A business leader calls a Chief Compliance Officer (CCO) difficult after a proposed distributor fails to provide basic ownership information. The transaction is important to the quarter. The CCO has asked for the missing information, explained the concern, and identified what is needed to proceed. In the performance discussion that follows, the focus shifts to whether the CCO understands the business.
This hypothetical presents a governance question. Did the CCO handle the matter poorly, or did an appropriate challenge expose a business practice management would prefer to leave alone? The answer requires evidence about the decision, the CCO’s conduct, and the operating environment. A label provides none of that.
Luis Velasquez examines this diagnostic problem in Why Effective Leaders Get Branded as Problems, published in Harvard Business Review. He identifies four sources of leadership friction: genuine skill deficits, historical reputation, overextension of a leadership strength, and organizational barriers. His framework provides a useful starting point for evaluating CCO effectiveness while protecting the independence necessary to perform the role. The compliance applications below build on his analysis.
Diagnose the Conflict Before Evaluating a CCO
Velasquez describes an evaluation trap in which organizations treat visible behavior as the explanation for friction while giving insufficient attention to context. Once a leader acquires a negative reputation, subsequent assessments can reinforce it without testing whether the original diagnosis was sound.
For compliance, this creates a particular risk. A CCO’s responsibilities include raising concerns that may complicate a transaction, challenge an executive, or require management to change an established practice. Friction can arise while the function is doing its job. It can also arise when compliance communicates poorly, applies inconsistent standards, or takes too long to decide. An effective evaluation must examine both possibilities.
Start with the event behind the criticism. What decision was required? What information was available? What did the compliance request say, when, and why? What alternatives did a CCO identify? Which actions by the business affected the outcome? These questions create a basis for assessing performance without assuming the conclusion.
Address Genuine Skill Gaps Directly
Velasquez’s first category recognizes that leaders sometimes lack a necessary capability. Applied to CCOs, relevant gaps may include unclear communication, weak prioritization, insufficient business knowledge, or ineffective delegation. Consider a CCO who repeatedly sends lengthy technical explanations without identifying the decision management must make. Executives may reasonably struggle to act on the advice. Similarly, a compliance team that treats every request as equally urgent can consume resources while delaying matters that warrant immediate attention.
Those are legitimate performance concerns when supported by recent examples and a clear account of their consequences. Agree on the improvement required, provide support, and assess the result. Independence does not excuse disrespectful conduct, poor execution, or unsupported recommendations. It gives a CCO room to exercise judgment while remaining accountable for the work’s quality and delivery. A sound review evaluates whether a CCO explains concerns clearly and helps the business identify acceptable ways forward where they exist.
Replace Old Reputation With Current Evidence
Velasquez’s second category concerns historical reputation. A leader may change while the organization still relies on an outdated account of how that person operates. A CCO who joined during a serious control failure may initially have imposed tight review requirements. Years later, colleagues may still describe the function as inflexible even after it has introduced clearer thresholds, delegated decisions, and improved turnaround times.
The evaluation process should test whether the criticism reflects current experience. Ask for specific recent interactions, the applicable requirements, and the outcome. Compare those accounts with evidence of how the process now works. Older incidents may remain relevant, but explain their continued significance rather than assume it.
A CCO can contribute by demonstrating improvement through current service measures, examples of resolved issues, and feedback from people who use the process. The objective is an accurate assessment. Favorable anecdotes alone are no more sufficient than a repeated negative label.
Recognize When a Strength Needs a Different Application
Velasquez distinguishes a missing skill from a strength used too broadly. That distinction matters for a compliance leader whose career has rewarded detailed review and personal control of important decisions. Those habits may help stabilize a troubled program. As the business grows, the same approach can create bottlenecks if routine matters still require a CCO’s personal involvement. The leader needs to develop the team and establish clear decision authority while retaining appropriate escalation for significant concerns.
The response should specify where judgment can be delegated, what standards apply, and how quality will be checked. This preserves the value of careful review while changing how it is delivered. A CCO should be willing to examine this possibility candidly. A complaint about delay may reveal poor business planning, an overly centralized compliance process, or both. Correcting one cause does not remove the need to address the other.
Examine Whether the Organization Undermines the Role
Velasquez’s fourth category addresses organizational barriers involving culture, resources, incentives, and decision rights. This is where the implications for compliance independence become particularly significant.
A company may require review before engaging a third party while rewarding executives who commit to start dates before review begins. It may expect timely investigations while restricting access to relevant records. It may ask a CCO to escalate serious concerns and then criticize the escalation as a failure to collaborate.
In each case, evaluate the contradiction alongside a CCO’s response. Coaching the leader to communicate more effectively may help, but it cannot supply missing authority or correct an incentive that rewards bypassing controls. A CCO should document the constraint, its practical consequences, and the proposed correction. Management should identify who will resolve it and by when. Repeated, material barriers belong in discussions with the responsible board committee, particularly when they prevent the function from carrying out agreed responsibilities.
Make Board Support Concrete
Board support for a CCO should be visible in the governance process. Directors need access to an account of significant compliance concerns that explains the facts, management’s response, and any unresolved differences. The responsible committee should also understand the basis for material criticism of a CCO’s performance. Where criticism arises from an executive whose conduct or decisions compliance has challenged, that context warrants examination. It does not automatically invalidate the criticism or establish retaliation.
An appropriately independent review should consider the substance of the concern, how it was raised, and the evidence behind any proposed personnel action. Human resources, legal, and the relevant board leadership should have clear roles consistent with the company’s governance arrangements. Regular private discussions between a CCO and ELT leadership (or the appropriate board committee) can help surface barriers before a performance dispute becomes entrenched. Directors should ask whether compliance has the access, resources, and authority needed to deliver what management expects.
Evaluate Effectiveness With Measures That Fit the Role
An evaluation based heavily on executive satisfaction can discourage necessary challenge. A review based solely on activity counts provides an equally incomplete picture. Assess the quality and timeliness of advice, the prioritization of risk, the development of the team, and the follow-through on significant issues. Consider whether recommendations are supported and whether remediation addresses the underlying problem. Business feedback remains useful when it is specific and examined in context.
The central discipline is to evaluate the work and its consequences. Agreement with management is not a reliable measure of effectiveness; disagreement alone does not demonstrate courage or sound judgment.
Action Steps for the CCO
Use Velasquez’s framework to improve how performance concerns are examined:
- Ask for specific evidence. Identify recent events, decisions, and consequences behind broad criticisms. Respond to substantiated concerns directly.
- Test all four explanations. Examine skill gaps, outdated reputation, overused strengths, and organizational constraints. Recognize that more than one may contribute.
- Agree on meaningful performance measures. Include advice quality, timeliness, prioritization, team capability, and remediation follow-through alongside contextualized business feedback.
- Document barriers to effective execution. Record missing resources, restricted access, conflicting incentives, or unclear authority, with proposed corrections and accountable owners.
- Establish a credible board review process. Clarify escalation and evaluation arrangements so significant concerns about a CCO and constraints on the role receive informed consideration.
Effective compliance leadership requires both sound judgment and the ability to make that judgment understood. Organizations strengthen accountability when they evaluate those capabilities fairly and address the conditions that prevent a CCO from using them.
