5 Benefits of an Ethics Hotline (And What It Should Contain)
Question: Are You Considering Implementing a Whistleblower Hotline?
There’s much to take into account regarding features and benefits of an ethics hotline.
Today’s environment has fraud, negligence, abuse or power, etc. running rampant… or so it seems. Statistics from various reports document that 40% of people believe their businesses have a weak ethical culture, although 62% were confident in their firm’s senior leadership. Over 30% of those surveyed said their managers don’t display ethical behavior – 65% of people who witnessed misconduct reported the wrongdoing but a worrisome 20% were retaliated against after doing so. Further, almost 15% of employees felt pressure to compromise their ethical standards in order to do their jobs.
Believe it or not, a whistleblower hotline is actually quite an easy and economical tool to incorporate into your corporate governance. Fraud, waste and abuse can all be detected early by incorporating an ethics reporting system. If employees are able to report on wrongdoing anonymously, you’re going to know that much quicker about any issues at hand.
Public companies are required to have a whistleblower program in place to satisfy SOX. But just because your company isn’t public, doesn’t mean a hotline can benefit you too. In 2005, the American Institute of Certified Public Accountants (AICPA) recommended that all organizations implement a whistleblower system for reporting wrongdoing. And in fact, smaller companies suffer more from fraud and other wrongdoing than their larger public counterparts, so having a system in place to detect and deter wrongs just makes perfect business sense.
So Now You’re Asking the Question: How Would an Ethics Hotline Benefit Me?
Well, there are a number of benefits of a whistleblower hotline, and incorporating this tool into your business culture:
- Encouraging a speak-up culture: You can pretty much guarantee that if there is wrongdoing happening inside your organization, there’s at least one person who knows it’s happening. But more than likely, a few people are aware of its going on. There are those of us who may feel just fine reporting misconduct face to face but most don’t. There is still fear of retaliation by either management or colleagues. Given the chance, most employees would report wrongdoing anonymously. And by reporting sooner, you catch that fraud sooner, thereby saving time, money and legal inquiries.
- Knowing about misconduct sooner, lessening duration: Knowing about misconduct sooner enables organization to put a stop to it earlier. The median duration of fraud until detection is about 18 months. For smaller organizations, that could mean the difference between staying in business or going out of business, as smaller business don’t have the resources to cover these types of issues. The sooner you know about it, the less money will be siphoned out!
- Understanding a deeper issue: It’s one thing to know that a certain type of wrongdoing is taking place. But why is it happening in the first place. Don’t just treat the symptoms, dig deeper to get to the root of the issue. This is the chance to take what is learned and apply it to existing policies and procedures making them even stronger. If it wasn’t reported in the first place, how long before things really had the potential to blow out of control?
- Better communication with the anonymous reporter: Using a third party hotline is the best method of generating the most comprehensive communication about the reported issue. Agents that are trained in sympathetic communication and who are able to customize the communication with each anonymous caller are much more likely to glean important information about a certain incident in order to provide it to the organization. At the same time, a representative at the organization can ask similar questions anonymously to the reporter, enabling them to work together to get the most information, and solve an issue quicker. It also encourages the speak-up culture
- Avoid violations and legal battles: Many organizations that face regulator’s violations started that way because there was not mechanism in place for employees to sound the alarm at the early onset. Employees may inform management about an issue, but nothing gets done, or the concern isn’t taken seriously. These employees will go outside the organization as a means of handling issues that have not been addressed by those close to the problem. Regulators have been known to lessen penalties, or drop them altogether if an organization has done its due diligence and taken appropriate steps to address and investigate issues.
Here’s How Your Whistleblower Hotline Should Look:
- Third Party Hotline: your program should be operated by a third party provider. Employees are much more likely to report misconduct if it doesn’t involve someone on the other end of the line who they are pretty sure is Bob or Sue in Human Resources on the 4th floor. They are more likely to phone the hotline if it’s answered by a live agent, 24-7-365, who’s been trained in sympathetic yet comprehensive communication and is able to ask the right questions in a non judgmental way.
- A Live Person: as in real, on the other end of the phone 24-7-365, in any language. That means all the time. Internal systems have their faults. What happens when the office is closed? Or if the person or people in charge of answering the phone (Bob or Sue) are on vacation?
- Unique / Regional Phone Number: Where available, toll free numbers should be available for any calling country. And aside from a phone number, employees should also be able to report their complaint via a secure website, secure email address, mail and fax.
- Multilingual: If you have operations in the four corners of the world, your employees need to be able to call into the hotline using their own native language. And if the operator on the other end of the line isn’t able to speak in that language, then an interpreter needs to be brought into the conversation immediately to start the conversation.
- Case Management: Unlike the one hour episode of CSI where the crime is solved during that one hour, most issues of misconduct require time for communication, investigation and asking questions. Reporters and reviewers should have a safe place where they can communicate anonymously back and forth for as long as it takes to get to the bottom of the issue. Respond, follow-up, investigate, respond again!
- Reviewer Follow-up: Based on the type of complaints that come in, reviewers who have been set up to handle complaints should be able to forward more serious concerts onto the appropriate party. Complaints are going to come in all shapes and sizes. It’s the first step in finding out about a wrongdoing in the first place. If, however, the issue is more serious, then it will need to be escalated appropriately.
- Knowledge of the System: No point in having a system in place if nobody knows of its existence. Put up posters in communal areas. Provide wallet cards to each employee. Announce it on the intranet. Let new hires know about it. Have lunch and learns. These are just a few examples of how to let employees know there is a place where they can anonymously communicate misconduct.
Hopefully this give you insight to how an ethics hotline can benefit your organization. Public companies already know the benefits of a whistleblower hotline as mandated by SOX… others find out about the benefits after regulators hand down hefty fines.
But any organization, private and non-profit can benefit too. Misconduct isn’t limited to securities violations. It comes in all kinds of shapes and sizes that have devastating consequences to businesses, and employee relations.