Updated: Aug 2
Understanding compliance mindsets using set theory
Those involved with compliance will eventually observe two different mindsets at work. Each one is concerned about compliance yet differ in their focus, goals, objectives and almost everything else. Both of these groups have something to offer but when not understood can create confusion and misalignment with respect to compliance.
The first one is concerned with protecting the organization by staying between the lines. This one follows Compliance 1 practices as discussed in our recent post.
The other wants to change the lines to achieve higher standards and better outcomes for all stakeholders. This one follows Compliance 2 practices.
The first is all about following the rules and keeping things the same, the second one invites change to make progress. This has all the makings of conflict unless a way can be found for each to work together.
Organizations that desire to meet all their stakeholder obligations will need to effectively contend with each compliance group. An integrative approach offers a path forward that recognizes the benefits of both when combined may increase the probability of an organization keeping all its promises.
In this article we will use the concept of social sets to better understand these two groups to see how they might work as one for the benefit of the organization as a whole.
The concept of sets and set theory is well established and used to describe collections of objects from which much of our mathematics is derived. Set theory is also used to better understand social groups and communities specifically using the concepts of bounded and centred sets.
Roughly speaking, bounded-sets are defined by boundaries and our relation to them (in or out). Whereas centred-sets are defined by a centre (e.g. values) and our direction of movement relative to it (advancing towards or retreating away).
For the purpose of discussion bounded and centred sets can be mapped to Compliance 1 and Compliance 2 practices as shown in the next figure:
We will explore each one in turn except the Fuzzy-set (C0) which describes a group not concerned about compliance.
Bounded-set Compliance (C1)
A bounded-set can be defined by these characteristics:
A focus on boundaries - are we in and or out
Static - evaluated at a fixed point in time
Homogeneous practices, variety of values
Some say we tend to think mostly in terms of bounded-set categories. We think of characteristics that define one group compared with another. This seems to be the case for Compliance 1 which thinks of compliance in terms of passing a boundary (e.g. an audit) that defines whether or not we are in compliance or out.
Boundaries in compliance consist of such things as: inspections, controls, management reviews, governance, obligations & risk registers, and so on. Evaluation is done at a point in time by identifying minimum thresholds and standards with respect to these characteristics.
The bounded-set is hard at the edges and soft in the middle. It requires substantial training and discussion to create consistent behaviours conforming to desired standards. It also requires an “adherence” mindset. Community is created by adhering to common practices.
Improvement is hard to define in the bounded-set. There is no change to see. Once you are "in compliance" what else is there to improve? Transformation if it exists at all is more about repairing the fences than moving the boundaries towards a higher standard or ideal.
All this makes getting "in compliance" a barrier that is difficult for many to obtain. However, once it is achieved many consider the hard part to be done and what is left to do is only maintenance. Monitoring the boundaries and making repairs (i.e. closing gaps) are key activities for bounded-set compliance that are in the "in" group.
Centred-set Compliance (C2)
A centred-set can be defined by these characteristics:
A focus on a centre (values, an ideal, etc.) - are we heading towards or away?
Dynamic - evaluated using multiple points over time
Homogeneous values, variety of practices
Centred-set compliance is concerned by the direction you are heading towards or away from the centre or ideal. For compliance the direction either advances or hinders the creation of compliance outcomes identified by goals, targets, and objectives to create what we don't already have.
Evaluation is based on measuring progress towards an ideal over a period of time. This requires multiple data points to confirm direction and progress.
The centred-set is soft at the edges and hard at the middle (the ideal). Community is created by bringing people together based on commonly-shared interests and values. You might call this a “missional” mindset. Centred-set compliance requires educating stakeholders who are assumed to have a “bounded-set” mindset which creates additional challenges.
Centred-set compliance is all about change which is necessary to make progress. However, transformation is less about improving what is and more about creating what isn't which is a riskier endeavour.
Centred-set compliance has lower barriers to get started. All you need is a group of people who are passionate about creating stakeholder value. However, that is harder than it might seem. Passion alone is seldom enough.
Trying to achieve ambitious (perhaps, even necessary) goals without a critical mass of support often will lead to failed initiatives. In addition, without structure and discipline these initiatives are often poorly managed which also contributes to failure.
Is it one or the other or both or something else?
When organizations begin to take ownership of their obligations they start their compliance journey usually with bounded-set compliance. The belief is that organizations benefit from structure and discipline to change values and behaviours. By repeating common practices a compliance culture and community is created.
As organizations mature in their compliance they may find that they don’t need the structures as much to be their tutor. Organizational and personal conscience informed by previous habits and practices may replace adherence to prescriptive rules. Organizations may also now benefit from having a community to help keep them in line.
However, a key problem is that values, beliefs, and community have all been shaped by practices around the boundaries.
Organizations in the bounded-set face the wrong direction for advancing compliance outcomes. They are looking for holes in the wall and are not facing the direction they should be heading to meet all their obligations. No wonder this can be a source of conflict with centred-set compliance groups.
Bounded-set compliance groups often do not realize that passing and maintaining the boundary was never the end but rather the beginning. There is a higher standard to obtain. Unfortunately, those in the bounded-set are often overwhelmed and preoccupied maintaining the boundaries (the walls) that they don’t have the resources to make any progress towards a "centre" no matter how important that may be.
Conversely, organizations that start with a centred-set approach have their own advantages and disadvantages. One key advantage is that it attracts those who are passionate about the end goals although perhaps not so much about how to get there. Nevertheless, centred-set compliance groups can bring needed energy and enthusiasm to drive compliance to higher levels and achieve more.
Centred-set compliance largest challenge is contending with bounded-set compliance groups. Centred-set compliance groups are often asked to metaphorically fit a square peg in a round hole with the hole being in the boundary and nowhere near the centre that they want to move towards. You may as well be speaking a different language.
Transforming one group to the other appears to have many challenges many of which are similar to the challenges associated with combining two cultures. Left to themselves they will operate as silos independently and not benefit from the other.
The solution for compliance may not be to add one to the other but have something else altogether.
Integrative-set Compliance (C3)
Clearly, compliance needs to stay between the lines AND change the lines simultaneously if it wants to meet all of its stakeholder obligations: mandatory and voluntary.
What is needed is another set that is integrative in nature focused on the whole. Integrative means combining two or more things to form an effective unit or system – precisely what compliance needs.
We can define this set by:
A focus on the connections - are we working as a whole?
Integrative values and behaviours
It is by managing connections that organizations can harness the power of both bounded-set and centred-set compliance. This is not about achieving balance or adding one to the other. Instead, it is about establishing essential capabilities that work together to reinforce each other to achieve the objectives of both. Not simple, but not impossible either.
Organizations that desire to meet all their stakeholder obligations will need to effectively contend with bounded-set and centre-set compliance groups. An integrative approach offers a path forward that recognizes the benefits of both when combined may increase the probability of an organization keeping all its promises.