Improved Leadership. Competitive Advantage.

As part of their everyday operating life, the clients we deal with must learn to live with regulators and auditors. Clients that interface poorly with auditors often face more administrative burden and, certainly, more intense oversight. Conversely, organizations that engage and partner with auditors, regulators, and watchdogs in a purposeful and constructive manner tend to be left alone more and are given greater operating freedom. We want to take just a minute to revisit assumptions (something that ELP does quite well!) to re-think the interplay between organizations and external stakeholders.

Importantly, leaders can choose how they want to frame up our collective orientations towards auditors or regulators. And we've, generally, been witness to three distinctive approaches. Notably, organizations and the managers that lead them can adopt a hostile and defensive approach towards visitors. Many weak organizations embrace this perspective. In this lexicon, we hear phrases such as, "who do they think they are that they can tell us what to do?" and "this is our house, and they can't come in here and talk to us this way," or "we don't do anything wrong, so this is a waste." This is a destructive path. Organizations with a hostile orientation towards regulators or visitors foster a sense of animosity, and both parties tend to dig their heels in. Our experience tells us that both parties spend incredible amounts of energy; organizations put up higher and higher walls, while regulators spin their wheels trying to take bricks down. We find this approach wasteful and inefficient across both parties. We also find that it destroys morale, as tension is the name of the game here.

The next approach is just the opposite. Here, the focus is on impressing our visitors. The ultimate goal is to present a picture of perfection (or near perfection) where the regulators will just leave us alone. Under this scenario, great efforts are spent trying to "look good" or to "shine bright". Predictably, there are some dark-sides to this orientation. One of the chief issues is that managers and employees are tempted to only share the good and to avoid—at almost all costs—the bad. We know of one case several years ago where an Army Company Commander mandated that new, white binders be purchased for the unit's Armory—the place where all weapons are stored. The Commander shared that, hopefully, the shiny binders would give a good impression to such an extent that the auditors wouldn't dig any deeper to reveal the deep problems they had in their chain-of-custody of the unit's weaponry. The Commander was right—the gloss was bright enough to mask some deep deficiencies that were only revealed several years later. The problem with this approach, then, is two-fold. First, it focuses our efforts on the superficial at the expense of the meaningful—assembling binders as opposed to drafting new procedures. Second, there's an ethical component to this. "Looking good" without "being good" can be particularly dangerous—especially in high-risk/high-hazard industries.

The third approach is the best approach, as it is the balanced approach. Specifically, it means changing our entire orientation towards regulators or visitors. Instead of looking at them as enemies (approach 1) or friends to impress (approach 2), the best organizations look at visitors as valuable resources from whom they may learn. What exactly does this look like? Actually, there are hybrid elements of both approaches above. Make no mistake, it is okay—if not advisable--to clean up a bit before visitors arrive. Just like in our own homes, we will clean, sweep, and fluff the pillows a bit before our in-laws or friends come in. It also means, however, taking the lead with the auditors and exhibiting some control over the agenda. We know of one senior manager who invites the regulators up to his office as soon as they walk through the gate. He shares a couple of organizational wins and performance areas that he's proud of. Then he shares two or three weak areas targeted for improvement for which he's looking for specific input to that end. Finally, he gives them his mobile number in case they need any resources or need an obstacle removed. To us, this orientation is the most potent. It shows a mix of organizational self-esteem (the wins), but, most importantly, a willingness to learn in a focused way (guiding the regulators to some specific areas).

Since most, if not all, of our readership deals with regulators, we encourage you to develop a healthy and balanced approach to visitors. At ELP, this is one area where we earn our keep. To learn more and to get some world-class coaching on how to properly interface with external agencies or visitors, please drop Robin Bichy a line at