New research by Kyle Welch of George Washington University (GWU) points to active internal reporting systems as a key tool for fostering trust and transparency within an organization.
“The best offense is a strong defense” is a phrase you often hear associated with professional sports – and it’s also one that reverberates in the world of compliance. Today, a strong defense can render concrete results in the areas of corporate transparency and employee trust. A watershed report unequivocally establishes that investing in a core aspect of your organization’s defense – the employee hotline – yields tangible results. New research by Kyle Welch of George Washington University (GWU) points to active internal reporting systems as a key tool for fostering trust and transparency within an organization.
Specifically, the findings indicate that increased hotline usage is associated with real business performance benefits such as:
- Greater profitability and workforce productivity
- Fewer material lawsuits brought against the company and lower settlements when they do occur
- Fewer external whistleblower reports to regulatory agencies and authorities
Trust & Transparency Is a Two-way Street
According to the study, activity goes deeper than just employee reporting.
Trust and transparency become more closely aligned with whistleblower hotlines after understanding how the GWU research report defines “activity.” According to the study, activity goes deeper than just employee reporting. The researchers also counted “the number of times the report file was accessed by management within the system.” This means the frequency in which management and program administrators access reports, investigate claims, and resolve issues plays an essential part in the ultimate ROI seen from whistleblower hotlines.
Organizations that drive this type of shared responsibility for incident reporting experience more profitability. That is a definitive point in our compliance ROI story. From a litigator’s perspective, I can also tell you that it leads to more defensibility. I’ve represented numerous clients who have experienced heightened levels of internal reporting. However, when it comes to enforcement, it is not just the volume of reports that determines penalties, but a combination of report volume and organizational responses to those reports. A track record of collecting more reports and properly investigating them shows judges and employees alike that the organization is committed to compliance.
The New Narrative for Enhanced Internal Reporting Mechanisms
Explaining this ROI to executives and boards became a lot easier with the release of Welch’s research. Now, in addition to anecdotes, empirical data validates placing our trust in strong hotline reporting systems as a means to positively affect workplace culture.
Bob Conlin, NAVEX Global’s CEO, has distilled these findings best:
“The data…shows that internal hotline reporting activity and the performance results highlighted above are always positively correlated: the more reporting activity, the better the results. What’s more, the reverse is also true. That is, higher internal whistleblower activity never correlates with negative business outcomes.”
This means that the real scare for organizations today is not an overused hotline, it is a neglected hotline. Silence is often indicative of a workforce that does not trust management. Increased hotline activity shows that employees are talking, giving employers a chance at internal remediation before things go external. Just hearing rumblings around the office illustrates a lack of trust between employee and employer and creates an environment where no positive change can be made.
To be useful, those rumblings need to become internal reports; active hotlines, fueled by trust and transparency, are the means to ensure that happens.
Bottom line: Employers need to double down on compliance efforts through reporting mechanisms, proper training, and investigation protocols. Those in the compliance industry may not be too surprised by Professor Welch’s findings as those in that industry have long argued the point. However, now objective empirical data proves that it is true.
Download & Print White Paper: The ROI of Compliance Program Hotline Reporting