Q&A with… Mark Slaugh
Greenway Magazine sat down with longtime compliance consultant, Mark Slaugh, CEO of iComply, the country’s oldest compliance firm to talk about the reality of compliance as the industry itself becomes a reality in Missouri. Slaugh, an early and active participant in Missouri’s industry, was quick to share that in a highly-regulated industry, compliance is a cornerstone to long-lasting success for every facility.
What is compliance? Why is it important in a highly regulated industry?
Compliance is often a buzzword in the industry synonymous with legitimacy. All too often, we falsely hear that a company or facility is “100% compliant” – we have not seen that in over nine years of business in hundreds of facilities. This is often the first red flag that a company has no idea what “Compliance” really means. While the definition seems simple enough – that compliance means adherence to a set of rules, regulations, and standards – the reality of compliance is much more complicated in cannabis. As a highly regulated industry, compliance also means brand consistency, quality assurance, and control, corporate compliance training, employee documentation, SOP version controls, approvals, and revisions on a regular basis, and ongoing measures and management of macro and micro aspects of the business, from audits to inventory reconciliations, incident reporting, daily systemized documentation, packaging and labeling, and books and records management for accuracy and completion to prove the adherence many claim to have in place. Compliance, for us, is a process of ongoing continuous improvement of an operational compliance infrastructure; its processes, people, and the accountabilities necessary to maintain adherence to rules, standards, and internal metrics for brand value consistency and the mitigation of risk.
How does Missouri’s program differ from other states?
Missouri differs in some critically important ways. The access for patients is a low barrier which means high participation and, given the limits on licenses, strikes a very favorable balance between sufficient patient access and a sufficient number of operators to allow for a robust selection of products, price points, and differentiation. This all equates to an unbelievably valuable license for owners and operators in very favorable market conditions. It is easy to expect ROI to be high in MO. From a regulation’s standpoint, MO has remarkably similar standards as those set in Colorado and leverages some of the best regulations in the game. Ironically, perhaps, the rules are leaner than other States as well. While this can seem favorable for a cannabis business in MO as it appears to require fewer rules, many make the mistake to equate fewer pages to fewer consequences or a pass to lenient business practices. For those of us that live in the future, we know that more regulations are on the way. The State also doesn’t have to consider the costs of complying with new rules and MO is full of many first-time cannabis business operators that cannot sense what is coming down the pipe.
In some ways, MO is lucky to have learned from Colorado, like with the recent edibles language wherein setting up manufacturing equipment capable of stamping, shaping, and marking edibles with a warning symbol didn’t require retrofitting existing equipment at the costs of tens of thousands of dollars. This is, however, a prime example of the need to anticipate other leading practices in compliance, QA/QC, GMP, and other standards not yet written in MO, but commonplace in more mature markets. For the clients iComply works with in Missouri, we bring these self-appointed standards to the table from Day 1 to better anticipate inevitable standards, shorten the learning curve for staff, and produce a greater ROI on the business by ensuring it has an operational compliance infrastructure in place that can proactively adjust to the inevitable changes in rules the DHSS will make. Other requirements such as quarterly inventory reconciliations reportable to the State are distinct differences Missouri operators will have to learn and contend with – as is the eventual separation of DHSS as a helpful industry partner to their actual role as inspectors, investigators, and enforcers of the rules, product safety, and standards for Missouri.
What is an anecdote you can share about the importance of compliance?
The devil is often in the details and while low-level enforcement actions may seem minuscule, they can have dire consequences. We were training a client’s staff once when regulators walked into the class and issued a show of cause to produce 12 months of books and records for auditing. We discovered that the client had added two flower cultivation rooms to their combined grow and dispensary. However, they reported the additional rooms only on their license renewal – thinking the State would adopt their permitted additions and updated diagram. They made only a low-level infraction mistake by not filing an 8545 Form indicating a “change or modification of premises”. Because they misfiled the wrong paperwork at the wrong time, investigators seized the production capacity of the two flower rooms to the tune of hundreds of plants which eventually became 20+ lbs. of flower that could not be sold or destroyed. Even worse, because the infraction constituted a low-priority case, it sat on the Attorney General’s desk, under a pile of more severe cases, for 11 months. During that time, the business couldn’t use the flower rooms, the product went bad, and their dispensary shelves went empty. While the infraction only resulted in less than a $10,000 fine, the impact to the business was catastrophic. They had to buy flower in wholesale – at a higher margin – which meant layoffs of employees who went to competitors, a loss of thousands of dollars in product, less patient business because of empty shelves, and so on. In that 11 months, this small level infraction easily led to $400,000 in costs due to the non-compliance. By the time regulators came in and we tried to train their staff, it was too late to remediate the situation. Despite the company’s best intentions and goodwill, they were already too late. The lesson being: by the time you are reacting to non-compliance, it will always be more detrimental, expensive, and risky than the investment to mitigate, or prevent, the risk and costs in the first place.
What considerations should a facility have when exploring compliance programming?
