Two years ago, I was sitting on a conference call with our UKG Lab startup companies. It’s an unbelievable program where we help existing and rapidly growing companies mature and learn from those with years of experience in business.
As I participated in this call, I reflected on how much happens in business on a regular basis. It brought me back to some of my own experiences working for smaller organizations where I wore “multiple hats”—i.e., performed multiple jobs that larger organizations would farm out or hire additional staff for. It also reminded me of how much risk smaller organizations carry, whether they realize it or not.
As young companies face rapid growth and set themselves up for long-term success, they must lay the groundwork in two critical areas: compliance and culture.
As human resources professionals and leaders, you play a pivotal role in shaping these areas in your company. A compliance strategy ensures that your organization adheres to laws and regulations, while culture defines the values, behaviors, and norms that guide your employees’ actions and decisions.
As a young business grows, it’s critical to understand the impact of compliance and culture on the workplace.
The competitive advantage of a combined culture and compliance strategy
Compliance and culture are rarely looked at together, let alone used in the same sentence. Yet, they actually work best together to set the groundwork for your organization to thrive.
Compliance is often thought of as, “do what you’re told,” or reap the consequences. Although this is true, we need to reshape this mindset to recognize that compliance plays a large factor in our people and company culture. Compliance is an opportunity to inspire efficiency and maintain steady growth without fear of fines or loss.
Culture is often referred to as shared values, attitudes, behaviors, and standards that make up a work environment. It’s easy to see that if our culture is not aligned with compliance, specifically behaviors and standards, it’ll be difficult for our organization to achieve the growth it deserves.
For example, if we don’t hire for healthy attitudes and behaviors, we know our culture and standards will slip leading to non-compliance. Non-compliance leads to fines, taking away from how organizations could reinvest funds to maintain a positive culture or develop programs to build a culture.
Thus, the spiral begins. To mitigate this, it’s critical to understand the “why” behind culture and compliance.
Why compliance is critical to culture
Compliance is a multifaceted concept that encompasses legal, ethical, and industry-specific requirements. It’s not merely about following rules and regulations; it’s about building a foundation of trust and responsibility within an organization.
Consider the following:
1. Legal obligations: At its core, compliance ensures that an organization operates within the bounds of the law. Employment laws and regulations continually change and vary from jurisdiction to jurisdiction. HR professionals must stay informed about these legal requirements and ensure their organizations are in full compliance. Failure to do so can result in legal consequences, including fines, lawsuits, and reputational damage.
For example, HR departments in the U.S. must be well-versed in laws such as the Fair Labor Standards Act (FLSA), Title VII of the Civil Rights Act, and the Family and Medical Leave Act (FMLA). Violating these laws can lead to costly legal battles and damage an organization's reputation.
2. Risk mitigation: Compliance efforts are not just about adhering to existing laws; they also involve proactive risk management. By identifying potential compliance risks and taking steps to mitigate them, HR professionals can protect their organizations from legal and financial liabilities. This proactive approach helps prevent issues before they escalate and become costly problems.
For example, conducting regular internal audits to ensure that hiring practices are fair and non-discriminatory can help an organization avoid costly discrimination lawsuits. Similarly, compliance with data protection regulations like the General Data Protection Regulation (GDPR) in Europe can prevent data breaches and the associated legal and financial consequences.
3. Employee trust and satisfaction: Employees are more likely to trust and be satisfied with an organization that values compliance. When employees see that their employer is committed to following the rules and treating them fairly, it creates a positive work environment. Trust between employees and the organization fosters stronger employee engagement, loyalty, and retention.
In contrast, an organization that consistently violates laws or engages in unethical practices erodes trust among its people. This can lead to high turnover rates, decreased morale, and a negative company culture.
4. Competitive advantage: Compliance can also provide a competitive advantage. Organizations that operate ethically and transparently often have a stronger brand reputation, which can attract top talent and loyal customers. In today’s socially conscious world, consumers and job seekers are increasingly looking for organizations that align with their values and principles.
When an organization’s commitment to compliance is evident, it can stand out in the marketplace, setting it apart from competitors that may have a history of compliance issues. It’s critical to stay in-the-know on the latest, such as The Secure Act, Department of Labor and Overtime Rule, non-compete changes, and more.
5. Global expansion: For organizations looking to hire abroad, compliance is essential when navigating different legal and cultural landscapes. Different countries have varying labor laws, taxation regulations, and cultural expectations.
Adapting compliance strategies related to data privacy and GDPR, and more, will ensure smooth global expansion.
Compliance can be your strategic advantage to great culture
Compliance and culture are not separate elements within an organization; they’re interconnected and mutually reinforcing. This is maybe even more critical at small, agile organizations.
HR professionals play a pivotal role to ensure both compliance with laws and regulations and to cultivate a positive workplace culture.
When you lead by example, provide education and training, and consistently measure and adapt strategies, you can build a strong foundation for success.
Find out how UKG Ready can help you automate processes, manage compliance, and put your people first.