Welcome to a special five-part blog post series on how to unlock the gold in your program. I visit with Gio Gallo and Nick Gallo, Co-CEO’s of ComplianceLine, LLC, the sponsor of this series.
One of the ongoing issues in compliance is to demonstrate the Return on Investment (ROI) in your compliance program. One way to do so is by demonstrating the extended value of compliance literally across your entire company. When overlaid with an ESG component, you can begin to see the gold in your compliance hills. In addition to showing how you can unlock the gold in your own compliance hills, Gio and Nick discussed demonstrating ROI for your internal budgeting process which can provide to you the financial resource to strengthen and improve your compliance program. Today, in Part 2, we consider how a corporate compliance function not only extends its value across an organization but demonstrates the value add of a robust compliance function in improving overall business ROI. It is a way of thinking about your compliance that many compliance professionals fail to grasp.
We began with an exploration of how a finance professional will view things differently from the compliance professional. This is important because there really is a different mindset or at least a different lens that a corporate finance function brings, separate and apart from the compliance function lens. As Nick explained, “in the finance game, people make massive bets, investing hundreds of millions or billions of dollars on acquisitions with no real certainty around how something’s will play out. You do not know if a market will disappear; if the historical growth is going to repeat in the future; if your margin improvements are going to justify a massive purchase price.” Moreover, an “investment committee is really about pushing on those assumptions and saying do we really feel good about how we assume things are going to play out?” He emphasized that it is about “getting comfortable with that level of uncertainty about predicting the future and making bets that are foundationally built on assumptions.”
Gio emphasized that many compliance professionals either believe or are perceived to believe that a company’s bottom line can improve being less risky. However, from the finance perspective that can come across as “Fewer expenses, fewer risk of fines and things like that, or things can get better by growth and improvement. This means not simply getting more revenue but becoming more efficient and even attracting better talent.” Of course, less risk can mean less upside and many finance professionals are “used to jumping to both sides of that kind of gain and loss. This means revenue slash growth versus expense costs.” However, if, as a compliance professional, you can realize that financial professionals are trained to kind of look at the downside, “it can allow you to reframe your perspective and your approach.”
Nick emphasized, “it’s really about being opportunistic. You are opportunistically looking at this risk landscape for things that other people have not seen before.” It was this insight that I found so critical for the compliance professional. Starting with the Department of Justice’s (DOJ) Evaluation of Corporate Compliance Programs released in June 2020, it has become paramount for a Chief Compliance Officer (CCO) to have access to all company data. This necessitates working across corporate silos from the compliance perspective. It allows a corporate compliance function to have insights other functions do not have and allows compliance to “connect the dots”. Nick went on to state, “Once those light bulbs start to turn on, you can have some really powerful outcomes that you never thought would happen.”
We concluded with a discussion of the compounding effect of a corporate compliance program. Even legally trained compliance professionals have some understanding of compound interest. The compounding effect of a corporate compliance program is similar. Consider training an employee to become a compliance advocate and that employee later becomes manager. Gio related, “These are all these follow-on effects. That’s compounding.” Another way to consider this compounding effect is in handling an issue that comes into your hotline, so that person has confidence, and they tell some other people about it. Now there are five people who have confidence in your program and then two of them report. Then they tell five more people. You have this opportunity for compounding of your compliance scope. Gio added in this scenario, “I think we’re going to get 10 more reports this year. A CCO is also selling their program short if you are not drawing that line through the whole story to say this is going to well beat our 15% or three X ROI target. It’s going to blow it out of the water because there are so many ways that what we do in compliance touches the whole organization and those things compound naturally.”
The bottom line is that if you make these little changes, these 1% changes per year, that translate into 40 times impact over a 12-month period. You continue to make these small, incremental changes over time. Then the cultural difference in your organization relative to your competitors very quickly is going to separate in a nonlinear way. It’s in a separate, in a logarithmic way. And that’s where two, three or four years down the road, the real impact of the changes will become apparent the impact that we can have can really be compelling.
