We all know this about corporate life: Support functions are the exclusive responsibility of designated groups. If you need or want compliance help, for example, you have to ask the compliance department. That’s a good thing, right?
Well . . . .
A few years ago, the former dean of the business school at the University of Toronto, Roger Martin, said granting corporate support groups monopolies hasn’t worked. Like all monopolies, staff groups have tended to become inefficient, expensive, and unresponsive.
Martin cited McKinsey research showing that senior executives had only a 30 percent satisfaction level in their corporate functions across the board.
To fix that, he proposed forcing support staff to compete with outside providers. “[T]he only way to have efficient, effective corporate functions is to take away their monopoly right to serve.”
Martin said frustrated CEOs have already broken IT departments’ monopolies. “They outsourced the entire function. The results were so spectacular that it spurred the growth of IT outsourcing into a gigantic global business.”
It’s not all or nothing. Martin said opening the door to competition “just a crack” could be enough to change the corporate world.
“Losing business every once in a while provides the training that the corporate functions miss when they own an ironclad monopoly right to serve,” Martin said. “I know no procedural substitute that comes close.”
Competition would work not only for IT but also for HR, legal, and others, he said.
What about compliance? Should it be forced to compete with outside providers?
If Sales and Marketing wants an external opinion about a compliance issue, should they be allowed to retain outside compliance experts? What would happen if outsiders could supplant or override internal compliance decisions?
Start with this: Compliance is different from other staff groups. They’re corporate gatekeepers.
Their core function is to help the company and its people stay out of legal and ethical trouble. To do that, they need some level of independence, skepticism, and the ability and willingness to sometimes say “no.”
A result of forcing compliance to compete with outsiders would be rampant forum shopping. Any threatened or actual “no” from compliance would spur Sales and Marketing (or anyone else) to bypass the gatekeeper and look for a pliable outsider to say “yes.”
Outside competition works for IT. Its job is to put what’s needed into a toolbox. Different tools for different jobs.
Compliance doesn’t work that way. There’s no such thing as equivalent choices between legal and illegal, ethical and unethical. Keeping the difference clear is what corporate gatekeepers do.
The root of many complaints about staff monopolies is that they’re imposed from above. Then they “charge” for their services, usually as an allocated “overhead” expense.
There’s evidence, however, that most executives are relatively satisfied with the cost-benefits of compliance. McKinsey’s research said:
Who should pay for support functions? Compliance with tax, accounting, and similar regulatory requirements was the one allocation activity that a majority of respondents considered “highly effective.” These allocations are usually unavoidable. But organizations should scrutinize many others that they now make only for internal strategic or operational reasons rather than for external compliance.
Most executives understand that compliance protects them and the company. Cost allocations (within reason) aren’t the biggest concern. Being “highly effective” in their core function is the priority.
Still, compliance leaders can learn something important from Roger Martin and his ideas about competition.
Internal corporate monopolies aren’t an invitation to be complacent or to lord it over anyone. Instead, compliance should use its protected space to constantly improve — experiment, be creative, learn new things.
What responsible gatekeeper wouldn’t welcome the chance to compete daily against itself?