Proactivity is essential to being able to manage compliance instead of it managing you. Operations and compliance go hand in hand and iComply has pioneered a methodology that effectively positions companies to proactively manage compliance with three key pillars in place: Compliant Processes, Compliant People, and Proactive Compliance measures and management. In Missouri, operators must make sure that their SOPs match the rules and regulations of the State but often forget to include warranties and representations made in their application, higher standards such as GAP, GMP, or ISO, QA/QC accountability, OSHA compliance, EPA compliance, Fire Code, equipment maintenance schedules, protective equipment, SDS sheets, and HR policies that all work hand in hand to ensure Employee Training manuals designated by position, roles, and responsibilities to compliance and include the accountability and documentation structures needed to PROVE compliance. Once these documents are in place as living, breathing infrastructure, companies must thoroughly train their staff in compliance according to their position required by DHSS and in each procedure, they are authorized to perform. Once compliant people are documented as such, they must then be held accountable to ongoing Macro and Micro auditing of overall operational compliance, inventory completeness and accuracy, books and records, packaging and labeling, and all of these measures should be frequent, ongoing, and in alignment with ever-changing rules and internal standards.
What is iComply’s story? Why cannabis compliance?
iComply’s founder Mark Slaugh was a pioneer in the modern commercial cannabis space in Colorado. He has run two industry associations, lobbied for years at the Capitol in Colorado, and has been selected by the government to participate in over 9 rulemaking committees on a variety of topics. A certified expert witness in Colorado’s rules and regulations, he started with early brands in the industry in 2009 with a specific passion for social justice and a desire to reform the global War on Drugs. In the early days, he quickly realized the difficulty in managing ongoing rule changes and the importance of establishing standards within the companies he helped put on the map. He founded iComply in 2011 with the vision of providing the most comprehensive regulatory support possible to further the legitimacy of the cannabis industry by helping it professionalize from an infant industry to one that matches the operational standards of other heavily regulated industries such as pharmaceuticals, hospitals, oil and gas, banking, and nutraceuticals. By helping businesses establish a robust, comprehensive, operational compliance infrastructure and compliance centric culture, iComply helps companies that care about compliance lead others by example and showcase to the world that the stigmas of cannabusiness have no place in impeding the progress of the industry. iComply handles all the boring, non-sexy, and frustrating details of licensed cannabis businesses so owners can focus on growth while trusting that the fundamental requirements of their business are in good hands and managed with their team efficiently and effectively because we’re at their side every day and over the long run.
How can comprehensive compliance education improve a facility’s operations?
When we were in St. Louis and Kansas City at the career fairs educating prospect employees on the cannabis industry, we saw many “deer in the headlight” looks. Most would-be workers were handing their resumes out left and right, but when asked “have you read the rules and regulations that pertain to the job you want?” 99.9% had not. No matter how dedicated, passionate, or skilled workers may be, they aren’t likely to be reading the legalese necessary for them to do their job appropriately. Luckily, they are also blank slates that can be trained the right way. Since 2012, iComply has masterfully organized and translated the complex rules and regulations into practical and easy to understand common English. We organize our Training Manuals so staff members in training can take notes, follow along online or in-person with our instructors (now via LIVE webinars due to COVID) and be able to understand what is expected of them together along with enforcement realities from experience and important areas off focus to avoid common mistakes in doing their job. We strongly stress comprehensive compliance training at least annually and the proactive auditing of staff member performance to ensure the education sticks and that they adhere to compliance as a culture backboned by strong SOPs internally. It improves the overall facility operations by making sure even the smallest gear in the machine tracks with the bigger operation and reduces turnover by ensuring staff knows what is expected of them and how to do their jobs without uncertainty or fear. Processes are only as good as the people running them and businesses do well to certify and document their employee’s knowledge and education to mitigate the risks and costs of non-compliance.
Is there anything else you want Greenway readers to know about iComply or compliance programming?
There is no substitute for experience. When examining compliance “experts”, we suggest the MO industry does its homework and asks the tough questions of would-be consultants. As with the application process, not everyone out there truly knows what they are doing or how to translate their skills into the cannabis industry. Rather than waste more time and money in the expectation of lower initial costs, over a larger learning curve, we suggest you build the business correctly from Day 1 and begin managing compliance as a critical foundation for legacy success. We say “Compliance is Forever” because how you establish (or do not establish) its infrastructure defines your company culture, products, and brand from the beginning. It is always harder and more costly to change bad habits later than it is to invest in doing the right thing, the right way, with the right people from the get-go. Establish a compliance budget that is not a legal budget (attorneys are different than compliance experts) and truly look at what percentage of your expected revenues you should insure through this budget to protect the overall revenue stream. Think of compliance as an investment that pays dividends rather than as an expense. iComply is generally less than 1% of expected annual revenues – and, as we say, it only makes sense to “put a penny on the dollar to protect the dollar”. When multimillion-dollar companies and licenses are on the line, this area of compliance core competency will define the future brands in Missouri and separate the good apples from the bad ones in the eyes of stakeholders, regulators, and patients.
This interview appeared in the September/October 2020 issue of Greenway Magazine.