Check out the full podcast here.
Tag: Gio Gallo
Welcome to a special five-part blog post series on how to unlock the gold in your program. I visit with Gio Gallo and Nick Gallo, Co-CEO’s of ComplianceLine, LLC, the sponsor of this series. There is also a podcast on this topic and the link is listed below.
One of the ongoing issues in compliance is to demonstrate the Return on Investment (ROI) in your compliance program. One way to do so is by demonstrating the extended value of compliance literally across your entire company. When overlaid with an ESG component, you can begin to see the gold in your compliance hills. In addition to showing how you can unlock the gold in your own compliance hills, Gio and Nick discussed demonstrating ROI for your internal budgeting process which can provide to you the financial resource to strengthen and improve your compliance program. We begin Part 1 by considering how compliance can be seen as a corporate ROI multiplier by looking at the impact of compliance across your entire organization.
One of the most ubiquitous issues in compliance is making a case for ROI. Every compliance professional must be able to be able to justify not only their spending but their budgeting requests. However, as Gio believes, compliance professionals are “literally leaving some money on the table because there’s a lot more to this game than meets the eye.” It is important to understand not simply the numbers but also who you are talking to about ROI or budgetary requests. Also is the zero-mindset which is usually brought to the budgetary process. Many corporate officers feel that if their department does not receive funding those dollars go to another department, and vice-versa.
Gio emphasized that budgeting “is not a zero-sum game. If you can understand that being aligned with other departments, having some positive externalities that help someone else get their job done, or take some work from someone else’s plate, these are all things that you can align with this full company view.” Moreover, this allows you to portray you are not simply competing for dollars but putting in a richer attempt to serve the overall company mission. He emphasized it really takes a “broadening of your mindset not simply thinking about risk in the full company, but also thinking about the compliance budget as part of the whole.”
Nick added that many Chief Compliance Officers (CCOs) who come from a legally trained professional backgrounds handle budgets “like they are running a nonprofit, by minimizing spending, as opposed to like an abundance or growth mentality.” A CCO really does need to use a different set of frameworks when it comes to thinking through compliance ROI and budgeting, “fundamentally different than the binary sort of risk aversion frameworks that you’ll apply to managing an ethics and compliance department or building an FCPA policy or the like.” He concluded that it is all about taking a calculated risk.
Nick acknowledged that this might require making some assumptions, but it is also about doing some of the same things a compliance professional must do each and every day. We talked through the example of hotlines. Here you begin with a mandatory requirement for US public company for a hotline in Sarbanes-Oxley (SOX) all the way through a best practices compliance program, formulated by the Department of Justice (DOJ) in its most recent Update to the Evaluation of Corporate Compliance Programs. From the installation of the hotlines, all the way through the benefits of a speak up culture, a CCO should begin to show and build a picture that can be taken to senior management or the Board to represent the benefits internally and the types of ROI.
Nick noted this is “the exact arithmetic that we want to utilize. If you have a strong culture that people are engaged with their purpose is resonant with the organizational purpose. This means people expend more discretionary effort which falls directly to the bottom line. Moreover, if you love your work and you feel like your voice matters, and you’ve worked other places where your voice doesn’t matter, then you’re going to feel a particular allegiance to that organization. You’re going to appreciate that. Turnover is going to drop a little bit. All of those benefits will go directly to directly to the bottom line.”
But the conversation does not end there. Gio said, “part of this is a persuasion path, pointing to those outcomes, based on these inputs, which are a hotline or an improved case management system. Those are in my mind, extremely credible, especially when you can start to bring the finance people who are controlling purse strings into that calculation. And that’s what the basis of a lot of our ROI coaching has been not only getting those assumptions dialed in, but also building the persuasion path around the delivery of that message so that it lands in a way that is resonant with the you want to loosen those purse strings up.”
