Day 15 of 30 Days to a Better Compliance Program

What if you want to take you post-training analysis to a higher level and begin to consider the effectiveness through your return on investment (ROI)? Joel Smith, the founder of Inhouse Owl, a training services provider, advocates performing an assessment to determine ethics and compliance training ROI to demonstrate that by putting money and resources into training, a compliance professional can not only show the benefits of ethics and compliance training but also understand more about what employees are getting out of training (effectiveness). The goal is to create a measurable system that will identify the benefits of training, such as avoiding a non-compliance event such as a violation of the FCPA. Smith admits that calculating legal ROI is very difficult as ethical and compliance behavior is an end-goal and of itself - not necessarily one that everyone feels should be subject to a ROI calculation. 

Smith noted, “it is extremely difficult to isolate the training effect to calculate what costs you avoided due solely to your ethics and compliance training. Although each organization will have a unique ROI measurement due to unique training objectives, it is possible to use a general formula to calculate ethics and compliance training ROI.” 

Smith’s model uses four factors to help determine the ROI for your ethics and compliance training, which are: (1) Engagement, (2) Learning, (3) Application and Implementation, and (4) Business Impact. These four factors are answered through posing the following questions. 

1. Figure out what you want to measure (i.e. what’s the “benefit”?) Before you ever train an employee, you should have a goal in mind. In the FCPA, you want them to avoid ethical and non-compliant actions that would lead to FCPA violations. 

2. Were employees satisfied with the training? What is their engagement? The next step is to get a sense of whether employees feel that the training you provided is relevant and targeted to their job. 

3. Did employees actually learn anything? If you want to understand the “benefit” of training employees, you must know whether they actually learned anything during training. 

4. Are employees applying your training? You should determine employee application and their implementation of the training topics, with employee surveys to understand whether they ceased engaging in certain risky behaviors or better yet understand how to conduct themselves in certain risky situations.  

5. What’s the quantitative business impact of your training? There are two parts to the business impact calculation: (1) the benefit calculation and (2) the isolation calculation. Determine with these 5 questions. 

1. How often could a noncompliance event occur?
2. How much revenue would be involved?
3. What is the profit margin on the revenue?
4. What are the other costs?
5. What are the noncompliance hard costs? 

Now it is time to calculate the ROI. Here I turn to the formula as laid out on Smith’s company website: “Total FCPA Noncompliance Costs Avoided - Total FCPA Training Program Costs  ÷Total FCPA Training Program Costs ($20,000) x 100=ROI”. Smith concludes by noting, “Even though calculating training benefits is often difficult and imprecise, it’s incredibly important to make an attempt to quantify training ROI” to demonstrate not only effectiveness but also “so you can show business people the incredible effect that engaging training can have on the bottom line.” 

The importance of determining effectiveness and the evaluation of your ethics and compliance program is becoming something that is emphasized more by the Department of Justice (DOJ). Beginning last fall, we started to hear that the DOJ wants to see the effectiveness of your compliance program. This is something that many Chief Compliance Officers (CCOs) and compliance professionals struggle to determine. Both the simple guidelines suggested by the Biegelmans and the more robust assessment and calculation laid out by Smith provide you with formulae you can use going forward. 

Three Key Takeaways

1. You need to know the effectiveness of your compliance training.
2. What is the quantitative business impact of your compliance training?
3. What is the qualitative business impact of your compliance training?

For more information, check out my book Doing Compliance: Design, Create and Implement an Effective Anti-Corruption Compliance Program, which is available by clicking here.