I apologize for my month long absence.  It’s hard for me to believe it’s already April. 

This past month, in addition to my full time job, I have been preoccupied with a massive home remodeling project (it’s given me a new appreciation for contracts) and consumed by March Madness. 

For international readers — March Madness refers to the super bowl of college basketball.  Although teams vie within their regional conference for bragging rights to be conference champs, in March the top 64 teams in the country compete for the NCAA championship.  The whittling down process sparks old college loyalties and consumes sports fans with bracketology, office betting pools (even though they’re illegal) and predictions about which teams will qualify for the ”Sweet Sixteen,” the “Final Four,” and who will ultimately prevail as champ.

Last night the Florida Gators men’s team was victorious.  Congratulations to them on last night’s win as well as winning 2 years in a row.  Tonight it’s the women’s turn.  The Tennessee Volunteers will match up against the Rugters Scarlet Knights (go Rutgers!).

Yup, following both the men’s and women’s tournaments left little time for blogging.  But that’s not to say that important issues — like compliance — weren’t top of mind.  They were.

How come a player can commit 3 fouls that half the people in the arena can see, but the player doesn’t get called on . . . until they travel?  I mean, there there are with how many people watching them, including the referees and they commit a foul.  OK, some of those fouls may be accidental and some are intentional.  When the refs are too strick you hear, “Come on, let ‘em play.” So inbetween those two extremes is room for lots ”hard” play that gets rewarded when the ball goes through the hoop and points are scored. 

It makes me wonder why so players risk a foul and risk being ejected (fouled out) from the game after 5 fouls even though they know lots of people, including referees paid to look for fouls, are watching?  Do they look for opportunities to break the rules?  Is it OK to break the rules as long as you don’t get caught?

Hmmm, and if this “play hard” culture is embraced and idolized by the fans, how much of it is transferable to the work hard/ play hard corporate culture?  Are the company policies, industry regulations, and the law merely a roadblock to profits?  Is compliance a losing battle?

It really depends on  how you score points in your organization.  If it’s all about profits at any cost it will be impossible to build more than a superficial culture of compliance.  If, on the otherhand, your corporate score card is more balanced (to borrow a phrase from Robert Kaplan) the trade-offs will be appreciated and the points will be more evenly distributed.

How the score stacks up in the end depends on the incentive structure that is created by the organization’s leaders.  The circumstances will help shape the behaviors.  What does your company’s scorecard look like?

A 374 page report on the cause of the fatal 2005 BP refinery explosion in Texas City was issued yesterday by an independent safety review panel headed by former US secretary of state James Baker.  The accident claimed 15 lives and injured 170 people.  At the time it was considered to be the worst US industrial accident in nearly a decade.

Although the goal of the report is to make recommendations concerning all of BP’s US refineries, the report is noteworthy for what it says about the relationship between corporate policy and leadership:

While BP has an aspirational goal of ‘no accidents, no harm to people’ BP has not provided effective leadership in making certain its management and US refining workforce understand what is expected of them regarding process safety.  The panel believes that BP has not proved effective process safety leadership and has not adequately established process safety as a core value.

In other words, the panel believes BP has put profits ahead of safety.

BP top brass vehemently deny they put profits over plant safety, saying they never turned down a request for safety funds.  But the real question BP leadership needs to ask itself is whether the corporate culture encouraged legitimate requests for safety funding or whether it had a chilling effect.  After all, if employees are afraid to ask, the question doesn’t get raised, and the request doesn’t get “denied.”

No news is not the same as good news.  Pent up safety needs do not evaporate.  They grow and fester in a reservoir of unmanaged legal risk.  If you look at the video re-enactment of the accident you see that there were multiple safety failures.  And that’s the problem with any unmanaged legal risk i– evenutally it reaches a tipping point, a point of no return.  For BP it was a fatal explosion.

Employees will generally do what they are told and what they are rewarded for: 

• How often was the cost cutting message sent?
• How often was the safety message sent?
• Which message was louder?  More frequent?
• Which message ruled when the two collided?

For better or worse  it is leadership that fills the white space on an organization chart and determines what is between the lines of corporate policies and mission statements.  THAT’s what creates corporate culture.  Policies are not enough.

How is your company’s corporate culture?  Could it use more transparency?  More consistency between policy and performance?

For more information about the reservoir of unmanaged legal risk and the role of leadership see chapter 12 of The Business Guide to Legal Literacy: What Every Manager Should Know About the Law (Jossey-Bass, 2006).