The bottom line is that as compliance leaders, we are “great at communicating the clarity that we have standing in and CCOs are also very good at dealing with the gray areas in the domain of risk management.” If, as the compliance professional, you can demonstrate the compliance function will “move the needle, from a risk management standpoint to not simply rectify the causes of those faster” but make the company run more efficiently, you can make a good case for increased budgeting and greater resources for your compliance program.
Check out the full podcast here.
Categories
Episode 086 – Alexander Hall
In this episode of The Ethics Experts, Gio welcomes Alexander Hall, founder of Dispute Defense and consulting board advisor at UNLV, to the show.
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Episode 081 – Jamal Theodore
In this episode of The Ethics Experts, Gio welcomes Jamal Theodore, technology and risk vice president, to the show.
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Episode 080 – Julio Briones
In this episode of The Ethics Experts, Gio welcomes Julio Briones, private duty home care business specialist, to the show.
Categories
Episode 069 – Tom Fox
In this episode of The Ethics Experts, Nick and Gio welcome Tom Fox, C-Suite Network Executive Leader, to the show.
Tom Fox welcomes brothers Nick and Gio Gallo, co-CEOS of ComplianceLine, along with Ronnie Feldman, CEO and founder of Learnings & Entertainments to this week’s show. They discuss innovative solutions to some of the challenges that compliance leaders face.
Addressing Compliance Challenges
Compliance leaders often face challenges in getting management to address compliance issues. Tom asks his guests how they would counsel a client experiencing these challenges. Nick expresses that this new age demands modern approaches: you can’t use the same approaches as 10 and 15 years ago. He suggests leading with value and reaching across departments to get the desired attention from management.
The Game of Influence
Gio comments that employees aren’t all reading the DOJ guidelines, nor are they all pondering how to change their organization’s compliance policies. Ronnie adds that the innovation needed to bridge this gap is influence – leaders need to understand how it impacts change within an organization. He recommends learning activities that are short, fun, and interesting. Nick says, “This is 100% a game of influence. We’re either trying to influence our peers, we’re trying to influence leadership to get more budget, and really our mandate is trying to influence the behavior within our organization.” He adds that there are two sides to influence: the objective and the human side. We need both to transform our teams and organizations.
Building a Speak Up Culture
Tom asks how an organization can build a ‘trust and speak up’ culture. Gio advises having a collaborative relationship with third-party vendors to be able to access information that may help to resolve employee issues. Ronnie comments that before creating any training program to tackle this or any issue, leaders should start with their objectives in mind. Think about the communication channels available and obstacles you may face, he remarks. “The goal is to influence the social environment,” he says, “and the best way to do that is to be interesting and short, and I think entertaining, because then you can put that in more places, and they’re gonna like you.” Gio adds, “We as compliance leaders and ethics experts need to be the ones who lead beyond those strict requirements and say, ‘Well, this is what quality means. This is what is going to get us to engagement. This is the type of partner that’s gonna help us figure out the thing that we don’t know yet.’”
The Importance of Active Listening
Tom asks, “What skills does a compliance officer need beyond being able to read the law or to read a spreadsheet?” Ronnie stresses the importance of being an active listener. He uses an example from his time doing improv to illustrate his point. “The compliance department as a profession needs to be better at integrating and melding with other departments and also bringing those views into their organization,” Gio says. There needs to be more diversity within the organization in order for compliance to function more strategically.
Why We Work Together
L&E and ComplianceLine’s partnership is so fruitful because both companies have a similar ethos, according to Nick. They’re both trying to impact the workplace in the same way, Ronnie adds. He points out that the Gallo brothers love trying new approaches to create solutions, and that it brings a synergistic energy to the partnership that allows them to work well together.
Resources
ComplianceLine.com
Gio Gallo at LinkedIn | Twitter
Nick Gallo at LinkedIn
Learnings & Entertainments: Website | LinkedIn
Ronnie Feldman at LinkedIn | Twitter
