Communicating compliance

Organising cooperation across competing claims.

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Both compliance management and corporate communication have expanded their fields of activity in line with their growing importance for corporate management.

This raises five organisational questions:

  • How can we define the roles and responsibilities of both functions in a practical way?
  • Which objectives can only be achieved through cooperation between both functions?
  • Which organisational and procedural interfaces are necessary to make this happen?
  • In which areas do the tasks of both functions overlap? 
  • Which conflicts can results from these overlaps and how can they be avoided or resolved?

The establishment of compliance management as a corporate function was driven by the same reasons that also fuelled the breakthrough of the stakeholder approach to strategic management.

An increasing number of industries find themselves in the firing line of socio-economic conflicts. Increasing regulatory scrutiny and lawsuits indicate a growing alienation between societies and businesses that threatens the latter’s licence to operate. The triggers of these conflicts can mostly be associated with one of two areas where large corporations have been especially prone to fail: governance and social/environmental responsibility.

However, not all companies within an industry face the same issues. Some do better than others in terms of business ethics and conduct as well as paying their dues to communities in which their market activities are taking place.

The harmful potential of being accused of wrongdoing is especially high for companies with an outstanding reputation: the more prominent they are and the better they are perceived by stakeholders, the easier and deeper they can fall. Accordingly, the broader approach to corporate communication called reputation management targets the same problems that companies have been trying to tackle through implementing compliance management systems.

Changing the rules

The broadening of the concept of public relations requires going beyond deploying owned and earned media to spreading key messages to employees and external mediators such as journalists or semi-professional information hubs on the internet.

Modern corporate communication demands direct involvement with stakeholders – not only talking to them but also listening. Instead of propaganda, communication managers need to dialogue with all groups and individuals who have to cooperate (or at least refrain from obstruction) if the company is to achieve its goals. Evoking and stabilising positive (or at least neutral) behavioural intention is the key assignment of executives in charge or corporate reputation management.

When the pioneers of reputation management were looking for a way to systematically explore how stakeholders perceive a company, they developed a tool called Reputation Model. These models consist of six to nine dimensions constituted by small batteries of indicators which are the backbone of the surveys used for stakeholder research.

One of these reputation dimensions is usually business ethics. Whereas all other dimensions are driven by indicators describing the desired behaviour of a company, business ethics are defined by what stakeholders do not want the company to do. A typical example is the indicator battery for this dimension in a reputation model used by a pharmaceutical company:

  • No illegal influencing of medical doctors
  • No lobbying against patient interests
  • No misleading ads or claims
  • No abuse of underprivileged for clinical trials
  • No drug testing on animals
  • No unfair treatment of business partners
  • No breach of ethical standards and code of conduct
  • No employee discrimination of any kind
  • No exploiting of workers in developing countries

That these reputational aspects are closely related with compliance management is obvious. The critical question is how to differentiate the tasks of compliance and corporate communication management and to organise the cooperation of both functions.

"The critical question is how to differentiate the tasks of compliance and corporate communication."

Both management tasks need to involve a broad range of management functions in order to establish and maintain a framework for the alignment of employees and their activities with the goals, values and rules of the company.

Both functions derive their organisational relevance from the ability to implement communication processes aimed at safeguarding key stakeholder relationships. Not only do compliance managers have to establish systems for monitoring and steering corporate compliance but they also have to create a culture that fosters intrinsic adherence to the code of conduct. This requires not only training measures but also intensive internal communication and alignment with the management of corporate identity and branding – i.e. activities within the field of competence claimed by corporate communicators. The same goes for making use of opportunities to leverage successful compliance management measures for public relations activities targeted at strengthening the corporate reputation.

There is only one target group that compliance communication can address on their own: compliance managers. All other internal and external stakeholders who need to be involved belong to other corporate functions (see Table 1).

Table 1: Ownership of target groups of compliance management

Working towards a stronger role

If compliance managers want to expand the range of audiences that they are officially in charge of, they need to do two things: (1) gain access to and establish relationships with more internal and external stakeholders and (2) improve their skills in communication, controlling and strategic management. Progress in both areas will substantiate the claim for a stronger role in organisational development. It will also provide compliance managers with opportunities to assess their current positioning, identify gaps and approaches for closing them. Such an assessment can include the following questions:

  • How does top management value compliance management?
  • Which tasks are officially assigned to the function?
  • Which targets for compliance management were agreed with senior management?
  • What do executives expect implicitly from compliance managers?
  • How are progress and success of compliance management measured?
  • What do compliance managers report to whom in which way?
  • What feedback is provided by the recipients of the reporting?
  • Which activities are run by compliance managers on their own that are not sufficiently valued?
  • What can be done to get more credit for these activities?
  • Are there activities of other functions that compliance managers can execute better?
  • Which corporate functions can complement the service offer by compliance management?
  • Which services does compliance management offer to other functions?
  • Who makes use of these offers how often and how intensively?
  • Do those who use them pay for these services – if yes: how much?

According to a 2014 professional survey of the German association of compliance managers (BCM) among 343 senior executives in German companies there is significant room for improvement with regard to the skillset of compliance managers. The survey conducted by the Quadriga University of Applied Sciences Berlin under the leadership of Professor Dr Henning Herzog revealed that: 48 per cent of the responding executives didn’t feel sufficiently informed about what compliance management actually does and which services they can request from it; 50 per cent found it necessary to integrate compliance management in corporate controlling; 90 per cent said that compliance managers need strong communication skills but only 62 per cent said that the compliance managers in their organisation are possessing them; 81 per cent saw the ability to cooperate with other managers as a key requirement but only 66 per cent saw the compliance managers in their organisation fulfil it; and 60 per cent asked for leadership skills but only 46 per cent recognised them with their compliance managers.

Table 2: Importance vs. fulfilment of skill requirements for compliance managers as judged by senior executives Source: Berufsverband der Compliance Manager (2014): Wie sehen Führungskräfte in Deutschland den Compliance Manager? p. 108

As a consequence, the survey’s respondents rely on the ability of compliance managers to help avoid inappropriate behaviour and negative headlines as well as to contribute to building trust and a positive image. However, they don’t see compliance managers playing a significant role in informing and motivating employees, in value creation or in stakeholder dialogue.

This opens two roads toward effective compliance communication: compliance managers can either improve their own skills and fight for this task or partner with the specialists in the corporate communication department. Maybe the best option is to do both. 

Executive Summary

  • Compliance management and corporate communication have both grown in scope and in importance for management. Therefore, measuring their similarities, differences and overlapping tasks is important, as is identifying ways in which they can work together to achieve strategic goals.
  • Both functions derive their relevance from the ability to implement communication processes aimed at safeguarding key stakeholder relationships.
  • To expand their audiences, compliance managers must (1) establish relationships with more internal and external stakeholders and (2) improve their skills in communication, controlling and strategic management.

Christopher Storck

Dr Christopher Storck is professor of strategy and communication management at Quadriga University, Berlin. He also serves as managing director at Hering Schuppener, advising corporate clients in strategy communication and corporate brand and reputation management, communication strategy and controlling, communication management, and organisational development.