Ethics programs need regular improvements.

• Author: Lewis, Leona
• Position: Ethics Corner

Many know what an effective compliance program looks like, but how does it operate?

An effective program is one that is planned, executed and enforced toward the goal of detecting wrongdoing and preventing noncompliance, according to the Federal Sentencing Guidelines of the Department of Justice. Although the guidelines provide information on what elements an effective compliance program should contain, they do not explain how the program must operate in a real company.

Beyond complying with the law, one important goal of having a compliance program is to respond to regulatory investigations. Compliance programs will need to be explained to a regulator at some point. To show an effective compliance program to regulators, a contractor must explain how the compliance program works by answering the following questions: How does the company decide how to achieve compliance? How does the company implement measures to achieve compliance? How does the company know whether compliance procedures work? How does the company react to problems?

The answers to these questions can change, but they need to be answered in detail. How the compliance program works needs to be well-known by those with a role in its operation.

One approach is to use the structure of continuous improvement, borrowed from the world of manufacturing, to operate an effective compliance program, also known as "Plan, Do, Check, Act" or PDCA. Those familiar with quality management from manufacturing already understand continuous improvement. A library of books has been published on the topic. As an example, below is a simple description of a manufacturing continuous improvement cycle.

First, a manufacturer creates a plan to produce a product. Second, the manufacturer executes the plan. Third, during product production, the company checks for defects in the resulting product. Fourth, the company manages the defects by creating corrective action plans for reducing or eliminating defects. The cycle repeats with execution of the corrective action plans, measuring the results, creating new corrective action plans, and so on. With each successive cycle, changes are made to improve results, reducing the risk of defects.

In addition to quality management in manufacturing, the process of "Plan, Do, Check, Act" is also helpful for a contractor building an effective compliance program. Using it is helpful because its implementation also gives the business the ability to answer fundamental...