past success or industry trends, you are less likely to equate business success with selling more of what you already offer” to your employees.”
Creating Value for other stakeholders. A corporate compliance program rarely considers additional stakeholders in new initiatives. This is a missed opportunity. In addition to the Business Roundtable’s Statement on the Purpose of a Corporation and its identification of five different stakeholder interest, the COSO 2013 Internal Controls Framework specifically talks about third party interests which should be incorporated into your internal controls framework. Consider the creation of “value for suppliers by reducing their operating cost. Like employees, suppliers expect a minimum level of compensation for their product. A company creates value for its suppliers by helping them raise their productivity.”
The author cautions that you should “Resist the temptation to play catch-up.” The compliance function should not simply determine “where their company lags” as the “ability to capture value depends on differences in value creation.” Your goal as a CCO is “to increase differentiation, not to close gaps. Insist on making trade-offs and where to focus their energy and resources.”
The author concludes, “every strategic move, every idea that comes across their desk, through the lens of value creation.” Unless an initiative creates value by creating greater business profitability through greater efficiency or creates greater value for employees or other stakeholders, such as suppliers, it should not be considered. Creating greater value through greater business efficiencies, for employees and other stakeholders, should be at the center of your compliance strategy. This will lead towards value creation as reflected in every decision made by employees at all levels of the organization. The focus on creating value shows up in big strategic plans and in small everyday choices.
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