Compliance Programs As Knowledge Networks

by Thomas Fox

The more I read articles about management and business systems, the more I am convinced that compliance with anti-corruption laws such as the Foreign Corrupt Practices Act (FCPA) or UK Bribery Act can be viewed as a formative business process. In this month’s issue of the MIT Sloan Management Review, in an article entitled “Designing Effective Knowledge Networks” authors Katrina Pugh and Laurence Prusak explore how companies can help to facilitate desired behaviors and outcomes by paying attention to the dimensions of knowledge network design.

The authors begin by noting that knowledge networks are as old as humanity itself. They define knowledge networks as “collections of individuals and teams who come together across organizational, spatial and disciplinary boundaries to invent and share a body of knowledge. The focus of such networks is usually on developing, distributing and applying knowledge. For-profit and nonprofit organizations of all sizes are seizing on this model to learn more quickly and collaborate productively. However, for every successful network, others have lost steam due to poor participation, goal ambiguity, mixed allegiances or technology mismatches.” What intrigued me about this concept was that if you think of a compliance regime as a knowledge network of how to do business ethically and in compliance, the authors have some key concepts to help you in your system design.

I.                   Framework for Knowledge Network Effectiveness

The authors begin by setting out a framework to capitalize on the “cohesion, conversation and connectedness” of a knowledge network. It all begins with an outcome, which is then calculated to meet your area of focus, which, for the compliance practitioner, is your compliance program. Next are the Behaviors, which the authors deem to be “conducive to outcomes: cohesion, demonstration of trust, connection sharing, using a common technology platform and making investments in collaboration”. Here the key is that network members are committed to “moving knowledge sharing to the platform so that everyone can benefit” from it. Next are the Dynamics, which are defined as “feedback loops, the systems and structures that sustain a given behavior. Dynamics can also be patterns of interaction with the outside world, such as reactions to market threats and incentives.” Finally, the authors detail the Design/Construction of the network. This final framework component “encompasses the set of conditions that network leaders explicitly put in place to trigger those dynamics and, in turn, set behaviors into motion.”

II.                 Eight Design Dimensions of Knowledge Networks

The authors identified eight performance information techniques and incentives to move behaviors forward. These eight design dimensions encompass three general concepts; those being Strategic, Structural and Tactical.

A.    Strategic

  1. Leader’s Shared Theory of Change. Here the authors said that leaders can describe the mechanisms through which the “network activities will have an impact on” its members and the organization. It is important so that everyone is well aligned and acts consistently.
  2. Objectives/Outcomes/Purpose. The authors state “leaders help define the network’s purpose and target outcomes. Outcomes can be solving a specific problem or combining forces and knowledge. They can be classified as one or more of the network goals described earlier, such as support of individual members.” They further advocate that a “charter or similar document lays out the network’s objectives and purpose, which need to be sufficiently crisp that members can state them.”
  3. Role of Expertise and Experimental Learning. Interestingly the authors believe that safety and respect are critical so that members will feel like they can speak out and speak up. It is critical that those persons who have the most knowledge do not dominate all of the proceedings. Leaders who understand the disparity of knowledge in their team members can “set a tone of safety and humility.”
  4. Inclusion and Participation. This part is key for the compliance practitioner because a knowledge network does not exist in a vacuum. There are always operational or other competing organizational models. It is not necessarily convergence but rather to “balance technical or operational expertise with convening or networking skills.”

B.     Structural

  1. Operating Model. Under this step “Knowledge network leaders decide what roles, responsibilities and decision processes are needed for optimal network operations. All stakeholders, including the public, should be described in the operating model, and there should be clarity about how resources are allocated.” However this step is dynamic and not static as operations can change over time and “the core leadership team may rotate to add fresh ideas and reduce burnout.”
  2. Convening Structures and Infrastructures. Under this piece, the authors proposed that leaders should use all the business’ communications tools available, stating “online and real-time or live convenings serve to build cohesion, connectivity, collaboration and engagement.” The amount of “face-to-face and voice-to-voice interaction depends on the network objectives. Rapid idea development and innovation require live discussions (online or in meetings), while intellectual capital management requires document management and broadcast communication.”
  3. Facilitation and Social Norm Development. Here the authors suggest that knowledge network leaders should “take on the roles of facilitators and change agents, not just project managers.” To do so, they “could agree about how to model and develop positive interactions within the network.” Many prevailing social norms, “such as inclusion, openness, transparency, accountability, curiosity and quality” should therefore be integrated explicitly into the facilitation processes.

C.    Tactical

  1. Measurement, Feedback and Incentives. Network leaders should look for evidence of the success or failure of participation in the network. Once again this is key for the compliance practitioner. The metrics must be both “credible and appropriate in terms of effort and relevance.” This database can be viewed monthly, quarterly or on different time frames but the key is to use the data to assess where you might be going and what improvements you might need to made. The authors end this point by stating that “High-performing network leaders manage to minimize bureaucratic review and tie performance to incentives quickly so that members feel pride, connection and even healthy competition.”

III. Conclusion

I found this article very useful because it presented many of the concepts that a compliance practitioner must work through in the implementation or enhancement of a compliance program. While the authors’ presentation was focused on knowledge networks, if you accept that a compliance program is really a network of knowledge which helps guide employees on how to conduct business in compliance with anti-corruption laws such as the FCPA; I believe it can help to do business within the guidelines of a best practices compliance program.

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.

© Thomas Fox, Compliance Evangelist | Attorney Advertising

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Thomas Fox

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