Leadership in Steering Compliance: Unintended Consequences & Judgement

Piet Calitz
Do we consider the ability of leaders to deal with compliance matters when we appoint them?

Technological innovation has led to big jumps in how we think about and manage organisations. This applies especially to the myriad of possibilities opened up by individual access to and ability to use electronic information. The vision of a ‘paperless office’ certainly seemed feasible a decade ago.

Yet today we seem to battle with mountains of paper, and perhaps more than a decade ago. This is often a result of organisations facing increased regulation and having to manage compliance. In short, dealing with compliance has become a major part of a leader’s day.

Regulation and compliance are often viewed as unnecessary; as red tape that prevents leaders from doing their real work. Valid objection to regulation, or concern about compliance required following from regulation, would normally be twofold:

  • The-cure-may-be-worse-than-the-disease: This is about the appropriateness of the purpose of the regulation. Will the regulation truly address the situation or problem it is aimed at? Is there really a need to take action or address the problem/situation at all? Will the regulation not cause more unforeseen difficulties in other areas over time? The net negative may be that regulation aimed at curtailing individual judgment inevitably leads to unintended consequences.
  • One size-fits-all: This is about the jump from the intention of the regulation to its implementation, or the compliance required by the regulation. Providing information may have its own inherent difficulties; but prescribing behaviour cannot cater for the multitudes of different circumstances. These circumstances include organisational-specific aspects, organisational complexity and size, industries, sectors and environments.

Thus, unfitting compliance requirements may encourage ‘checklist’ adherence to the letter, as opposed to the spirit, of the regulation.

Small wonder then, with everything that leaders already have on their plates, that they may be tempted to ignore, sidestep or completely delegate such responsibilities to others. Delegation may work with compliance that is mostly procedural in nature, or related to the provision of information.

The concern would be with the unintended consequences of compliance. Some of the outcomes of compliance may not or could not have been anticipated. In such instances, the outcomes of compliance may be at best wasteful and at worse destructive.

Yet how do we foresee the unforeseen, how do we anticipate the unintended consequences?

A core requirement for the appointment of leaders is their ability to consider and make decisions based on the context. Context here is the embeddedness of the organisation within a broader society and environment, as well as in specific locations where the organisation may be based. Considering the context requires that leaders should approach compliance from the perspectives of foresight and oversight.

Foresight requires leaders to make sense of regulation or compliance within a context and over time. This is judgment about the impact of the regulation in the long term; both for society and the organisation. It is about the intention or the spirt of the legislation, not necessarily how it is formulated nor how it is implemented.

On the one hand the leader may decide that the regulation needs to be opposed since it is not good for society. In such instances, the leader needs to select the appropriate way or forum. In other cases, it may well be that the regulation is crucial in the longer term, but not necessarily in the interest of the organisation. It will then be incumbent on the leader to develop the groundwork for such insight to be shared, as maybe required, with the stakeholders, shareholders and staff of the organisation.

At times regulation may be more operational in nature. The leader’s involvement then would be that of oversight; of ensuring that the right people, structures and review mechanisms are in place. In this way, the demands of compliance can be met to manage the potential risks intended to be addressed by the compliance.

This is the compliance than can be delegated, although the leaders should ensure feedback mechanisms to alert them to changes to existing compliance requirements.

The unintended consequences may not be immediately apparent to all and may take time to become visible. Thus, leaders also need to exercise judgment in terms of the patience required. Such patience may take the form of knowing that it will take time before the message can be heard. This is a preparedness of not being too early with a message for audiences not yet ready to receive the message. This is the patience following from laying the groundwork for a message that will only be heard later.

Judgment as patience may also be its own opposite as impatience in terms of what needs to be fixed now. This is the identification of areas that must be addressed with urgency.

As organisations and technology innovate it will not mean that compliance will go away. Instead regulation may spread and become more complex and time consuming. This is an inevitable consequence of societies and political systems coming to grips with and responding to what organisations are doing.

For leaders, the management of compliance will stay part of the job. Perhaps compliance will become an even more substantial part of their time, energy and attention in future. Leaders will have to ensure that they have the right mental models, strategy, structure and people in place to facilitate their own foresight, oversight and patience…

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