Written by Sargon Youmara, Partner, Vonya Global
Research and case studies have proven that a majority of employees do not speak up when they see fraud or misconduct in the workplace. This is true across a spectrum of businesses, even when employees have great IT security, sound internal audit procedures, and other corporate resources to report misconduct. Modern businesses face a major ethical challenge in creating a culture that encourages employees to report wrongdoing and in combating retaliation. Despite its challenging implementation, a speak up culture is crucial to legitimate company compliance and training efforts.
Cultural Change Starts With Management
In 2011, more than one-third of all workplace discrimination claims filed with the Equal Employment Opportunity Commission (EEOC) were for retaliation against employees who expressed their workplace concerns. What can companies do to ensure that employees are safe from retaliation? A speak up culture can allow businesses to maintain their edge, while overcoming biases against whistleblowing.
According to researchers at the University of Michigan, one of the most important factors in creating a speak up culture is ensuring that supervisors model appropriate behavior for employees. Employees will be more willing to report fraud or misconduct to supervisors if they have seen these supervisors express similar ethical behavior, especially following through on matters of misconduct. Employees who saw supervisors report ethical violations, conduct internal audits appropriately, or respond positively to complaints were far more likely to speak up.
Speaking Up: The General Motors Case Study
General Motors is a great example of a company that has struggled due to a lack of misconduct reports, but ultimately succeeded in reversing this trend by implementing a speak up culture. Harvard Business Review blogger Amy C. Edmondson points out several key problems that hampered GM’s employees from expressing concern and that ultimately led to compromised consumer safety. Specific issues involved broken communication channels, defective products that were approved only to be recalled, and lacking accountability among safety personnel. The resulting investigation highlights the importance of these crucial speak up practices:
Direct Exposure to Ethical Behavior
Employees are unlikely to risk bringing attention to potentially painful subjects such as fraud or internal audits if they believe these discussions will hurt their chances of success in the company. As the GM example shows, this individual mindset eventually causes problems for the company as a whole. Ethical leadership not only encourages employees to act on misconduct; it’s also good business.
Clear Channels of Communication—the More Direct, the Better
When important messages about serious company problems don’t get delivered, fatal flaws can easily erupt. Make certain that even the lowest ranking employee can communicate directly with higher-ranking management as needed to report ethical problems. Also, ensure that if an employee does come forward, he or she receives a timely, appropriate response. As with ethical behavior, when company leaders value good communication, so will employees.
Edmondson points out that GM’s public apology was an effective, powerful step towards rebuilding trust with the public. GM also took responsibility for safety issues by recalling products. These efforts showed the public that there was no attempt to conceal mistakes and that the company was working to correct problems.
To ensure that management is prepared to respond to ethical complaints, businesses must train leaders appropriately. Training should include education on how to handle failure personally and as a team. Formal training in speak up cultures is available from various sources. Best practice resources for creating a speak up culture are also available to businesses; here is one such resource from the Institute of Business Ethics.
Creating a speak up culture is essential for business success. There is no simple fix. This real problem requires real time and culture investment. Yet, solutions are within reach for any business willing to make the effort. Payoffs include legal, ethically-sound business practices, greater reputation, and happy employees. How can you afford not to invest in a speak up culture?
This post was contributed by Sargon Youmara, a Partner with Vonya Global. Sargon Youmara has 20 years of diverse experience in business risk consulting, internal audit and public accounting. He leads various internal audit initiatives and Sarbanes-Oxley projects to a wide-array of companies from start-ups to multi-national corporations. Sargon is the Risk and Internal Control knowledge partner to his clients and has a depth of experience in:
- Creating “start-up” Internal Audit Departments
- Evaluating Internal Audit Department Effectiveness
(QAR and Internal Audit Capability Maturity Model)
- Reducing risk in international operations
If you would like to contact or connect with Sargon directly you can find his profile on LinkedIn: http://www.linkedin.com/in/syoumara.