People & Culture

This article is an excerpt from a full blog on Insperity.com. Read the complete post here. 

From a legal perspective, owning and operating a business is inherently risky. While it’s not possible to shield your business from every conceivable negative outcome, establishing a culture of HR compliance can protect your company from the most common business risks. 

In the U.S., business owners must comply with an ever-increasing and evolving list of laws and regulations at the federal, state, and local levels. As your company grows in size and complexity, even expanding into new states and municipalities, ensuring legal compliance can become complicated.  

Furthermore, it can be more difficult to monitor the details of each employee’s behavior to avoid running afoul of the law. 

However, a company culture that encourages ethical behavior and promotes proactive compliance can significantly reduce risk exposure. This is what a culture of HR compliance is all about, and why it is so important. 

So, what are common risks that businesses encounter?  

And how do you create and maintain a culture at your company that mitigates these liabilities? 

What are the risks that business owners can face? 

Business owners face three main legal risks: 

1. Regulatory 

2. Civil 

3. Criminal 

All businesses must comply with numerous laws passed at different levels of government. Depending on your industry or business type, some laws regulate nearly every aspect of your operations. Non-compliance with these laws may result in time-consuming investigations or audits, costly fines, operational disruptions, and reputational damage. 

In dealing with employees, businesses can be subject to accusations of discrimination or harassment, which can also consume significant amounts of time and money, diverting resources away from the business and resulting in similarly harsh penalties. 

In especially grievous situations, business leaders can face imprisonment for criminal offenses such as tax evasion or insider trading, for example. 

Company culture as a risk-mitigation tool 

Together, strong values and positive culture encourage employees to hold themselves to a consistent standard of beliefs and behaviors – no matter where they are and who is watching –  and provide a safe, supportive environment for them to speak up when they notice a potential cause for concern. 

Your company’s core values and workplace culture: 

• Are the foundation of your organization and should permeate every aspect of the workplace 
• Dictate your company’s beliefs, priorities and preferred courses of action 
• Set the expectation for how all employees should conduct themselves as representatives of your company 
• Serve as a framework for decision-making in challenging situations 

In the absence of clearly defined core values or if a toxic culture persists, employees may instead rely on their personal instincts, opinions and past experiences to navigate challenges. Employees whose values don’t align with yours may act in a way that puts your company in legal jeopardy. Additionally, employees may hesitate to ask for help or report problems, letting issues escalate into bigger liabilities.  

The more you guide your team, the more your company can benefit. Your values and culture must emphasize the behaviors you want your employees to exhibit each day on the job. 

Leaders must model and reinforce desired behaviors for the rest of the organization. There should never be a perception that senior employees are exempt from expectations that other, lower-level employees must adhere to, or that exceptions to rules exist.  

Values and culture must be reviewed regularly for relevance, adherence and effectiveness, as well as to identify and correct any issues. 

Building a culture of HR compliance 

Characteristics of a strong culture 

As it relates to legal compliance, your company’s culture should promote characteristics that include: 

• Ethics
• Integrity 
• Honesty 
• Safety 
• Respect 
• Responsibility 
• Transparency 
• Community service, along with an understanding of how the organization serves the greater good 

People underlying the culture 

You can envision and explain the culture you want your company to embody, but ultimately you depend on your people to implement and live it. 

This all depends on your hiring processes and ongoing commitment to employees. 

Hire carefully and consider the cultural fit of each job candidate as equal in importance to their skills and experience. 

• Broadcast your company culture and values, and clarify the type of employee you’re looking for. 
• Ask interview questions intended to uncover a job candidate’s values, gauge their working and communication styles, and reveal their thought processes in certain scenarios.  
• Provide new hires with a thorough introduction to your culture and values. 
• Reinforce initial training with regular training. 

When mistakes happen 

Setbacks are inevitable, but a robust, well-defined culture of HR compliance can mitigate the impacts.  

• Address isolated incidents individually. 
• Address widespread problems in larger meetings or communications. 
• Assess the root cause of the issue, including whether some aspect of your culture was to blame. Evaluate how this happened and how your company can resolve it. 
• Focus on your organization’s strengths. 
• Reframe setbacks as learning opportunities. 

Learn more about creating a culture of HR compliance by reading the full blog here. If you’d like to learn more about how Insperity can help your business, contact Matt Sternberg or Gina Carvana.