Ruth Rendell and Developing Better Compliance Solutions

This article was republished with permission from Tom Fox’s FCPA Compliance and Ethics Blog.

Ruth Rendell died this past weekend. Along with Patricia Cornwell, she was one of the two greatest mystery writers for the past couple of decades. I thoroughly enjoyed her books, which, as her New York Times obituary said, were “intricately plotted mystery novels that combined psychological insight, social conscience and, not infrequently, teeth-chattering terror.” For a mystery writer, it does not get much better than those accolades. Another crime writer, the Scottish author Val McDermid, was quoted in the New York Times as saying that Rendell and P.D. James “transformed what had become a staid and formulaic genre into something that offered scope for a different kind of crime novel. In their separate ways, they turned it into a prism for examining the world around them with a critical eye.” Rendell was truly an innovator and a one-of a-kind.

One of the things that Rendell continually challenged was our human bias. I thought about her writing when I read a recent article in the May issue of the Harvard Business Journal entitled “Outsmart Your Own Biases,” authored by Jack B. Soll, Katherine L. Milkman and John W. Payne. I found the article to have some interesting insights for the Chief Compliance Officer or compliance practitioner. While noting that using our instincts is something we all engage in and can use to our benefit, the authors believe “It can be dangerous to rely too heavily on what experts call System 1 thinking – automatic judgments that stem from associations stored in memory – instead of logically working through information that’s available.”

The authors believe the problem is that “Cognitive biases muddy our decision making… and even when we try to use reason, our logic is often lazy or flawed.” They cite the cause of this problem to be that “Instead of exploring risks and uncertainties, we seek closure – it’s much easier. This narrows our thinking about what could happen in the future, what our goals are and how we might achieve them.” Finally, as a solution they suggest, “By knowing which biases tend to trip us up and using certain tricks and tools to outsmart them, we can broaden our thinking and make better choices.”

The authors suggest to “debias” your decisions, you must broaden your perspective on three fronts. These are (1) thinking about the future, rather then simply one objective; (2) thinking about objectives, rather than simply the circumstances in front of you; and (3) thinking about multiple options, rather than one option in isolation.

Thinking About the Future

This is more than simply hedging your bets. The authors believe that “Because most of us tend to be highly overconfident in our estimates, it’s important to “nudge” ourselves to allow for risk and uncertainty.” They suggest that you use the four following techniques:

1. Make three estimates. The authors state, “To improve your accuracy, work up at least three estimates—low, medium and high—instead of just stating a range. People give wider ranges when they think about their low and high estimates separately, and coming up with three numbers prompts you to do that.”
2. Think twice. They suggest that you should “make two forecasts and take the average” because they believe that “when people think more than once about a problem, they often come at it with a different perspective, adding valuable information. So tap your own inner crowd and allow time for reconsideration: Project an outcome, take a break (sleep on it if you can) and then come back and project another.”
3. Use premortems. I found this exercise very interesting. The authors explained, “In a premortem, you imagine a future failure and then explain the cause. This technique, also called prospective hindsight, helps you identify potential problems that ordinary foresight won’t bring to mind.”
4. Take an outside view. Here, “You need to complement this perspective with … [a view] that considers what’s happened with similar ventures and what advice you’d give someone else if you weren’t involved in the endeavor.”

Thinking About Objectives

The authors believe that too often “people unwittingly limit themselves by allowing only a subset of worthy goals to guide them, simply because they’re unaware of the full range of possibilities.” You should generate objectives and you can work to sort through them as you progress because “Articulating, documenting and organizing your goals helps you see those paths clearly so that you can choose the one that makes the most sense in light of probable outcomes.”

The authors suggest two steps will help to ensure that you are “reaching high – and far – enough with your objectives.” First, you should seek the advice of others; however, you should “Outline objectives on your own before seeking advice so that you don’t get ‘anchored’ by what others say. And don’t anchor your advisers by leading with what you already believe… If you are making a decision jointly with others, have people list their goals independently and then combine the lists.” Second, you should cycle through your objectives by tackling them one at a time, because “looking at objectives one by one rather than all at once helps people come up with more alternatives. Seeking a solution that checks off every single box is too difficult—it paralyzes the decision maker.”

Thinking About Multiple Options

The authors believe that while you should have a “critical mass of options to make sound decisions, you also need to find strong contenders—at least two but ideally three to five.” They note, “Unfortunately, people rarely consider more than one at a time. Managers tend to frame decisions as yes-or-no questions instead of generating alternatives.” The authors also believe that corporate group think tends to avoid a loss rather than reaching for a win. To overcome this, they suggest two techniques:

1. Perform a joint evaluation; evaluating options in isolation does not ensure the best outcome. They write, “A proven way to snap into joint evaluation mode is to consider what you’ll be missing if you make a certain choice. That forces you to search for other possibilities… That simple shift to joint evaluation highlights what economists call the opportunity cost—what you give up when you pursue something else.”
2. Use the “vanishing-option test,” which requires you to “Assume you can’t choose any of the options you’re weighing and ask, ‘What else could I do?’ This question will trigger an exploration of alternatives… That might prompt you to consider investing in another region instead, making improvements in your current location, or giving the online store a major upgrade. If more than one idea looked promising, you might split the difference.”

Why is all this important for the CCO or compliance practitioner? We are presented with options that appear to be simply Go/No-Go or even one-off decisions. A Foreign Corrupt Practices Act (FCPA), UK Bribery Act or other anti-corruption program should require a variety of responses. Just as all risks are different, the management of risks can be handled differently. As a CCO or compliance practitioner, you cannot be Dr. No, living in the Land of No; you must be proactive to come up with solutions to help your business unit folks to not only do business in compliance with the relevant laws, but to actually do business. Just as Ruth Rendell was able to weave an intricate story line into the traditional mystery format, you, as the CCO or compliance practitioner, should be able come up with solutions to the compliance issues that you face.

This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business advice, legal advice or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The author gives his permission to link, post, distribute or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.