Risky behaviour
“The greatest risks are the risks that we don’t see, and the most difficult problem is in preparing in advance for that kind of thing.”
[Peter L.Bernstein, financial historian, economist and educator]
‘Compliance’ is now an industry in its own right, with professional services and jobs dedicated to the practice. Companies look to auditors,management consultants, behavioural scientists, and psychologists to understand how best to comply with regulations and reduce risk.
The most important factors relate to how the workforce understand their roles in relation to risk and compliance and are equipped to actin accordance with this.
Psychologists have long suggested that fostering cooperation often relies on the actions of others (Kelley and Stahelski, 1970). Leaders play a vital role in shaping their followers' beliefs and behaviours, creating an environment that encourages collaboration and positive interactions.
The 2020 Coronavirus pandemic presented one of the largest behavioural challenges in the modern world. Human behaviour had to change fundamentally to contain the spread of the virus - it had to do so rapidly and for a prolonged period of time. At the core of this behavioural change process were sets of rules about hygiene, consumer behaviour, social distancing and isolation.
Some of these behavioural changes were adopted in companies,and directed at employees, or customers. And some were governmental, directed at public organisations, and the general public. These rules could only be effective if people followed them. It required a worldwide effort to boost compliance and fight the Coronavirus. This crisis is a good example of how important compliance is in today’s world.
Do as I say, not as I do
Leaders who don’t lead by example are one of the key reasons for compliance failure. The commitment of senior leaders to compliance sets an all-important tone for the entire organisation. When leaders prioritise and visibly engage with compliance training, it fosters a culture of transparency and responsibility and is vital for effective compliance. But when leadership fails to embrace and promote compliance values through their actions and decisions, this can have a profound negative impact. A lack of leadership commitment often manifests in the form of inadequate resources, poor oversight,and a general indifference towards compliance processes. This sends a clear signal to employees that compliance is not a priority and leads to a breakdown in accountability, including a culture where non-compliance becomes normalised.
That’s why (positive) role models are vital – they cultivate trust and loyalty by demonstrating consistency, reliability and genuine care for the well-being of their teams. They set an example for others to follow by creating standards of excellence.
Risk factors
In a business environment, behavioural risk includes unwanted behaviours that result in poor decisions or adverse outcomes for the organisation and its stakeholders. Although it is easier to focus on the obvious (visible) behaviours, the challenge is to delve deeper into the drivers that shape them. These drivers, aka ‘behavioural risk factors’, are the keys to effecting change.
Behaviours don’t exist in isolation. They result from underlying factors and are strongly influenced by social context and group associations [Frank, Zhao, and Borman 2004]. Therefore, changing means transforming the environment in which individuals operate. Managing behavioural risk involves assessing the traits of individuals as well as examining group norms and habits– exploring the heart of organisational culture and understanding ‘how things are done here’.
The BAD way
At BAD we use insights from behavioural science to unpick these behaviours around compliance.They help us design experiences beyond just raising awareness or conveying knowledge.We understand that training around risk and compliance needs to be short and relevant and help people feel empowered to do the right things.
We worked with one of our regular clients to update their compliance training and reframe managing risk as a ‘daily, inclusive practice’ by overcoming fears and learning a new language of risk [Reframing Risk, NESTA, 2020]. We achieved this with instructor-led training (ILT) featuring video scenarios of two managers with completely different attitudes to risk – demonstrating that risk can also be a force for good as well as having negative outcomes. By using the right hooks,examples, real stories and facts that resonated, we were able to get employees to relate to the material in a ‘safe space’. Break-out activities were used to encourage discussion, reflect and share risk insights.
Having staff commit to moral standards is also likely to be more effective than ordering them to ‘follow the rules’. It can be especially powerful to publish people’s commitments so that they’re visible to others.Making commitments public, especially to those who are admired, means that people feel obliged to see them through to avoid reputational damage [Cialdini,2007]. People also adapt their behaviour to gain acceptance from others.This means that being in a group has the potential to change people’s beliefs,preferences and decision-making.
Do the right thing
Recent research revealed that two in five Brits (that’s 40% of us) regularly break health and safety rules because they view them as unnecessary. The culture within companies and industries greatly influences adherence to rules. A positive culture is often fostered by strong leadership and effective systems for addressing issues. The effectiveness of internal controls and compliance with regulatory standards is shaped by factors such as behavioural biases, ethics,and social dynamics, highlighting the importance of a supportive environment in promoting accountability.
Several options are available to companies and regulators seeking to improve compliance: Changing perceptions of detection and punishment; de-biasing decision-making processes; enhancing the role of morality; and improving company culture. All have a role to play in reducing the amount of rule breaking.
To address these issues, organisations must adopt an integrated approach with a focus on strong leadership, empowering employees,providing effective training, ensuring open lines of communication, and committing to ongoing enhancement of processes.
Trust is a must
As the regulatory environment grows increasingly complex,integrating compliance into core business strategy is crucial for mitigating risks and sustaining overall performance.
It was Stephen R. Covey’s son who said: "Compliance does not foster innovation, trust does. You can’t sustain long-term innovation,for example in a climate of distrust.” [The Speed of Trust [2006] Stephen M.R. Covey]
But it was Einstein who said: “Every kind of peaceful cooperation among men is primarily based on mutual trust and only secondarily on institutions such as courts of justice and police.” [Albert Einstein, US German-born physicist, 1879-1955]
