Flattened Organizational Models: Benefit or Curse for Compliance? (By Patrick Wellens)

GACO recommends the article by Patrick Wellens in the latest Compliance & Ethics Professional® (CEP Magazine) - SCCE's award-winning, monthly publication available to SCCE and HCCA members. 

The article discusses the impact of flattened organizational models on corporate compliance, noting that while this new leadership approach offers benefits like increased employee autonomy and responsibility, it also introduces significant compliance risks. These models, which eliminate numerous middle management layers and empower employees with increased autonomy and decision-making power to improve agility and satisfaction, pose a significant challenge to corporate compliance. Unlike traditional organizations where compliance was enforced through managerial approval, policies, and segregation of duties, the primary control mechanism in a flattened structure is the frontline employee "doing the right thing". This increased empowerment, when combined with the elimination of governance instruments like approvals and guidelines, creates additional risks, including decentralized decision-making by uninformed employees, reduced supervision leading to undetected noncompliance, and blurred accountability within project teams. 

Strengthening Compliance Through Training, Monitoring, and Ethical Culture

To overcome these compliance risks, the article suggests several compensating measures. Companies must provide employees with more extensive compliance training to ensure they can make compliant decisions independently. Since managerial oversight is reduced, organizations should implement additional monitoring activities or enhance data analytics capabilities to spot outliers and noncompliant transactions. Furthermore, management and the compliance function need to communicate more frequently about integrity and ethical values, clearly define accountability for compliance in project teams, and strengthen the speak-up culture by ensuring a non retaliation policy and transparent investigation processes. Finally, incorporating compliance into performance evaluations and promotion decisions helps to incentivize ethical behaviour."

The full magazine can be accessed over the following link:  https://www.corporatecompliance.org/publications/cep-magazine; the article itself can be accessed/viewed here: https://www.enfco.eu/publications/