According to the FT, last September the US SEC paid $22m to an insider “whose detailed tip and extensive assistance helped the agency halt a well-hidden fraud at the company where the whistle-blower worked”. That came two months after a $17m payday for a former official at a different company.1
Whistleblowing signifies a person is covertly disclosing something which should be of interest to all managers and shareholders but which is being ignored or suppressed. Without protective anonymity and possibly financial inducement it might never come to light. Having structures in place that make this possible has obviously produced tangible benefits. However, this is no substitute for having a culture that actually promotes disclosure and learning.
We recognise that there are circumstances when people feel that there is no other remedy to a situation than being able to speak out under the protection of anonymity. We are also acutely aware that far from being a “nice little earner” whistleblowing is one of the most emotionally stressful things an employee can do: it’s the equivalent of being a spy without any training. Whistleblowing may be a good fall-back position if your organisation is serious and really wants to know what is going on, BUT don’t stop there…Why?
Imagine if whistleblowing was the primary mechanism for ensuring best practice in an organisation. What would you assume must be true within that organisation? Whistleblowing implies a culture of fear: people can’t speak up without fear of being bullied or maybe pushed out of the company. It implies that either senior management are not in control of their brief or that there are things happening which they don’t seem to want to know about. You could say that whistleblowing is the lazy approach to managing corporate culture: a sort of “I want things to improve, but not enough to disturb the way things are today” approach.
In the extractive industries, companies have created Intervention Policies, where employees are trained to report issues of concern to their line managers and line managers are trained to listen and to respond positively to the concerns raised by their teams. It is recognised that how such a report is received is as important as making the report in the first place.
This reporting protocol – or intervention – is almost the diametrical opposite of whistleblowing. The company is committed, in alliance with its employees, to identify issues which might cause it or its people physical, financial or reputational harm. Intervention implies an open organisational culture, where issues, which reduce profitability, are sought out by management and employees alike. It indicates that the workforce can recognise issues, which might adversely impact company performance, and are united with management in trying to root them out. These schemes can provide awards for identifying important issues which lead to positive change.
The intervention mindset flourishes in organisations which believe they can benefit from feedback. It is a natural part of a learning organisation and it can take many forms. The original idea behind the workers’ suggestions box was to glean ideas from the cheapest source of information available to any organisation – its employees. This is fine, but it depends on the organisation really wanting to hear and learn from feedback which may be critical.
Embracing this mindset is not about being virtuous or nice, it is simply good business. The less time you have to spend putting things right and investigating things that have gone wrong, the more time the organisation can spend doing business profitably. We endorse whistleblowing as being a structurally integrated policy: the organisation is sending a demonstration of intent. Our point is that to rely on whistleblowing alone is to avoid the effort needed to build an open culture, which aims to get things right as opposed to stopping existing wrongs. Getting it right regularly and creating a learning culture is a highly profitable strategy.
1 David J Lynch, “SEC rewards help bring forward the whistleblowers”, Financial Times, 18 September 2016
Authors: Ian McDermott and Richard Lewis