AZAREL
Opinion: April 2011
Compliance - the role of the CECO and an integrity culture.
As I mentioned in last month’s opinion many large organisations are introducing
the role of CECO – the Chief Ethics and Compliance officer. But what exactly does he or she do and how does it work? In
a large business the compliance burden will inevitably be large, complex and diverse – as in Sainsbury’s. What would a CECO
and his department look like and do?
Contact details:
Phone: 07917565011
E-mail: tim@azarel.org
In a time of drastic change, it is the learners who inherit the future. The learned usually find themselves equipped to live in a
world that no longer exists.
Eric Hoffer
Union Leader and writer
Given the complexity of compliance, a Chief Ethics and Compliance Officer might be a good idea? But what do they do?– Part two of three.
The Civil Engineering and Construction industry is having a tough time, what should they be doing to transform?
Create a centre of Excellence. If you are really serious about compliance you need to know what you are dealing with and
make sure you do it well. Creating and maintaining this centre of excellence is the primary role of the CECO and his department.
No jobs for jobs' sake. Don’t create a lot of new jobs, just to keep a CECO’s ego happy. His organisation may even be a virtual one, with senior managers having a technical or compliance link to the CECO, whilst actually being responsible for another section or department within the business.
Not everything that is faced can be changed, but nothing can be changed until it is faced
James Baldwin
American writer
Civil Engineering - the need for transformation
A couple of months ago I wrote about the big changes facing the legal profession and
the need for a big transformation in law firms if they are to succeed. This month I have a parallel story to tell
about another industry – Civil Engineering and construction.
Few of you will not be aware of the major reduction in infrastructure spend the UK faces in the current era of austerity. The construction industry will bear the brunt of this. In an industry where margins are slim (top 100 civil engineering company margins in 2010 averaged 2.6%), there is oversupply and competition is fierce in a slimmed down market.
Companies are already failing and expectations are high in terms of doing more with less (especially from government clients). Like the legal profession, the solution lies in nothing less than radical transformation. Here are some of the things that need to change; there will be few surprises for many of you, but it is a hige challenge for the industry.
Following on from this the primary functions of the CECO/ Department are to:
· Make sure that every element of compliance – financial, technical, HR or whatever, is documented, allocated across the business and
clearly covered in the relevant business processes.
· Support other department in build
compliance effectively into business processes.
· Train the relevant staff in their
area of compliance, what that means and how to deal with failure.
· Ensure that the
audit process is comprehensive and covers all aspects of compliance
· Report to the
Board
· Communicate across the business to build a ‘compliance and ethical’ culture
in the business
· Continue to be up to date with all changes.
Starting at the top, to ehom would the CECO report? If the organisation is serious the CECO can only report at two levels. Either the board as a group (not the CEO) or the Chairman. Anything less is open to abuse.
Next is the what. Should a CECO
department do all the work, is it a supervisory department, what about audit? And of course how big should a CECO Department
be? I believe that there are several principles which dictate the answer to these questions:
Integrate the process. If
you want to be effective in dealing with compliance, the act of ‘complying’ has to be built into the business process and not a separate
activity. Consequently the CECO and his team will not be in the business of ‘doing compliance’
Let Audit audit! The Audit
Department is there to do just that, so why should a compliance department do their job for them?
Client engagement. Construction work is often undertaken on an adversarial basis with a zero sum game contract (i.e it is always
win/lose as opposed to win/win). Clients are often unsure what they want and when they are they leave little room for innovation. There is a lot of interesting new technology out there, but if the client is either unaware or reluctant to try, it makes life hard
for the contractor to deliver the best job for the money. Marks and Spencer is a great example of a company that excels in terms
of how it engages with its suppliers, try new things and work together in order to get the best value for money.
Integrate the whole supply chain. Car and computer manufacturing have probably gone further than most industries in having the whole supply chain working together from inception of a new product to its production and delivery. Perhaps because so much construction is seen as a ‘one off’ and design is usually completed by a consulting engineer there is perceived to be less scope for integration and doing things differently. Yet it is starting to happen. The 2012 Olympic complex has worked hard at integration and the main stadium is on time and cost. It does not really matter whether your business is construction, food, banking, cars or computers. There is a chain of development and supply. The best businesses have worked hard at integration and seamless delivery – it will continue to go this way.
Mass production of unique items. The car industry has also led in this area of mass producing cars, but also being able to meet individual customer specifications. The computer company Dell does the same thing with it’s on line sales. You can take a standard computer and then customise it to suit your own needs. Construction needs to do the same thing. Rarely do two projects have identical outputs – even things like a big supermarket. Survival will come through bringing the ‘factory’ process as close to the end result as possible.
Whilst these lessons are potential survival issues for civil engineering and construction they apply equally to any business, manufacturing,
service, public or private sector. They need to be built into strategy and applied!
This is no mean task. Returning to our example of Sainsbury’s think of what this would mean for them and the benefit to them
of being ‘good at compliance’.
Is it time for your organisation to appoint a CECO?
Next month I will talk about an ethical culture –
promise!