No CEO or deputy minister wants her organization to be ridiculed in the media or subjected to criminal investigation because of misconduct of which she is unaware. No leader wants to discover his organization has broken the law, harmed its customers, cheated its shareholders or misled Parliament. Yet, such incidents happen all too often.
A recent example is the rampant illegal phone-hacking within Rupert Murdoch’s media empire — an outrage that is costing News Corporation dearly in terms of profit, reputation and future prospects. This is not an isolated incident: In any two-year period, about 40 per cent of large organizations discover (usually too late) they have been victims of significant fraud, according to international surveys by PwC.
How can such malpractice go undetected, sometimes spreading like cancer and threatening to bring down an organization? One major reason is the leaders have failed to make it safe for honest employees to challenge or report misconduct.
Research consistently shows staff are often the first to know when something is wrong, so whistleblower protection is one of the tools of choice for organizations to combat internal misconduct. But employees who come forward may be taking a huge risk and, too often, they suffer vicious, career-ending reprisals. By ensuring employees can safely ring the alarm, organizations can spot potential problems and nip them in the bud before they spiral out of control.
One barrier to this common-sense approach is the persistent myth that whistleblowers are bad people — irresponsible, disloyal, publicity-seeking and perhaps mentally unbalanced — who rush off to the media with half-baked stories. This ugly stereotype persists because we hear the same slanders repeated every time a whistleblower case becomes public — as the accused wrongdoers do everything in their power to discredit witnesses to their misconduct.
Research shows whistleblowers are much more likely to be loyal, high-performing employees — they nearly always follow the rules scrupulously, reporting their concerns internally up the chain of command and giving management every opportunity to investigate and fix a problem — and very few go to the media at any stage, even as a last resort.
Since it’s in everyone’s best interest to encourage honest employees to come forward if they suspect wrongdoing, how can this be achieved in practice?
Fortunately, there is a body of knowledge and experience available, some of it encapsulated in national standards. These insights come mostly from countries such as the United States, United Kingdom and Australia where legislation has created incentives for organizations to develop internal disclosure systems because employers will be punished more harshly for misconduct if their own compliance systems are absent or ineffective.
Changes of practice and culture are essential. Enron had a wonderful internal disclosure system — on paper. But management fostered a take-no-prisoners, bonus-driven culture that rewarded misconduct so even Sherron Watkins, the vice-president who rang the alarm, was unable to stop the rot before the company collapsed.
Here are some of the essential ingredients of an effective disclosure system:
Visible leadership commitment and role modelling
This means taking all types of malpractice seriously and acting decisively to address it. It means making sure all employees know how to raise a concern and to whom. And it means preparing for the worst-case scenario — senior managers being implicated. In this case, employees must be told about alternative channels they can use (such as an audit committee or regulator) when an internal system no longer seems safe.
Robust systems for independent, impartial investigation
Staff need credible assurances they will not be punished for coming forward with honest concerns, even if these prove unfounded. Their identity must be held confidential if they so wish, so people don’t feel the need to report anonymously. Anonymous tip-offs are problematic for many reasons, including the difficulty of investigating properly, and it’s a sign of a healthy organization when employees trust the disclosure system will protect their identity.
Staff who raise concerns must be protected from reprisals, otherwise the flow of information will simply dry up.
Wrongdoers naturally try to cover their tracks. Some may go so far as to destroy evidence, create fake records, perhaps initiate bogus investigations and accuse others. Wrongdoers may also attempt to neutralize potential whistleblowers by quietly trashing them to others (such as senior management, HR or auditors) and then getting rid of them through methods such as harassment or bogus poor performance evaluations.
A great deal hinges on the quality of investigations, which must remain impartial, examine the evidence provided and probe sufficiently to get at the facts. It is essential to have access to well-qualified, experienced investigators to ensure the truth is uncovered, even in difficult circumstances, since these are the situations that pose the greatest threat to an employer.
Demonstrating and maintaining effectiveness
Implementing an effective disclosure system is not a one-shot deal — it will need to be monitored and periodically refreshed.
During the startup phase, those involved in operating the system, including line management, will require training and all employees need to have the system explained to them.
There needs to be reporting of successes, which means real problems are identified and fixed. Thanking staff — even indirectly — for bringing problems to light reinforces the attitude this is normal and desirable behaviour. And periodic renewal can take the form of a system audit, refresher training and reminders to staff.
Some organizations require all employees to review and sign a code of conduct every year as part of their contract of employment. This is a good opportunity to discuss what types of behaviour are acceptable and what to do if the code is being violated.
It’s essential, relatively easy and cost-effective to monitor system performance (for example, by using employee surveys to measure awareness and trust in the system and the prevalence of perceived misconduct) and to track trends in the frequency and seriousness of disclosures. Exit interviews can also help reveal undetected failures in the system.
Is it worth all of this effort? Enlightened organizations that take a proactive approach to whistleblowing emphatically say, “Yes.” Besides providing a robust defence against serious misconduct, protecting truth-tellers also helps maintain an honest, open and healthy environment where employees feel free to speak up about concerns (of all sorts) and, as a result, management actually know what’s going on — one of the keys to organizational success.
In the words of Jack Welch, the former CEO of General Electric, management’s task is to “face reality as it is, not as it was or as you wish it were.” Protecting whistleblowers is one proven way of pursuing this intelligent goal.
David Hutton is executive director of FAIR (Federal Accountability Initiative for Reform), an Ottawa-based registered charity that works to protect whistleblowers who protect the public interest. For more information, visit fairwhistleblower.ca.