THIS & THAT
Reward employees to report internal fraud
Corporate culture discourages whistle blowing. Consequently, the underlying issues do not get due attention at the right time from the right people.
Over a period of time these issues assume unmanageable proportions and manifest themselves before public as major scams and scandals. A recent study concluded that, a change in approach to whistle blowing could actually help save organisations and the
ir reputation.
Whistle blowers are often projected as people who blow up a petty issue to meet their own interests. They are seen as those who damage the reputation of their organisation just because a colleague or a superior bruised their ego and they are not willing to take or are not aware of the right channel to deal with the issue.
Whistle blowing is considered unprofessional, believed to display inability of the individual to cope with trying situations and perceived as a form of vengeance. As a result employees, across the hierarchy evade reporting mistakes and even fraud to avoid unpleasant situations or save their jobs. This creates the right environment for the problem to breed, to a scale that it will pull down the whole organisation eventually.
A research by Indiana University’s Kelley School of Business and Georgetown University revealed that whistle blowing becomes damagingly public only when managers fail to devise and implement policies that encourage employees to report wrongdoing internally.
Janet Near, chair of Kelley School’s department of management and entrepreneurship says, "The stereotype is that whistle-blowers always start out going to the media and try to go for the maximum publicity. They don’t. If I’m a manager and I find out that whistle-blowers typically don’t do that, then it behoves me to set up procedures so they can blow the whistle internally and minimise the damage to the organisation externally."
Near adds, “An organisation’s reputation is one of the most important assets that it has – and once it loses that, then we can see how quickly it falls apart. It was just a matter of months until Enron was gone.”
Study into the cases of whistle blowing and corporate fraud reveals that it is an employee at some level, who first discovers a corporate wrongdoing, much before an external watchdog. So, to make sure it is not the next Enron, an organisation should take a proactive approach to such issues and create the right climate to deal with them.
This begins with formulating and communicating a clear, well-defined protocol for reporting wrongdoing. More importantly, the management should commit itself to implement them effectively across the organisation, without bias. The protocol should define punitive measures, protect the whistle blower from harassment and help the organisation prevent legal hassles.
Managers should be trained to deal effectively with wrongdoings, complaints about them, the wrong doers, the victims if any and the whistle blowers. They should be educated about the importance of being models to their employees.
After all only when the employees believe their management strictly adheres to ethics, they restrain from unethical behaviour and feel safe about reporting such instances.
When a report is received, the management should let the employees know the outcome of the investigation. This makes the employees believe that the company takes such issues seriously.
Offering financial rewards is another way of encouraging whistle blowing. Near says, “Observers of wrongdoing consider the costs and benefits of acting, along with other factors. The simplest interpretation of motivation theory would suggest that providing valued employer rewards for internal whistle-blowing would increase its frequency.”
Taking the size and scale of organisations today, mistakes and intentional wrongdoings are common. However, a culture that encourages reporting this can save the future of organisation and prevent situations like what happened to a prominent IT firm in the recent past.
