Volume 7 | Issue 7Putting it in context
A message from CDC Integrated Services, LLC
Ethics Hotlines | A Tale of Two Perspectives
Ethics hotlines are growing in popularity. They provide an accessible and anonymous way for employees to report potential wrongdoing; and in principle, any straightforward means for a company to better protect itself from fraud or learn of employee misconduct would appear to be an obvious plus. Yet, many enterprise-sized organizations have opted out of an ethics hotline.
While on the surface hotlines may seem a convenient option for receiving employee complaints, tips, or concerns, it’s often the process that surrounds the hotline which can determine whether it ultimately succeeds or fails. When your organization is considering an ethics hotline, here are some must-knows to help ensure you institute a successful “Hot Line”.
How Ethics Hotlines Work
Often an ethics hotline phone number is extended beyond just employees to customers and vendors as well. With 24/7 access, individuals can call from any location at any time, which means somewhere other than the office, warehouse, or job site if they have concerns about confidentiality.
The breadth of issues employees can report on via an ethics hotline may include suspicions of:
Crime, such as fraud or theft
Employee misconduct, such as bullying or harassment
Safety and health violations
The specialist who receives the tip is charged with validating it, and therefore, typically receives special training on how to gather enough information to ensure the complaint is credible.
Ethics Hotlines as an Employee Relations Tool
Within the realm of employee relations, one striking statistic that supports the use of ethics hotlines relates to ethical violations that involve management. In a recent survey of the U.S. Workforce, 60% of reported misconduct involved someone with managerial authority, the very people who should be setting a good example of ethical conduct. The anonymity of an ethics hotline is both conducive and crucial to reporting just such management misconduct, especially if employees fear retaliation were they to use more ‘traditional’ channels.
For claims that fall into the enforcement arena of the Equal Employment Opportunity Commission (EEOC), a National Business Ethics Survey (NBES) found violations such as discrimination were witnessed by 12% of respondents and another 7% witnessed sexual harassment. Therefore, if employees are willing to report it, employee-related misconduct can easily be flagged via an ethics hotline.
Ethics Hotline Pros
Perhaps the most important pro is that ethics hotlines do, in fact, help organizations mitigate risk by providing a platform to field valuable tips. For example, the Association of Certified Fraud Examiners confirms that organizations with ethics hotlines are more likely to detect fraud, catch it quicker, and ultimately experience a lower cost associated with the fraud. Here are some of the more prominent plusses:
Convenience, which encourages usage
Anonymity for individual reporting a violation
Breadth and types of issues that can be reported
Ability to ‘third party’ outsource hotline management
Ethics Hotline Cons
The negatives surrounding a hotline are daunting because they encompass administrative intangibles such as perception and logistical hurdles. A few of the cons include:
Incomplete information gathered from calls
Biased information purposely used to target an employee or manager
The negative perception of both ‘whistleblowing’ and ‘hotline use’ by employees
Fear by callers of retaliation, thereby impeding process effectiveness
Costs of resourcing and supporting the hotline
Ethics Hotlines: Employee Relations Boon or Bust?
While many organizations view ethics hotlines as an employee relation ‘best practice’, successful implementation is daunting. Whether a company chooses to manage its hotline internally or outsource it to a third party, parsing and routing the tips and complaints that come in require company management support, careful planning, and adequate resources.
To succeed, an ethics hotline requires:
Collaboration – Between HR, IT, Management, and others working together to ensure the hotline’s success
Guidelines – Procedures for the hotline’s use need to be shared with employees, vendors, and clients as applicable
Technology – A robust platform for anonymously entering, documenting, and tracking employee-related events
Employee Buy-In – An ethical company culture supporting transparency and fair outcomes when using an ethics hotline
Resources – A budget, staffing, well-planned internal communications, oversight, IT and personnel training
Ethics hotlines can be a powerful tool for company management teams. They set the tone for employee relations best practice internally. They also deliver positive effects for the organization’s culture and bottom line. Implemented incorrectly, the hotline goes unused or even worse, is abused by disgruntled workers. Therefore, while ethics hotlines have obvious pluses, they must be treated as a strategic talking point for employee relations teams and managers everywhere.
In fact, the Sarbanes-Oxley (SOX) Act requires all publicly traded companies to implement a confidential, anonymous way for whistleblowers to inform the company of suspicious accounting practices. The law is intended to protect investors from previous accounting scandals and abuses like Enron and WorldCom.
On The Implementation Side, and From the User Side of The Ledger
In soliciting hotline “Buy-In” by potential internal and external users, the following issues are usually raised and must be satisfactorily addressed:
Who is authorized to make hotline reports (employees only, contractors, agents, customers, suppliers, etc.)?
Which site locations within the organization have access to the hotline (offices and other company facilities within the U.S. only or also subsidiaries and affiliates outside the U.S.)?
Which languages are relevant to the organization’s employee/vendor/customer populations’ input?
What types of misconduct (fraud, theft, misuse of funds, conflicts of interest, harassment) may be reported?
Does the company also use the hotline as a forum for user’s new business ideas, recommendations for improvement, and other thoughts on corporate vision and values?
While Ethics Hotlines would appear to be both an obvious and relatively easy tool for business and industry to employ, it is hoped the above piece points out some of the potential pitfalls that can occur with poor implementation.
Additionally, without universal ‘buy-in’ to and trust by both sides of the ledger (company/organization and employees/other inputters) a seemingly good Ethics Hotline program can become ineffective or worse, used as a tool against the implementor.
When all the I’s are dotted and T’s crossed and both implementors and users see it as an effective, easy to use, and confidential then an Ethics Hotline is going to be both valued and used as the tool for good that it is meant to be.
What also matters on this subject is leadership. Hotlines work where leadership is present, and conversely, this resource falls short when leadership is absent.
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