Encouraging Internal Whistleblowing (And More!)
Carl R. Oliver and Francis J. Daly
This article updates a 2003 report by Lilanthi Ravishankar on whistleblowing. New issues covered include:
Recent U.S. laws and regulations on whistleblowing
Attitudes and regulations about whistleblowing in other countries
Ways to position whistleblower programs so that employees actually use them
Practical ways to cut down on wrongdoing through the creation of a culture of trust
In Encouraging Internal Whistleblowing in Organizations, Lilanthi Ravishankar’s main point was that by the time an employee blows the whistle to an external entity, much damage to the business has already occurred. So a company benefits when its managers and executives create an organizational culture that encourages early reporting by “internal whistleblowers—employees who bring wrongdoing at their own organization to the attention of superiors.”
Ravishankar then formulated the key question: “How does an organization create a culture that encourages employees to ask questions early—to point out issues and show courage in confronting unethical or illegal practices?”
We should add: “even if employees only suspect something may be amiss” because the earliest questions are the best questions. They enable the organization to solve a concern while it is small, well before it escalates into a large problem, well before much damage occurs, and well before employees are likely to find the “hard evidence” society wants external whistleblowers to deliver. What can an organization do to encourage early questions and thereby eliminate need for either external or internal whistleblowing?
Attitudes Toward Whistleblowing
While acknowledging that whistleblowers sometimes are honored as “saviors” who cause important changes, Ravishankar focused on two unfavorable attitudes toward whistleblowers. One is negative social pressure by people who see a whistleblower as “a ‘snitch’ or ‘lowlife’ who betrays a sacred trust largely for personal gain.” The other is retaliation that ruins whistleblowers’ careers, a problem so widely recognized that federal and state jurisdictions enacted a number of laws prohibiting reprisal.
A third unfavorable attitude, discovered by companies with operations outside the United States, is that a number of countries strongly oppose whistleblowing for reasons linked to their history and culture, such as the two reasons above and sometimes their association of anonymous accusations with historical oppression and genocide. France and Germany, in particular, have refused in the past to approve whistleblower “hotlines” that U.S. companies believed the Sarbanes-Oxley Act of 2002 requires them to operate so employees can anonymously or confidentially report concerns about accounting or auditing matters.
What can managers do to prevent those unfavorable attitudes from harming the organization or any employee?
Since the mid-1980s, U.S. public policy has encouraged whistleblowing and a broader focus has blossomed over the years: a focus on making organizational culture a company’s primary means for fighting ethical wrongdoing in the ranks of its own employees, an approach that operating at its best eliminates need for any whistleblowing and makes moot the three unfavorable attitudes.
The blossoming focus on organizational culture can be seen by tracing through time the development of three published documents widely recognized as describing what U.S. public policy expects of business ethics. With respect to whistleblowing, those expectations are:
1986. The Defense Industry Initiatives on Business Ethics and Conduct (DII) expect whistleblowing plus high values, integrity, and “a free and open atmosphere that allows and encourages employees to report violations of [the company’s] code without fear of retribution,” an early description of organizational culture.
1991. The U.S. Sentencing Guidelines for Organizations (USSG) expect whistleblowing plus a “system whereby employees and other agents could report criminal conduct . . . without fear of retribution.”
2002. The Sarbanes-Oxley Act (SOX) requires the audit committee of the board of directors of publicly traded corporations to establish whistleblowing procedures for “confidential, anonymous submission by employees . . . of concerns regarding questionable accounting or auditing matters.” Moreover, SOX continues the protective philosophy expressed in the DII and USSG by prohibiting retaliation against fraud whistleblowers.
2004. Amendments to the USSG specifically add the expectation that organizations “promote an organizational culture that encourages ethical conduct.”
