For years, NAVEX Global has been proud to provide the industry’s best and most statistically accurate hotline benchmarking data. By analyzing anonymized data we gather through our hotline and case management solutions, we provide ethics and compliance officers with statistically significant data they can rely on for benchmarking and assessing their program’s performance and moving toward predictive risk mitigation.
We recently completed our 2015 Ethics and Compliance Hotline Benchmark Report which was based on over 730,000 reports from more than 4,600 clients. Our analysis revealed a number of notable findings—including:
Key Finding #1: Organizations May be Taking Retaliation Claims More Seriously
While there was no significant increase in overall employee reports of retaliation to company hotlines in 2014, our analysis showed that the substantiation rate for whistleblower retaliation reports jumped from a consistent 10-12 percent in prior years to 27 percent in 2014. This is a 125 percent increase.
Listen to the webinar on the hotline benchmark report results: “Benchmarking Your Hotline in 2015: How Does Your Data Measure Up?”
While this increase could be an anomaly, our hope is this indicates that leaders are taking retaliation claims more seriously than they have in years past and are more aggressively investigating concerns. When we published our report last year and presented findings to groups of clients and others, we raised a red flag about the low reporting and substantiation rates in this category while there were huge numbers of retaliation cases being reported to outside agencies. We also know that the SEC Whistleblower office and other government agencies are taking these concerns quite seriously.
Knowing that these cases are often more difficult to prove, it is not surprising that a 27 percent substantiation rate is somewhat lower than the overall rate of 40 percent for all reports. But, if organizations are more proactively managing and investigating these allegations—and fostering a speak-up culture—then we are more likely to hear about these cases before they go outside.
As most ethics and compliance officers know, retaliation is possibly the one compliance violation most likely to do irreparable damage—not only to a company’s culture, but also to employee morale. Further, it damages the credibility of the entire program and the people who run it. It is personal and strikes at the heart of an employee’s well being: job assignments, pay and their sense of “belonging” in the workplace community. Retaliation also stifles transparency, erodes trust in leadership and eliminates future reports. At its worst, it drives the disenfranchised employee straight to regulators, rather than to company authorities. (See some of our recommendations for encouraging internal reporting in this post.)
Key Finding #2: Continued Uptick in Case Closure Times
Our report revealed that case closure times continue to rise. The number of days from the time a reporter files a complaint to the completion of the investigation and case closure rose to 39 in 2014, three days longer than the median in 2013.
Of particular concern is that case closure time for accounting-related issues rose to 57 days (nearly halfway to the various 120-day regulatory windows) and closure time for HR related cases rose to 39 days. Given that so many HR related cases can (or should be) closed in a few days, this is disturbing—and particularly so knowing the impact a festering behavior issue can have on organizational culture.
The continuing increase in case closure time should be a red flag for ethics and compliance officers, executive leaders and boards of directors. Longer closure times may contribute to the loss of employee trust and confidence in corporate leadership.
We also highlighted longer case closure times as a concern in our report last year. During presentations of those findings, we asked our audiences what was driving the delays, and most said that while report volume overall is rising, the number of available resources to investigate is not. We recommend that organizations with increasing report volumes identify root causes and make this a high priority management issue. Best practice organizations should close cases in an average of 30 days.
Key Finding #3: Five-Year Trend in Reporting Volume Increase Continues
According to our data, over the past five years, reporting volume is continuing to rise—with a 44 percent increase in volume per 100 employees since 2010. This could be taken two ways. The first is that employees are more aware of the reporting options available to them and trust the process to be fair and objective. Second is that employees may not trust the other resources available to them such as their managers.
This is always a balancing act and it is critical that employees not be discouraged from using the hotline. That said, organizations generally could do a better job educating and supporting first and second level managers on their responsibilities when receiving concerns from employees as the hotline is often the last internal line of defense.
Report Indicates Maturing E&C Programs
While there is always work to be done on the part of leaders everywhere, the report findings overall are encouraging. It’s a promising sign that ethics and compliance programs are moving in the right direction: encouraging employees to report misconduct internally so it can be addressed. Further, as ethics and compliance programs continue to mature, these data points can be part of an organization’s overall scorecard to ensure they are effectively defining and implementing program initiatives – as well as moving toward the ultimate goal of taking proactive, rather than reactive, actions to help strengthen their organizations’ culture of ethics and respect.