Updated: Nov 13, 2020
When it comes to improving compliance it is important to know not only what your obligations are but also how each obligation has been designed to perform the regulation function. Knowing this will help organizations better understand what is needed to meet their obligations by knowing:
The level of compliance rigour required.
The level of support needed from leadership and management
Controls that may need to be established
Who is accountability for which part (self, industry, or government)
How best to improve compliance
What level of investment to make
What is at stake and the level of risk
Among other things
All of which are derived from the obligation design.
Four Obligation Designs
There are four common ways that obligations are architected to regulate aspects of quality, safety, environmental and legal concerns. These can be described across the dimensions of micro-macro and means-ends parameters:
Prescriptive-based (micro/means ) - focused on prescriptive rules that must be followed to achieve specific outcomes.
Management-based (macro/means) - focused on the processes by which obligations are managed.
Performance-based (micro/ends) - focused on the objectives and how obligations will be met.
Outcome-based (macros/end ) - focused on the overall outcomes.
Each compliance design approach will in turn create different demands on an organization which can be discovered by considering where the regulation function is being applied to structure of the obligation:
Outcome-based regulations specify the ends or the outcomes and not the means. The onus is on organizations and industry to determine the means, the performance criteria and the rules that should be followed. This is an example of self-regulation and where leadership is essential at all levels to advance outcomes.
Performance-based regulations specify the level of performance to achieve the desired outcomes but not the means or the rules that should be followed. This is common with industry programs to achieve zero fatalities, zero emissions, incidents, breaches, and so on. Continual improvement is necessary to advance the desired outcome. In this case, industry associations act as the regulator and take on some of the leadership responsibilities.
Prescriptive–based designs specify the details and does not specify performance or outcomes just the rules to follow. This the primary form of government regulation which takes on responsibility to achieve the desired outcomes. Organizations are expected to conform to the rules. Leadership is still important but perhaps less or in a different way. Following rules requires a culture of conformance rather than a culture of improvement and proactivity.
Management-based designs like ISO 14000 and 19600 more generally focus on the processes by which you manage obligations. What is being regulated are the management processes not necessarily performance, or outcomes. This makes management standards applicable to all forms of regulatory designs, however, with the caveat that this only happens when organizations incorporate performance and outcome standards along side of their management systems. Leadership is essential at the program level to ensure that effectiveness is not lost in the pursuit of consistency and efficiency.
Regulatory bodies and standards organizations may elect to use a combination of the four regulatory designs based on the nature of the risks they are attempting to ameliorate through regulation. Compliance analysts should be aware of this when they identify obligations and evaluate compliance risk. Obligation registers should include this information to help inform the actions for effective compliance.