Compliance is broken beyond repair. We spend hundreds of billions of dollars every year on compliance, sapping employee’s time and creativity while making them increasingly indecisive and risk averse.
Even worse, the large-scale efforts have little if any effect as evidenced by the continuous string of corrupt practices, subprime mortgage misselling, emission scandals, and sham bank accounts in companies with multi-million dollar compliance programs.
Wait. What was ‘compliance’ there to do in the first place? Well, simply to align behaviour with good standards of conduct. Nothing more. And given that most people like to be treated fairly - even in business - the problem is not the purpose but the means.
Compliance was invented to do the job but turned it into a bureaucratic monster with heaps of rules and controls driving agony and costs while causing many to outsource ethical judgments to a heavily staffed function. Oh yes, it has created jobs. Thousands of lawyers and auditors have enjoyed hockey-stick career paths while large international law and auditing firms have created new lines of business. Yet, it remains old-fashioned, legalistic and paper-based.
What would we do if parachuted in from another planet – or Silicon Valley for that matter – with the task to simply ensure such good conduct, assuming no knowledge of how it is tried and failed today?
Would we spend years developing long, legalistic paper policies and put employees through hours of ‘no-look-click-through’ compliance training as well as require them to certify adherence to loads of documents they haven’t seen let alone read?
Would we get to ‘know our customers’ by requiring them to sign papers to confirm they are not cheating on taxes, or ask our business partners to sign-up to a Code of Conduct that is different from those of all their other clients? No way.
Ok. So people dislike it, it costs billions and it doesn't really work. Sounds like an opportunity to disrupt status quo.
What if we would use technology to place razor sharp focus on the crux of the issue: Improving people’s judgment and the context that supports it?
We would offer principles-based guidance to accommodate people’s short attention span and make it instantly accessible on their mobile devices.
We would leverage technology to strengthen judgments by crowdsourcing opinions on ethical dilemmas from peers and experts and use machine learning to recommend meaningful options; not by deciding for them, but through deriving patterns to offer suggestions, similar to how artificial intelligence provides search results, traffic predictions and support physicians to understand risks of complications.
We would nudge people to apply a moral compass to encourage ethical reflection at the very moment they make critical judgments, such as during meetings; in the afternoon when morals decline; in risky geographies; or when under pressure.
But why? Because behavioural economics research has shown that nudging people with moral reminders at the moment of decision-making leads to far more ethical behavior: students don't cheat on tests and people report more honestly on insurance claims.
We would make leaders responsible for pushing the moral reminders to ensure employees act on their newly improved judgments and counter any ‘deliver at all costs’ pressures from higher ups. We would measure actions against ethical expectations using frequent and technology-enabled performance feedback with direct impact on career development and bonus. Hold on. Why reward something that is simply expected? Well, in the end we reward what we believe is important. If we want people to conduct business responsibly, we must reward it.
This cutthroat focus on decision-making is hardly rocket science even if it seems light years away from today’s approach - just think of how the insurance industry’s efforts to tackle annual losses of $80bn due to dishonest claims, largely focus on detection, investigations and sanctions, rather than to improve honest reporting in the first place (like with the Moral API).
Nor is it an attempt to sidestep regulation. On the contrary, it serves acutely to drive good behaviour but with compliance as the outcome not the vehicle. In the process, we save colossal pain and resources, keep companies from ethical breakdowns and offer a means to speed up decision-making and unleash creativity.
At the PolicyStore, we enable tech-driven moral crowdsourcing to make people better decision-makers, and embed behavioral economics insights and machine learning algorithms to nudge them for ethical conduct, in just seconds.