Using incentives to drive compliant behaviour is not new. It’s a fascinating area that captures our natural human inclination for what is pleasurable, good, positive, and gratifying. Our natural instinct, as humans, is to move towards what is good for us or perhaps others in an ideal situation and distance ourselves from what is potentially harmful and dangerous. Understanding this response is crucial in designing an effective compliance incentive programme that motivates employees and stakeholders to comply with policies, procedures, and codes of business conduct applicable in an organisation. The Department of Justice and the Securities and Exchange Commission believe that using monetary structure for compensation and rewarding employees who comply with policies and applicable rules in discharging their duties reinforce compliance policies and procedures within an organisation. Positive incentives like promotion, compensation, and commendation drive compliant behaviour. This is because there is no better way to encourage doing the right thing than creating reward mechanisms to encourage positive conduct. One of the ways to show that an organisation endorses an action or priorities-compliant behaviour is to reward every action or conduct in that light.
While incentives can be a powerful tool to drive compliant behaviour, their misuse can lead to unintended consequences, even discouraging compliance. Instances of employee and stakeholder disorientation resulting from the misadministration of incentives are common. This article highlights these potential risks, underscoring the need for caution and awareness among compliance professionals.
The purpose of compliance is not clearly defined.
Using incentives to drive compliance programmes without clearly understanding the importance of compliance programmes to the business objectives or purpose may be futility. One reason for this is that business stakeholders need to understand and appreciate compliance beyond the incentives offered by the organisation. Building a sustainable compliance culture around incentives and compensation is difficult, if not impossible. Consider a situation in which the only reason for compliance with an organisation’s policy or procedure is because of the incentives offered by an organisation. In that case, one cannot say that such an organisation truly has a culture of compliance. In such organisations, the likelihood of compliance violation or breach of compliance will be high when incentives are no longer available. In addition, compliance figures or statistics may not be reliable if high incentives induce a high level of compliance. Compliance professionals should only use incentives to drive compliance programmes when the purposes or the need for compliance is explicit and domesticated into business processes. It is easier to use incentives to drive compliance messages or culture when there is proper alignment between compliance objectives and the business objectives of an organisation. It will be an illusion to think that the use of incentives is a magic wand that can nurture compliance programmes to maturity.
Bogus incentive programme without a sustainable budget plan.
Compliance professionals understand they need to be cautious about developing or implementing a compliance incentive programme without a sustainable budget plan. Compliance incentive programmes should be within budget and sustainable over time. A compliance incentive programme without a sustainable budget plan may not be viable in the long run as it is likely to be perceived as contributing to the high cost of business. A compliance incentive programme without a sustainable budget plan is often burdensome to the company and may not enjoy top management support, leading to an abrupt termination of the programme. A sustainable compliance incentive programme should be budget-friendly and enjoy top management’s commitment. The incentive programme must be able to meet the reward expectations of stakeholders as defined by the company. It’s easier to sustain a compliance incentive program when limited to a few compliance incentives than to raise employees’ hopes on an unsustainable incentive package.
Discriminatory or selective reward systems
Discriminatory administration of compliance incentive programmes is another way to avoid using incentives to drive compliance behaviour or programmes. An organisation’s compliance incentive programme must be clear about what action or conduct needs to be rewarded. If confidence and trust are to be built, the reward system must have uniform standards. Compliance professionals are, therefore, advised to ensure that there is no discrimination in how employees and other stakeholders are rewarded. No one should be given preferential treatment or be rewarded more than others for the same conduct or action.
Non-alignment of corporate reward system to compliance incentives programme.
The compliance incentive programme should align with the corporate reward system. To have this alignment, compliance professionals must play an active role in developing a corporate reward system such that persons with undeserving conduct are not rewarded for doing the right thing in the wrong way. It will be counter-productive for a corporate reward system to disregard ethical and compliance issues when considering candidates to be rewarded within an organisation. The design of the corporate reward system should include the requirements for a compliance clean bill of health that shows that all business achievements or goals were attained within the tenets of acceptable policies and business practices. Compliance Professionals should work closely with top management to ensure compliance incentive programmes are not at cross purposes with corporate reward programmes.
Finally, compliance incentives promote compliant behaviour. For organisations to derive benefits from the compliance incentive initiative, the administration of the compliance incentive programme must be transparent and fair to all.
Key Takeaways
- Positive incentives like promotion, compensation, and commendation drive compliant behaviour.
- Building a sustainable compliance culture around incentives and compensation is difficult, if not impossible.
- Compliance professionals should only use incentives to drive compliance programmes when the purposes or the need for compliance is explicit and domesticated into business processes.
- An organisation’s compliance incentive programme must be clear about what action or conduct needs to be rewarded.
