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What doesn’t kill a company makes it stronger: inside CannonDesign

Imagine that a senior manager in your firm and an external consultant were engaged in activities that did not just cross an ethical gray area — they were illegal.

It’s unthinkable. Yet it happened at 950-person A/E firm CannonDesign, and today, the firm is a better business partner because of it.

In this issue of The Friedman File, I’m sharing their remarkable story, one that I believe every A/E/C and environmental consulting firm can learn from. Whether your firm is involved with government contracting (as CannonDesign is) or not, read on to learn why transparency, communication and professional ethics must be baked into your firm’s culture — and how to make that happen.

In 2013, CannonDesign made headlines when they became publicly embroiled in a federal investigation by the U.S. Attorney’s Office into an external consultant they had worked with for 18 months in 2010 and 2011. The former Veteran’s Affairs (VA) official who had been brought in to help develop VA projects during that time, but whose contract wasn’t renewed, was under federal investigation for trading in government information. Worse, one of their own senior designers was implicated in the bribery scheme.

“It was a shock given our long history of corporate citizenship,” says Brad Lukanic, AIA, who became CEO in July 2016. “CannonDesign has been around for more than 100 years, and had never been involved with anything like this, but we were not as sophisticated in our policies, practices and compliances as we should have been.”

“It was a very difficult situation,” he says. “For many CannonDesigners, this is an avocation. It’s not just a job. Good architects, engineers and designers were concerned. It was a very emotional time. It was also expensive financially. It’s not just the penalty and the lost work. Compliance itself has a cost attached to it.”

Rather than hunkering down and waiting for the storm to blow over, CannonDesign leaders saw an opportunity to grow from the experience and set their firm apart in a positive way. Three years later, they’ve resolved the case. Both individuals are serving jail time. And CannonDesign has created what is arguably the gold standard of formal compliance and corporate ethics programs.

Here’s how they did it:

Cooperation with authorities. CannonDesign cooperated with the government and participated in the investigation, sharing more than 400,000 documents with investigators. The employee under investigation was relieved of his responsibilities. It wasn’t without pain. The firm was suspended as a federal contractor for six months in 2015, but successfully argued for reinstatement. (They continue to provide professional services to the VA.) CannonDesign also agreed to remove itself from a large VA hospital project in California, which had been tied to the investigation. And they paid $12 million in penalties — a big blow to the employee-owned firm.

A clear and cohesive external message. CannonDesign’s leadership knew their clients would hear or read about the investigation and have questions. They created talking points for all leaders, and proactively broke the news to clients. In a handful of cases where clients expressed questions or concerns, leaders followed up personally to assure them that CannonDesign had put new measures in place to assure that this would not happen again.

Transparency with employees. “Internally, it was a learning experience for us,” says Lukanic. “It is the culture at CannonDesign to have as much transparency as possible. We communicated with our employees about what was happening to the degree allowed by law.” The firm also developed a common language to enable their people to better understand and discuss the topic.

A new Office of Compliance. CannonDesign invested heavily in building a new Office of Compliance. Paul Moskal, a former FBI division counsel, was brought on as Principal and Director of Compliance in 2014, a role with direct access to the CEO, General Counsel and Board of Directors. The office, which is also staffed by an attorney with A/E experience, was trained for and tasked with developing, rolling out and managing a robust corporate compliance program.

Top-down leadership. Ethics and compliance have become part of everyday life, starting with a Code of Conduct for the Board of Directors, and today includes a Director of Compliance. Firm bylaws were scrutinized and modified to strengthen review and oversight, and additional legal staff was brought in to implement risk management and business practices, as well as to help with project due diligence reviews. They also established an Ethics Committee overseen by the Office of Compliance and trained Integrity Champions in each office. “We wanted to identify policies and procedures that show everyone how we live at CannonDesign,” says Moskal.

An established Code of Conduct. CannonDesign’s Board created its first Code of Conduct with specific federal and international contracting language. The Code, called “Living Our Vision,” is published on the firm’s internal and external websites, along with a hotline for confidential reporting. Employees are now required to annually certify in the code.

Compliance language everywhere. Today, CannonDesign includes compliance language in all of its contracts, not just those with federal clients, subject to client approval, says Moskal. “Our clients see this as a value add,” he says. In fact, recently, an institutional client cited CannonDesign’s ethics and compliance guidelines as a top reason for their selection. “They appreciated that we have compliance language and policy that informs and protects them as much as it protects our firm.”

Human Resources now uses compliance and ethics language in job postings, offer letters and exit interviews, and has established guidelines about the hiring of former government employees. Moskal meets with new hires to personally introduce the firm’s compliance program. CannonDesign has also created an “Acts of Integrity” program to reward ethical and compliance-related behavior.

Education and training. Staff training has been extensive, using internal and external experts and an electronic library. From the CEO on down, employees must have basic ethics and compliance training. Company policy mandates an additional 1 to 4 hours per year, depending on position. Since 2014, employees have completed nearly 12,000 hours of training, including training specific to the Foreign Corrupt Practices Act (FCPA) and federal procurement and contracting.

A/E/C and environmental consulting firms need to be aware of the things they can do to protect everyone involved in their projects. With ever-changing technology, increased awareness and the global economy, issues of compliance and ethics are becoming more important. They’re also being more carefully watched than ever before.

“Ultimately, we were in receipt of government information that we should not have been given,” says Moskal. “We take responsibility for that. We take responsibility for our former employee, for not having a compliance program in place, and for other employees not stepping forward. We believe that by talking about it, we can help other firms avoid this experience.”

What steps is your firm taking to manage risk, ensure compliance and build a strong ethics mindset among staff? Call me at (508) 276-1101 or email me at rich@friedmanpartners.com.

By | 2017-07-18T15:14:11+00:00 December 2016|Business Strategy, Case Studies|

About the Author:

Rich Friedman, President of Friedman & Partners, has worked in and consulted for the A/E/C and environmental consulting industries for more than 25 years. Starting out in the trenches as an environmental consultant and business developer for Stone & Webster Engineering in Boston, Rich expanded his reach as the partner in charge of marketing and business development research, consulting and training for ZweigWhite. He also managed a variety of other projects involving strategic planning, mergers and acquisitions, and executive search. Since launching Friedman & Partners, he has worked with firms at all levels, from small niche consultants to large ENR 500 organizations. He’s also conducted hundreds of seminars and workshops for firms, design and environmental industry professional associations and venues, including AIA, SMPS, ACEC, AGC, NSPE, Build Boston/ArchitectureBoston Expo (ABX), WTS and Chief Executive Network.