Build Organizational Culture to Encourage Ethical Conduct
Where we have worked as ethics officers, allegations identified less than one percent of the employees as “outliers”—suspected or actual ethics violators. Lynn Brewer, who worked for Enron and now is an independent ethics consultant, said her experience is that up to 20 percent of the employees in companies she works with may be outliers. Either way, the alleged violators are a minority. Not that a “minority of wrongdoers” should be ignored, but a company should invest most of its ethics effort on helping the majority of its employees (our 99 percent or Brewer’s 80 percent) achieve the high ethics they aspire to.
For a company with 125,000 employees at more than 1,200 locations in several nations, the challenge of getting all of them to think the same way about ethics is akin to getting 125,000 individual rowboats to go in the same direction. For a smaller company with 125 employees at one location, the challenge may be smaller in quantity but has no reduction in intellectual complexity. The company must somehow touch every employee and get her or him to actively row in the right direction. Once everyone is trained, if employees see someone’s rowboat straying off course, they often are able to get that person back on course—making ethically wise decisions—without pain or shame.
Professors David Cooperrider and Leslie Sekerka paint two approaches to building organizational culture. One has a deficit focus: detect errors, analyze root causes, plan remedies, and implement corrections. The second has an appreciative, positive focus: seek and draw out human strengths so the organization self-organizes to be even better.
With respect to company ethics, the first approach, deficit focus, is whistleblower territory. The company is reactive. It responds to whistleblower reports, either external or internal, by racing to fix worrisome, distracting, and sometimes crippling problems that have already struck the company, problems caused by “outliers.” The second approach, appreciative focus, is rowboat territory. The company addresses prevention. It seeks to avoid problems entirely by helping the 80-99 percent majority achieve the high ethics they aspire to. Instead of fighting ethical breakdowns, it builds an organizational culture that encourages ethical conduct.
For ethics programs, the two approaches are not an “either/or” choice. Both are required. Problems created by the minority must be resolved, but helping the majority prevent problems deserves much more attention, is ignored too often, and has an important side effect: Peer influence can pull an outlier minority toward majority norms.
Eliminate the Need for Either Internal or External Whistleblowing
A recent development is that some people who want to blow an external whistle use Internet blogs that publish their allegations without review by intermediaries such as journalists, law enforcement officers, elected public officials, or advocacy group staff members who might influence tone, content, and credibility. Laws may prohibit adverse action against an employee who whistleblogs. Blog operators, of course, may elect to delete a blog entry. Or a company may choose to post correct information alongside the whistleblogger’s allegation.
Field experience answering employee calls indicates people blow external whistles when they hope outsiders will fix the problem but believe the company won’t listen to them. They blow internal whistles when they hope the company will fix the problem but believe the managers won’t listen to them. They feel no need to blow any whistle when they believe—trust—a manager will listen to them and fix the problem. To eliminate the need for any whistleblowing, an organization must build a culture of trust.
Where trust flourishes, whistleblowing is unnecessary because the culture is so open and honest that everyone feels safe raising any issue with anyone and is confident the issue will get prompt, full, and fair consideration.
Interestingly, Vince Nye provided a spectacular demonstration of such trust. Nye, an internal investigator at Hewlett-Packard, had the ethical sensitivity early on to recognize “pretexting” for what it was and raise it with HP managers as an ethics issue: “[I]t is very unethical at the least and probably illegal. If [it] is not totally illegal, then it is leaving HP in a position that could damage our reputation or worse.” A month later, Nye notified HP managers a second time that he considered pretexting an ethics issue: “Although in the opinion of our legal staff the practice of obtaining cell phone call data is legal . . . [it] is still in my mind an inappropriate investigative tactic and unethical. . . . If one has to hold his nose and then conduct a task, then [it] is logical to step back and consider if the task or activity is the right thing to do. In this matter, collecting cell phone call data in my opinion was a nose closer.” Nye’s words stand as evidence that a viable trust system existed in the part of Hewlett-Packard he worked for. Nye challenged up not just once, but twice! What could speak more eloquently for his belief that his organization’s culture, its trust system, made it safe for him to speak out?
