Picture the scene: It’s the end of the quarter, and your compliance report is due for inclusion in the board materials. You and your staff have been busy crunching the numbers; so far they’re looking pretty good. The board is going to be pleased, you say to yourself. Fewer helpline calls this quarter. Theft numbers are also lower.
You e-mail your report to your boss, and breathe a sigh of relief that you’ve finished your task. A little while later, an e-mail response appears in your inbox. “Your report looks good,” your boss says. “However, a concluding statement would be helpful. What do you make of the drop in numbers? Can we say that we’re out of the woods when it comes to these problems?”
How do you respond?
Years ago, I might have accepted the suggestion of including such overtly good news for the board. If numbers for theft, helpline calls, formal complaints, and the like are down, it must be that we’re heading in the right direction. If theft is decreasing, then consider that problem solved!
Today, however, I wouldn’t be so rosy. Lower helpline numbers are not necessarily a good sign. In fact, they may not be a sign of anything at all. Or, they could actually be a bad sign—a signal that, among the rank and file, there is reluctance to report misconduct even if they see it, perhaps because they fear the consequences of bringing their own bad news to the attention of superiors.
Recently, the Ethics Resource Center (of which I am president) released its findings from the 2007 edition of the biennial National Business Ethics Survey. A nationwide survey of almost 2,000 employees at all levels and companies, NBES asked employees about ethics in their workplaces.
Unfortunately, the results were not pretty. Not only is misconduct on the rise across the country (back to levels predating Enron), but also many of our assumptions about helpline use are incorrect. In fact, when it comes to reporting, employees across the country are not displaying a rise in ethical courage, and they’re not using the channels we provide—most noticeably, the confidential “hotlines” that companies increasingly use as the front lines of their efforts to prevent ethical lapses and demonstrate compliance to regulators.
Specifically, our latest NBES indicates:
Employees are not using hotlines to report misconduct that they observe. Only 3 percent of employees who observed misconduct in the past 12 months made use of the anonymous helpline to report it. In fact, employees are just as likely to go outside of the organization to make a report, as they are to use the provided helpline mechanism.
Employees are more likely to report some types of misconduct using the helpline, but not others. While still small in numbers, employees are more likely to report misuse of confidential information, bribes, and Internet abuse using the helpline. But when they need to report something very personal, such as sexual harassment, they tend to go outside the organization.
Supervisors are the primary recipients of reports. By far, more employees report misconduct to their immediate supervisor than through any other company channel. Forty-three percent of employees who reported something chose to talk to their supervisor. The second most popular recipient of reports was another member of higher management. Clearly employees prefer to talk with a person, particularly someone they already know and, presumably, someone they trust.
What is worrisome about this news is that many corporations lean on their helpline statistics to determine the overall ethical health of their organization. But another, larger challenge confronts businesses today: 42 percent of employees are not reporting misconduct at all.
Not only is misconduct on the rise; many of our assumptions about helpline use are incorrect.
According to our research from the 2007 NBES, employees decide not to report misconduct for two primary reasons. First, 54 percent of employees fear that their report won’t make any difference; management won’t take action. The other reason is fear. Even though 80 percent of employees believe that management does not tolerate retaliation, for more than 35 percent of non-reporters, fear of retaliation was a primary reason to keep quiet rather than alert management to wrongdoing.
We have some work to do in increasing reporting, and in gauging how well our compliance programs really do reduce misconduct. There are some steps to take:
Train your supervisors. Equip supervisors to recognize reports of misconduct when they occur. Many reports may be mislabeled as “yet another management issue,” but the response to that employee makes all the difference. If a supervisor dismisses an employee’s report, the company takes one step closer to earning the perception that management doesn’t respond to reports.
Inform employees about the outcome of reports. When management takes the time to inform employees about the outcome of reports that are made, perceptions of fear and futility are eased. Companies should provide ways for employees who report misconduct to check the status (confidentially) of any follow-up investigations taking place. Additionally, companies should develop a means to communicate to all employees the “sanitized” statistical information about reports made, investigations initiated, and disciplinary action taken for substantiated reports. Workers aren’t entitled to know the names involved, or any details that might help them identify the parties involved—but they should receive regular overviews that demonstrate management’s commitment to identifying and addressing problems.
Create tangible incentives for ethical courage. Making ethical decisions in the face of pressure to do otherwise requires personal risk by an employee. Reporting misconduct to management also takes ethical courage. Employees are more likely to take these risks if their experience tells them that management supports, rewards, and protects individuals who take steps to uphold standards. Companies should take steps to provide rewards for employees who demonstrate the right conduct by reporting, even if those rewards are not made public.
Establish supplemental mechanisms for collecting reporting statistics. The immediate challenge for America’s companies is to address the gap that exists between misconduct and the willingness of employees to alert management through meaningful channels. Two in five employees don’t notify management in the face of misconduct. The real tragedy in this situation is that if company leadership is not aware that misconduct is occurring, they cannot rectify it. The risk is also that organizations banking on helpline statistics to “prove” that misconduct is being prevented and detected may be shortsighted.
No comments yet