As companies grow and become subject to increasing regulatory scrutiny, one of the most valuable intangible assets that executives can foster is a culture of compliance. This blog post will describe the importance of a culture of compliance and how to create it.
What Is a Culture of Compliance?
Culture is defined as “the set of shared attitudes, values, goals, and practices that characterizes an institution or organization.” A culture of compliance is one that values following through on an organization’s regulatory obligations and expectations, even in the face of obstacles or inconvenience. While a culture of compliance is related to a culture of ethical behavior, it is narrower and geared toward understanding the specific rules a company needs to abide by and the value that can be derived from crossing the T’s and dotting the I’s.
Why Does a Culture of Compliance Matter?
Instilling a culture of compliance helps enable an organization to meet its goals and objectives. Such a culture helps encourage proper behaviors and steer clear of regulatory and legal trouble. This all helps enable long-term growth, security, and profitability.
Developing a culture of compliance is especially important for smaller businesses. As small companies grow, they will almost inevitably cross a threshold where expectations and requirements shift as they come under the purview of various governing or regulatory bodies. Instilling a culture of compliance before reaching this point will help make this transition much less bumpy.
What Are the Main Pillars of Compliance & How Does Compliance Culture Relate to These?
Key components of an effective compliance program include the following:
- Written policies and procedures
- Some examples of potential policies and procedures are:
- Designated compliance officer
- Training and education
- Communication channels
- Internal auditing and monitoring
- Enforcement
- Incident response
Having a full compliance program implemented isn’t a requirement for creating a culture of compliance. You can begin instilling values and norms of compliance even if your company isn’t large enough to support or require a full compliance program. By creating a culture of compliance in advance, you’ll help prepare the way for an effective compliance program.
What Are Some Ways to Create & Nurture This Culture?
Having set the stage for why you should care about a culture of compliance, the next step is to understand best practices for implementing one in your organization. These best practices are covered below, including a real-world example of what an effective compliance culture looks like.
Begin with the Tone at the Top
As with most things in any organization, an effective compliance culture starts with tone at the top. Leadership needs to demonstrate the importance of compliance and the value that can be derived from seemingly mundane compliance-related activities. They must also demonstrate their support by providing proper staffing, reporting structures, and training to facilitate compliance and mitigate any gaps that are found.
Assess Your Current State
Taking stock of your employees’ existing understanding and value of compliance can help you identify areas for growth. If employees already appreciate the importance of compliance, you can help prepare them for the future by identifying specific regulations to prepare for. If there is a lack of understanding around the significance of compliance activities, training (such as security awareness training) and encouragement can be offered.
Create a Plan
Based on the current state of your organization and your vision for the ideal future state, create a plan for how to get there. Identify leaders who can take responsibility for and champion the effort to build a culture of compliance. Develop milestones or other methods to measure your progress.
How Do You Measure a Culture of Compliance?
Although a company’s culture is an intangible asset that’s difficult to quantify, some possible measures of success include:
- Training completion rate and time-to-completion
- Policy attestation/acknowledgment rates
- Phishing simulation failure and reporting rates
- Hotline/reporting volume (note that rising reports often signal a healthier culture, not a worse one)
- Mean time to remediate audit findings and self-identified issues
- Control self-assessment pass rates
- Percentage of exceptions self-identified vs. auditor-identified, which is arguably the single best culture indicator
- Repeat findings year over year
Communicate & Reinforce
Based on your plan, look for opportunities to consistently embed messages about compliance. Some ideas are to include compliance-related themes in meetings, incorporate compliance into company goals, strategies, and mission statements, and include compliance topics in personal goals.
Align Incentives & Reinforce Accountability
Take some time to evaluate your incentive structures and make sure that they are not misaligned with desired ethical outcomes. Look closely at what performance reviews, bonus structures, and informal recognition reward, and add compliance-related objectives where possible. If incentives are the carrot, accountability is the stick to help encourage compliance expectations. Make sure that company policies clearly communicate expected behaviors and the consequences for failing to meet them, and be consistent in applying them regardless of an individual’s level within the company. Publicly praise team members who raise their hands to disclose issues. When an organization punishes individuals for bringing missteps to light, internal transparency quickly vanishes.
Celebrate Progress
As the company makes progress, take opportunities to celebrate success. If your company successfully passes an examination or issues an audit report such as SOC 1, SOC 2, or SOC 3, make sure to recognize those responsible and celebrate the achievement together.
A Real World Example of Compliance Culture Done Right
During my time as an auditor, I have seen different ways a culture of compliance has been implemented, from an outside observer as well as an internal participant, but one particular example is instructive.
A large institution found itself unexpectedly facing regulatory oversight and scrutiny. Doing the right thing was embedded deeply into the company’s existing culture, but there were concerns about how factoring in new compliance requirements would be received and how to best steer the organization to where it needed to go.
The company started with the tone at the top, with executive management taking the message to heart and setting an example of how important compliance was to the success of the company. The importance of compliance was communicated clearly and frequently, along with the “whats” and the “whys” of the changes involved.
Incentive structures were developed to hold people accountable and encourage the desired behaviors. Management made a concerted effort to mature and expand first and second lines of defense and empower them to help drive the compliance efforts and measure success without becoming too heavy-handed. Existing policies and procedures were bolstered, and new ones created where gaps were identified. External experts were brought in to help provide support and expertise needed to bolster the initiative and secure its success.
The progress of the compliance initiative was communicated to internal personnel so that they could see the progress that was being made and feel a sense of ownership and participation in the company-wide effort. While it took time to embed compliance as a key part of the company’s culture, it eventually did come and proved valuable as the company navigated the new reality of regulatory compliance.
How Does Your Compliance Culture Impact Your Audit Process?
The components of an effective compliance program listed above map directly to the Trust Services Criteria for SOC 2 reports. Even if your company is at the beginning of its journey toward creating a compliance program, a solid compliance culture will give employees the right incentives and encourage them to take proactive steps to support the process.
The Bottom Line on Building a Compliance Culture
A company’s culture is one of its most unique and valuable assets. Adding a culture of compliance to a company’s overall culture will serve it well both in the near and long term.
If you would like to learn more about how we can assist with your organization’s compliance, or inquire about the audit services offered by Linford & Co, please feel free to contact us.
This article was originally published on 2/15/2023 and was updated on 9/16/2026.