Although Nye felt the culture around him was open and honest enough for him to safely speak out twice, on the second occasion he argued that decision-makers failed to give full and fair consideration to his issue. That highlights the reality that creating an organizational culture fostering ethical conduct is not simple and one-dimensional. Different parts of an organization develop subcultures, so a company must attend to each subculture and ensure trust flourishes and the subculture embraces open communication, compliance with the law, and—beyond compliance—recognizes that sometimes company values expect higher standards than the law demands. From Nye’s perspective, for example, the decision that pretexting is legal (compliance) should be overridden by the danger that pretexting could damage the company’s reputation (values). Others have stated the principle succinctly: “Some things that are legal, this company chooses not to do.”
Many companies already try to encourage a culture of trust by espousing open door policies and encouraging employees to take problems first to their managers. But employees may see those channels as blocked, as offering no hope of action to resolve their concerns. What blocks the channel may be:
Attitude. We’ve all heard about managers whose attitude is “my way or the highway,” “don’t rock the boat,” “I don’t want to hear bad news,” or “just do what you’re told--you’re not paid to think.”
Behavior. We’ve all known managers who seem unavailable. They are “always” in meetings, or traveling, have their door closed, are too busy to listen, or are uninterested.
Wrongdoing. Some of us have known managers who actually did something wrong and want to cover that up.
Fear. Retaliation by managers can be too wily and subtle to prove in court but nonetheless real and painful.
Insightful leadership and vision are required to overcome those obstacles—to change those attitudes and behaviors, to prevent wrongdoing, and to eliminate fear.
Steps for Creating a Culture That Eliminates Need for Any Whistleblowing
U.S. newspapers today are full of stories demanding that people be taught “ethics” and what they mean is teach people the rules then catch and punish anyone who violates them. But the vision that business ethics is a police function is wrong. Don’t design ethics programs to catch wrongdoers and punish them. That’s a good thing to do, but policing is someone else’s role.
Establish a Leadership Vision
The leadership vision should see business ethics as a mentoring function Design it to help people make good ethical decisions in the first place and thereby prevent wrongdoing, eliminate ethics failures, and eliminate the need to punish anyone. Ethics is a tool leaders use to build mentoring relationships and a trust system throughout their organization.
Four Ways to Mentor Managers and Employees
Use Training. Have managers teach compliance, company values, and good ethics decision-making to their direct reports. The best way for managers to learn those things is to teach them, and the best way for employees to learn is to be taught by their own managers. We’re talking about an enduring effort, not one-time classes. Discuss ethics in regular staff meetings throughout the year, year-in and year-out. Such teaching involves managers and employees in discussion of ethics issues in a safe, training environment, and it opens the door for safe discussion of real ethics issues in the future in their normal working environment.
After Boeing Corporation experienced several very public ethics scandals, an outside committee led by Warren B. Rudman studied Boeing’s ethics program. The Rudman report emphasized that leaders must take responsibility for ethics: “We cannot stress enough how important it is for senior executives to incorporate into their everyday planning and communications the unambiguous message that ethics, integrity and compliance are at the core of Boeing’s corporate culture.” For training, specifically, the Rudman report said the give and take of group discussions led by their own managers “is most effective, not only in imparting information, but in ensuring that management at all levels is seen to view these issues with the utmost seriousness.”
Use Performance Appraisal. Use a performance evaluation and management process that looks toward helping employees succeed in the future more than toward documenting weaknesses perceived in the past, that tracks and builds on the ethics training and mentoring being conducted by the manager, and that is designed to focus managers on coaching employees to success throughout the year because that builds trust.
Use Feedback Surveys. Provide occasional multi-rater (or 360-degree) feedback, especially for managers, because people need to know how others generally perceive they live up to the company’s values.
