Understanding the Differences Between Conformity and Compliance

In this week's episode, Ricardo talks about the difference between compliance and conformity.

Compliance and conformity are rules that an organization must always follow. However, the purpose of each is quite different.

Often the company decides to follow a specific rule not because it has to but because it is good for the business, such as obtaining ISO certification. In this case, we are talking about conformity; that is, conformity is everything the company is committed to doing because it will be suitable for it.

Compliance, on the other hand, are rules that the company must follow to stay in business. For example, a publicly-traded company has audits and reports that need to be sent to regulatory bodies such as, in the case of Brazil, the CVM (Brazilian Securities and Exchange Commission). These reports are not made because the company wants to, but because it is a legal requirement for them to be disclosed.

That is, compliance is the set of rules that exist to ensure that the organization acts in compliance with the laws and regulations in force.

Ricardo gives some examples of conformity and compliance in projects. He also cites the recent example of Elon Musk's Twitter purchase deal, where one party considers the information about fake accounts as compliance, and the other considers it as conformity already declared in the purchase memorandum.

Listen to this week's #5minpodcast to learn more.

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Episode transcript

The transcript is generated automatically by Podscribe, Sonix, Otter and other electronic transcription services.

Hello everyone. Welcome to the 5 Minutes podcast. Today I'd like to talk about compliance and conformance. Many times people interchange these two concepts because both of them are rules that organizations should follow. And I agree completely. Both compliance and conformance are a set of rules that your organization must follow. However, the reason why your organization follows a specific rule is the key difference between compliance and conformance. When you create a rule or your self imposed a rule that your company decided to commit, and the company decided to do that because it's good for the company, it's a voluntary commitment. This is conformance. A perfect example. Your company decides to pursue a quality standard using ISO. It's not required by law. You do that because it will increase the awareness of your client. It will increase your brand reputation. It will increase your product's reputation. Or maybe the client will not buy from you without this certification. And this is conformance. In my personal life, I can create a rule requiring that I become certified in project management or certified in agile. Why? Because it's something that I'm self-imposed on because I think it's good for me. On the other side, what is compliance is the rules that your organization must follow to stay in business. If you are noncompliant, you are doing something that goes against the law. So this is the difference. It's a legal obligation. For example, if you are a publicly-traded company, you have a series of obligations that you don't do because you want. It's because it's the law. You need to disclose some information. You need to share this information because it's part of your compliance policy.

Going back to personal life, as I said on conformance about certification, compliance is a driver's license. If you want to drive, you must have a driver's license because if you drive without a driver's license, you are going against the law. So it's a compliance action to have a driver's license to drive. And this is the basic concept between compliance and conformance. For example, just out of curiosity, in Brazil, when you put compliance in a tool like Google Translate, compliance and conformance will drive pretty much to the same word in Portuguese. So this is why many people mix this and try to think that this is all the same and it's not. One final point. Many items and many rules. They start as conformance, and over time they become compliance. Let me give you an example. Environmental and social actions. If we go back 50 years ago, the laws regarding environmental protection were, I would say, quite minimum, the bare minimum; you can do pretty much everything. What happened is that some companies, the market, and the public started to complain that you start to put pressure, and now there is a set of laws and regulations regarding the environment. Now there is a big, big discussion. My Ph.D. is in sustainability and ESG in project environment and ESG. Several aspects of the ESG are still conformist. Companies are doing it because it's good for them because it improves their brand reputation. But there is a strong movement on transforming some ESG requirements into compliance with legal requirements. So if you want to continue in business, you must apply and have very specific governance; that is still the case on the G for I would say public traded companies, the social aspects, and the environmental aspects.

So over time, there is a common nature that some conformance items, they start to become compliance terms or compliance rules in terms of companies, in terms of specific types of products, for example, it's good that you if you're selling a toy for kids that you don't have things that could, I would say, hurt the children. Over time, some of these items were conformance items. Companies decided to do that. Now it's a legal obligation. Otherwise, you can not sell this story, and why I'm saying this to the project environment because in the project environment, most of the projects we do, are bounded by the same rules because many companies, specifically the large companies, need to disclose topics around compliance on their projects. You need to disclose, for example, that you are expecting a 20% increase in revenue with the project, and you have already delivered several sprints and several MVPs? How much revenue did you increase? So this is a critical thing. For example, when you see publicly traded companies, they report pretty much every quarter, and this is compliance. This is not just a desire for you to be open, but this is a compliance requirement. So this is why it's so important to understand this the governance and the bounding system of your project are bound by the company you are in. Never forget that it's not something completely isolated where you can do whatever you want. It's regulated by the company and by the legal aspects that your company is embedded in. I hope you enjoy this podcast and see you next week for not a 5 minutes podcast.

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