Andrew Mitton

On Septemer 22, 2009 the GAO released its report on the compliance and ethics programs of 57 government contractors each with yearly contracts over $500 million.  The report didn’t find any startling conclusions.  It found that all of these large contractors had programs in place – a code of conduct, ethics awareness programs, and internal controls.  It would be interesting to see how many contractors below this amount have programs in place.

The challenges for government contractors that were discovered in this study are determining whether mandatory disclosure is required, expanding the program to meet the growth of the company, checking whether subcontractors have their programs in place, and utilizing subcontractors in foreign countries with different standards.

The report ends with four recommendations.

1. Implement new DFARS giving DCMA and other contracting officials responsibility to verify the implementation of contractor ethics programs.
2. DOD IG’s office should determine the need for displaying the DOD fraud hotline posters.
3. DOD IG’s office should determine the content of the poster including revising the poster to inform contractor employees of their federal whistleblower protections.
4. If there is a need for the posters, amend DFARS to require display posters regardless of whether contractor has its own posters.

It appears that these changes wont affect the large contractors.  They have the resources to adapt to the changes in the law.  The biggest challenges are more than likely with smaller contractors.  Once the DCMA starts reviewing contractors, they will more than likely find that many contractors either don’t have programs or that their programs are inadequate.

I love the marshmellow test: place one marshmellow in front of a person; tell them they can eat this one now or they’ll got another marshmellow if they wait for the tester to come pack.  Oh the pain of waiting!  This video says it all.  It shows how we struggle with long term vs. short term gains.  It takes discipline to take the long-term approach.

Oh, The Temptation from Steve V on Vimeo.

Proctor and Gamble’s new CEO, Bob McDonald, announced new strategy called purpose-inspired growth.  The plan is to focus on purpose, values, and principles; then the money will naturally follow.  I’m intrigued, but don’t want to discuss the merits of this strategy.  Instead, I want to discuss the execution of the strategy.

Rosabeth Moss Kanter of Harvard Business School had this to say on her blog about the rollout:

McDonald calls P&G’s purpose the most consistent factor in a 171-year history of growth. When he showed it on screen in South Boston, the room nodded reverentially. “We will provide branded products of superior quality and value that improve the lives of the world’s consumers, now and for generations to come. As a result, consumers will reward us with leadership sales, profit and value creations, allowing our people, our shareholders, and the communities in which we live and work to prosper.”

Sounds good so far.  But try this: turn away from your screen and recite the statement in your own words.  I’ll go ahead and wait ….   So, how did you do?  Take a look at the statement again.  It’s a completely well-written statement that’s easy to understand, but entirely forgettable.

This is something I don’t understand – a corporation can create memorable commercials, but can’t create a memorable credo from the top.  Yes, everyone nodded reverentially, but probably walked out of the room forgetting the message.  It’s too bad that the statement wasn’t boiled down to some short and memorable phrase.  There’s truth in Chip Heath and Dan Heath’s methodology in their book Made to Stick.  A simple unexpected credible concrete emotional story will stick.  It’s too bad that Proctor and Gamble doesn’t have that here.

I came across a story about a retired school teacher, Tim Tepas, his son with Down Syndrome, Keith, and Albert Pujols, all-star baseball player for the St. Louis Cardinals.  Read the story first at St Louis Today called: St. Louis Fan Fills Uplifted After Fall.

What struck me most about the article is Albert Pujols saying: “Please lie down sir.  Don’t try to get up sir.”  This small act embeds my opinion of Mr. Pujols.  I see him as a class act and as a compassionate and caring person.  This small act also gives me a higher opinion of the St. Louis Cardinals.  It’s the accumulation of these acts that generate a reputation.  A company full of Albert Pujols is a company that succeeds.

I recently read a statement that made me stop and think.  The statement is: “Trust is probably the most important currency of business.”  If you don’t trust someone, then you move much more slowly.  You do your due diligence.  You make sure that you have all the right provisions in the contract.  You set up reminders to follow up on a commitment.  You end up spending more money and time on a transaction.

On the other hand, if you trust someone, you can do things on a handshake.  You walk away with an assurance that things will get done smartly.  The only surprise is when you’re expectations are exceeeded.  You don’t spend as much time and effort on the project.

For example, Dov Seidman of LRN recently was faced with the decision to let go a number of his employees at LRN.  But he did it the right way as he explains in his article in Business Week.  LRN gave severance packages with no strings attached.  They let their employees take their cell phones and laptops.  They shared internal memos with customers to keep them apprised of the changes.  The result (in spite of the lawyers who counseled against it): a succesful restructuring.  In short, it takes trust to build trust.  LRN will be all the better for it.  Through these small actions they have built up more trust in their trust bank account.  Way to go LRN!

Here are a few highlights from KPMG’s 2009 Fraud Report:

• Two-thirds of executive reported that inadequate internal controls or compliance programs at their organizations enable fraud and misconduct to go unchecked.
• Seventy-one percent reported that they were most concerned about a potential loss of public trust resulting from fraud and misconduct in their organizations.
• The greatest room for improvement in their programs is employee communication and training.

Based on this report it seems the place to start is communication.  With so many tools available on the Internet, this should be easy to do.  But it all starts with the message, and the message comes from the Code of Conduct.  The more effective and inspiring the code, the better the message.  The better the message, the better the communication.  Better communication means that the program will ultimately be better.

Here’s another take: Bill Pawonka at Ethicspoint says: what’s important is that your organization have a strong ethical culture, a way to collect reports of misconduct, and a system to consistently investigate, document, resolve and ultimately analyze each report.