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The Compliance Dance – Closing gaps and raising standards

When it comes to meeting revenue, margins, and overall business objectives many organizations establish performance-based systems and processes to ensure that they meet their targets.

However, when it comes to keeping compliance promises associated with quality of service, impact on the environment, worker and public safety, organizations often put in place less rigorous systems where the notion of performance is connected more to cost rather than advancing outcomes.

The Dance of Compliance
The Dance of Compliance

Many organizations also limit their compliance efforts to reducing liability and avoiding prosecution by establishing audit processes to close the gap between work-as-prescribed and work-as -done. Compliance performance is measured by the size and number of gaps that are discovered and the costs associated with closing them.

That is not the story for some organizations that aim higher and commit to achieving broader goals for their compliance such as: zero violations, zero emissions, zero fatalities, zero incidents, zero harm, zero breaches and other standards. There are many good reasons why companies will want to do this which I have written about here and here.

For these organizations a different approach is taken, one that establishes processes that not only close the gaps to standard but also raises the standard towards the ideal. Even when they are closing gaps they will take a more holistic perspective that focuses on outcomes and effectiveness at the same time as efficiency and cost.

Closing Gaps

Maintaining consistency to a standard is the primary function of a compliance system and is accomplished by closing the gap between work-as-imagined or work-as-prescribed and work-as done.:

  • Conformance gaps: what standards are we not consistently achieving that if we did would advance compliance effectiveness?

However, there are other gaps that also need to be addressed:

  • Performance gaps: what are we doing that if we did more of would improve compliance effectiveness?

  • Capability gaps: what are we not doing that if we did would improve compliance effectiveness?

  • Achievement gaps: what objectives are we not achieving that if we did would advance compliance effectiveness?

  • Uncertainty gaps: what threats or opportunities hinder or advance our objectives to meet all our obligations?

The conformance gap is by far the most common and often the only one that many companies pay attention to particularly with respect to prescriptive obligations. However, these are what are called necessary, but not sufficient conditions to achieve or advance targeted compliance outcomes. You could say that closing these gaps are not improvements at all but rather steps along the way to operational compliance where real improvements can start to be made.

Raising Standards

Achieving effectiveness is the purpose of all compliance programs and accomplished by raising standards as needed to achieve the targeted levels as measured against progress towards compliance outcomes such as vision zero targets (zero harm, zero violations, zero incidents, and so on).

This is not unlike how how a LEAN organizations use pull systems to improve the performance of their production processes.

Performance issues are often hidden although they commonly manifest themselves as stockpiles of inventory. What is difficult is knowing which part of the process to change that will result in overall increases in productivity and the reduction of these stock piles. You can imagine asking the very same question when it comes to obligation debt where the gaps also pile up. Where do you improve your compliance performance?

In LEAN thinking we pull customer demand (rather than pushing it) to stress a production process to expose the parts in the process that are hindering performance the most. These are the activities that are not able to keep up that create wait times upstream which lets you know what to improve first, second, and so on. This approach is repeated until the flow through production creates zero wait times and continuous flow is achieved: zero waste and the highest performance.

Using this process Taiicho Ohno was able to double the capacity of Toyota's manufacturing with the same number of people. The same can be achieved with respect to doubling a company's ability to meet their obligations with the same cost. Wouldn't that be good!

What a pull system does for manufacturing is what raising standards does for compliance. When you raise standards you quickly observe the areas that are holding you back the most. You will then have a ranked list of areas to improve to unleash greater compliance capacity, efficiency, and obligation performance. You will also be able to identify any uncertainty in meeting obligations which will tell you where to put your risk controls.

The Challenge

The challenge that many organizations face is how to do both: close gaps while raising standards at the same time. It is a dance that most never learn. Many never move beyond closing gaps and many will wait until a major incident has occurred before they raise their standards. Unfortunately, waiting is not only a waste when it comes to manufacturing, it is also a waste when it comes to compliance.

Compliance is famously known for bottom line thinking focused on passing audits. Seldom is any attention given for top line considerations which would include better outcomes for the organization.

We know that in order to achieve mission success organizations need to focus on both top and bottom lines, however, what many don't know is that this is also true for meeting obligations.

The compliance dance is not really anything new. It is the same dance that organizations have applied for years to their value chain and now need to apply to their compliance chain.

You take two steps forward, and then one step up, do the hokey pokey and turn your compliance around. That's what its' all about.


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