The Hats of HR- Part 4: Compliance Officer.

This is a free article you might find interesting. It’s also a sample of our knowledge and how we can help you get a bit better at your job, and/or how we can help you fix a problem. If you’re interested in our consultation services, contact us.

This should go without saying but disclaimer: The information provided below is for general informational purposes only and does not constitute legal, financial, medical, or other professional advice. You should consult with a qualified professional for specific advice tailored to your circumstances.

If you’re interested learning more about this topic, managing risk is very relevant, or you can find all of our courses here.

The yuck hat.

Let’s not pretend that it’s not. No one likes this part of the job. But it’s got to be done, and we’ve got to do it, because someone has to, and better HR than others.

Listen here for more on the HR vs P&C identity crisis.

What specifically are we talking about?

What is compliance and why is it a bad word?  Compliance is adherence to rules and requirements, a compliance department ensures that the organisation adheres to external rules and internal policies.  The extent to which we dislike them (if at all) depends on our attitude to rules; are they guidelines?  Sacrosanct? There to be broken?  Something that we be in big trouble with it was found out that we broke?

This article is a deep dive into the concept of compliance.  Strap in. 

Read here, here and here for the other hats (so far)

Types of rules

I use the term ‘rules’ for a specific reason; it’s a catch-all terms for a range of prohibitions on behaviours with varying levels of strictness.  To expand through examples; we have criminal law, civil law, government policy, government guidelines, organisational auditable rules, company policies, manager expectations, workplace norms- all a sliding scale of rule strictness, penalties and enforceability.  

In an industry, there may be laws that someone might go to jail for if they break them, there might be rules that if non-adherence to them is discovered in an audit, may result in the company losing certification (e.g. their export license).  By comparison, internal policies may exist around internal recruitment which is more a ‘best practice’ rather than rigorous followed.  In short, some rules are serious laws with serious penalties, others are ‘more of a guideline’.   Some are just social expectations, where the consequence is no more than an arched eyebrow and a tut.

Read here for more on the recruitment process.

Read here for more on how people react to be being dismissed for breaking rules.

Attitudes to rules

As well as variation in the strictness of the rules in question, we also have cultural variations in adherence to rules.  As collective groups, some cultures are more likely to follow and adhere to rules than others.  We also have individual differences, with some people more attuned to rules and anxious at breaking them, some more cavalier.  So we not only have different types of rules to follow with differing levels of expected compliance, but different likelihood for groups and/or individuals to follow them.

Tax is a good example of this, because the question of what is tax avoidance, and what is tax evasion, is a natural grey area.  Tax evasion can be a serious crime, with many high profile historical and current people going to jail for it.  Whereas some places the practice of tax avoidance is widespread, and often a complaint leveled against a society’s rich.  During the Grexit crisis of the early 2010s, tax avoidance was considered a part of the problem, as 24.3% of the Greek economy went largely untaxed (although not the only, or even worst in the EU), which was reported to be a problem for those countries funding the bail out packages.

Read here for another area attitudes can differ-swearing.

Entrepreneurial spirit and business growth cycles

But cultural attitudes also include organisational cultures.  A good example (but not the only example- if you have time, read up on the Enron collapse), is the entrepreneurial spirit.   This is somewhat of an oversimplified trope that doesn’t apply to all start ups, but often small, entrepreneur business identify with an attitude of innovation, creativity, flexibility and a ‘just get it done’ attitude. 

Entrepreneurs, and/or organisations that consider themselves to be entrepreneurial, are frequently characterized by an indifference or frustration with unnecessary constrains on their decisions.  Entrepreneurs are more likely to fire someone than follow a performance management process, or at least grate against the laws constraint upon them.

Within the well-established theories on business life-cycles is the transition from an entrepreneurial to a structured business.  As the business grows beyond the capacity of one leader to control, guide and decide to structured practices and delegations of roles and responsibilities, organisational cultures often struggle with rules based coordinator, and romanticize the ‘good old’ entrepreneurial days.

Read here for more on how you need to know the business’ strategy.

Listen here as well for how business strategy informs HR.

The prisoner’s dilemma of business rules

One of the most interesting thought experiments every created is the prisoners dilemma.  If you’ve not come across it, I recommend reading a better explanation than my summation.  Essentially, a two man team of criminals is captured, separated, and interrogated.  The dilemma for each is that if they follow the agreement not to talk, they’ll suffer major consequences if they other doesn’t. 

The prisoner’s dilemma also occurs if a form between competing companies; if they are the only one following the rules, they’ll suffer a disadvantage, and maybe go out of business.  We will see a lot of ‘bending’ of rules in highly competitive, low-margin industries, where the risk of getting caught is weighed against losing customers to competitors who may (or may not) be cheating on the rules. 

In short, rules get in the way, and if you can dodge them, you can get an edge on the competition. But….rules are there for a reason, and most rules have consequences.

Listen here for more on how HR can be involved in risk decisions.

The HR role of compliance

So to re-surface after that deep dive, what is HR’s role? A couple of keep points to consider. 

Firstly, there are different types of rules, which have different levels of consequences, so not all are weighed evenly.  I would imagine you would never agree with criminal conduct, but it’s not impossible that you could approve of a decision that could be found to be wrong and consequently penalized, if the cost of the action is less than the cost of inaction.  Sometimes a risky dismissal is better than retaining a risk to the business.

Secondly, the organsational culture will have a collective attitude to rules. Some cultures are highly compliant, some have a very relaxed attitude to the rules.  Understanding the tone of the organisation is important to understanding your part.  However, most of the time this attitude isn’t rigid, isn’t set-in-stone, but a loose and vague aggregate of individual opinions and underlying national culture.  In this situation, you have an opportunity to influence and move this attitude.

Listen here for more on manager attitudes to holding people to account.

Thirdly, it’s your job.  Regardless of your own opinion, or comfort with conflict, it’s your job to assess, appraise, then approve or not approve, of course of action and whether it adheres to internal or external rules.  People ‘run things past HR’ to see if they are within the bounds of legal or policy requirements, and afterwards rely upon any seal of approval (formal or informal) you’ve given.

Listen here for more on why people are happy to do things they would otherwise prefer not to do.

Other similar articles:

Podcast episodes:

If you have a few seconds, we appreciate any feedback: