Leading in a regulated world

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Leading in a regulated world

October 26, 2015 -

Vanderbilt University released a report last week on the financial impact of federal regulation on U.S. colleges and universities. The study estimates that U.S. colleges and universities spend north of $27 billion dollars on compliance every year. That is a phenomenal sum, spent on everything from research compliance to meeting accreditation standards as well as overall financial accountability with other state and federal laws.

The compliance industry has grown exponentially since 2000. The collapse of Enron and Worldcom due to nefarious accounting practices led to the Sarbanes-Oxley corporate-governance law of 2002, and the financial disaster of 2008 brought on largely by questionable loan practices within banks has led to a new round of regulations as well. The Wall Street Journal estimates that “Since 2009, there’s been nearly a 40% rise in the number of chief accounting officer titles, according to findings from Russell Reynolds Associates.” These positions did not exist before 2000, as Chief Financial Officers were all that was necessary from the financial part of a company.

Regulatory governance has grown in almost every sector of modern life.  The European Union’s chief regulatory officer, Margrethe Vestager, has made news recently for taking on global behemoths Google and Gazprom for anti-competition infractions. The Affordable Care Act, combined with the more longstanding HIPPA (Health Insurance Portability and Accountability Act) laws has left the healthcare industry awash in red tape.

Part of the reason for all of this regulation is that we live in an increasingly complex world, but human nature has not changed. In one of the more ironic twists of the modern era, we live in a world that eschews moral rules, but continues to pile on rules and regulations in every other facet of life. We want to uphold personal sovereignty over our moral decisions, but inherently know deep down that freedom without boundaries is not freedom, but anarchy.

This regulatory world demands much from leaders. First, it points to the vital importance of preparation from leaders. The famous George Costanza defense of “was that wrong?” from Seinfeld does not work in real life. Leaders must understand that every detail matters when it comes to their company. Record keeping is important. Being able to notice problematic trends is important. Being able to anticipate future challenges is important. All of this preparation is why leadership teams are such a vital component of contemporary leadership. The environment is too complex for leaders to think of themselves as isolated individuals atop the mountain. They need to see the strength and power afforded by capable leadership teams.

Which brings on the second point. Leaders need to make sure they have the right people on their leadership team. Jim Collins termed this “getting the right people on the bus“, and it is hard to overstate how important this is when it comes to leading amidst the complexities of contemporary life:

“Most people assume that great bus drivers (read: business leaders) immediately start the journey by announcing to the people on the bus where they’re going—by setting a new direction or by articulating a fresh corporate vision.
In fact, leaders of companies that go from good to great start not with “where” but with “who.” They start by getting the right people on the bus, the wrong people off the bus, and the right people in the right seats. And they stick with that discipline—first the people, then the direction—no matter how dire the circumstances.”

With all the complexity of a highly regulated world, it is vital that leadership teams be able to communicate and share information through relationships of trust rather than suspicion or competition.

Joseph is a great example of a biblical leader. He exhibited “wisdom and discernment” so clearly that Pharaoh made him prime minister over all of Egypt (Genesis 41:38-42). He was in charge of planning and preparing for a famine that was coming, and his wisdom, preparation, and discernment saved an untold number of lives.

Perhaps the greatest, but most unheralded need for Christian leaders is the need for true wisdom born of deep character. In a complex world, the answer is not to simply seek smarter, more intelligent people, but to seek smart, intelligent people who have strong character and exhibit wisdom in their daily lives. Those are the leaders you want to have on the bus to help navigate through the complexities, frustrations, and challenges of the regulatory world.

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