Use an Open Line. Provide a safe path—an Open Line—anyone can use to get a question or issue to functional experts and senior managers. We refer to that safe path as the Open Line whether the communication arrives by telephone, letter, e-mail, or face-to-face meeting with the “caller.” The name makes a difference. Research conducted by the Ethical Leadership Group showed channels named Hotline or Alert Line receive about four calls per year per 1,000 employees. They apparently are seen as 9-1-1 whistleblower emergency lines that don’t welcome calls unless they report crimes in progress. Lines with friendly names like Open Line or Help Line apparently are seen as mentoring lines and receive about 23 calls per 1,000 employees each year.
A number of third-party companies offer to supply Open Line service but what they best support is reaction to incidents, not mentoring the ethical majority. Analyze the data. Studies consistently indicate about 20 percent of Open Line callers ask a question the company can answer to prevent an ethics incident. About 20 percent allege fraud, waste, abuse, or other compliance issues, which the company has a legal duty to detect and investigate. The remaining 60 percent express workplace concerns which a function—usually human resources—can address to cure damaged trust. Like any answering service, what third-party suppliers do is only a first step in the Open Line process: take a message for the company to act on later. Using them denies a company opportunity to mentor all callers immediately, eliminates opportunity to help the 20 percent asking questions find answers immediately, and eliminates opportunity for the company to collect incidental climate-sensing information.
While reality is that a company cannot prevent ethics questions and issues—they will always arise—a company benefits from taking steps aimed at preventing any need for whistleblowing, external or internal.
With respect to opposition to whistleblowing in some other countries, the French data protection authority approved guidelines legitimizing hotlines if employees choose to report voluntarily, if confidentiality is honored, if people accused are notified with details of the allegation and are given fair opportunity to respond, and if European Union rules for transferring information across borders are followed. Our experience is that when companies sincerely operate their ethics program and Open Line in the mentoring frame, both France and Germany thus far have approved those companies’ Open Line telephones. It has not been blanket approval. The Open Line needs to encourage employees to call for guidance, to express concerns, or to report problems the company needs to address but to do so without encouraging anonymous accusations. Good practice is to have those telephones answered in Europe, have local managers conduct inquiries, and promptly notify the employee and works councils if evidence points an accusatory finger at an individual employee.
Ravishankar’s conclusion remains true: “[O]rganizations will have to institute rigorous policies to allow employees to bring unethical and illegal practices to the forefront. Companies will have to train managers and executives on how to encourage openness, not unlike the sexual harassment training of a decade ago. Putting processes in place will not be quick, but it is certainly necessary given the increased public scrutiny of corporate behavior.”
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Gardner, Howard, with Fryer, Bronwyn. “The Ethical Mind: A Conversation with Psychologist Howard Gardner. Harvard Business Review, March 2007, pp. 51-56.
MacNab, Brent, Brislin, Richard, Worthley, Reg, Galperin, Bella L., Jenner, Steve, Lituchy, Terri R., et al. Culture and Ethics Management: Whistle-blowing and Internal Reporting Within a NAFTA Country Context. International Journal of Cross Cultural Management, Vol. 7, No. 5, pp. 5-28, 2007.
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Treviño, Linda K., and Nelson, Katherine A. Managing Business Ethics: Straight Talk About How To Do It Right (4th ed.). Hoboken, NJ: Wiley, 2007.
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Carl R. Oliver, Ph.D., has been a leadership and management faculty member at Stanford University and Air University. He taught business ethics, leadership, and management for nearly 20 years at a Fortune 100 company and served for seven years as its corporate ethics process administrator. Francis J. Daly, M.A., a Fellow at the Markkula Center for Applied Ethics, contributed to this report, which was prepared for the Business and Organization Ethics Partnership.
June 1, 2007
Ethics Center announces faculty Hackworth grantees
The Ethics Center is please to announce its Hackworth Grant Faculty recipients, awarded to selected Santa Clara University staff who will focus on ethics-related projects.
Young Park New Global Jesuit Network Scholar
Professor Young Park from Sogang University in Seoul, Korea has been named Global Jesuit Network Visiting Scholar at the Ethics Center, thanks to a generous gift from Chuck and Nan Geschke.