How to secure a budget and convince your management to invest in a successful whistleblowing system
Whistleblowing systems are essential tools to help detect and report non-compliant behavior and ethical violations within an organization. These platforms allow employees to confidentially and securely report inappropriate behavior without fear of retaliation.
As a compliance officer, or someone in charge of the well-being of both the people and the business in your organization (HR, risk manager, internal auditor, ethics officer, …), you are well aware of the necessity to have an internal reporting system available. But the benefits of a whistleblowing system may not be as obvious to your stakeholders or the decision-makers in your company. While you clearly see its benefits, others might see it as a cost with a low, or non-existent, return on investment.
However, it has been proven time and time again that the cost of not having a good whistleblowing system will always be higher than the cost of implementing and maintaining one. For instance, we can recall the 2015 Volkswagen case (Dieselgate). The emission scandal, known as "Dieselgate," resulted in a global recall of millions of affected vehicles, as well as significant legal and financial penalties for the company.
The whistleblower, an engineer at Volkswagen, informed US regulators about the illegal software installed in the cars. He had previously raised concerns within the company about emissions cheating but was ignored and eventually left the company. His decision to report the issue to external parties ultimately led to the exposure of the scandal and the company's downfall.
So what are some concrete arguments you can use to convince your organization to invest in a whistleblowing system?
What are the benefits of having a whistleblowing system?
Having a secure, accessible, and reliable way of reporting wrongdoings within your organization has many benefits. They can range from an improvement in quality of life for employees, to financial savings for the company. To better understand them and how they affect the overall activity of an organization, let’s break them up into categories.
Benefits for the organization
From the company’s point of view, investing in a whistleblowing system can provide several benefits, including:
- Early detection and prevention of risks: A whistleblowing platform can allow employees to report potential misconduct or unethical behavior before it escalates, allowing the company to take corrective action and prevent damage to the company's production, reputation, or legal liability. In the long term, this will allow you to identify the root cause of dysfunctions and fix it to prevent it from recurring.
- Improved corporate governance: A well-designed whistleblowing platform can help reinforce a culture of transparency and accountability within the company, encouraging employees to report concerns and ensure that issues are addressed in a timely and effective manner. Having a strong speak-up culture within your organization can help start a continuous improvement cycle.
- Reduced legal liability: By providing a safe and confidential way for employees to report concerns, a whistleblowing platform can help companies identify and address potential legal violations before they lead to costly litigation or regulatory penalties (which often are very expensive fines). Moreover, new legislation, such as the EU Directive, includes an obligation to implement internal reporting channels in public and private entities of 50 employees or more.
- Enhanced employee morale and engagement: Employees who feel that their concerns are taken seriously and addressed promptly are more likely to be engaged and committed to the company, leading to increased productivity and retention rates. Whistleblowers who feel ignored almost always end up leaving the company, where they did not feel valued nor heard. Additionally, an undetected hostile work environment for your employees will result in considerable costs. Hiring new employees to replace those who keep getting pushed out by low morale and bullies costs as much, or more, as a whistleblowing platform.
- Competitive advantage: A company that prioritizes ethical behavior and transparency is more likely to attract and retain customers, investors, and employees who value these qualities, leading to a competitive advantage in the marketplace.
Investors have to vet the companies before they commit. Showing transparency and ethics, and displaying a solid speak-up culture will give investors the green light they need. Indeed, companies recognized as the World's Most Ethical Companies in Ethisphere's 2023 Ethics Index did better than a similar group of large companies by 13.6% over five years. But the competitive advantages a whistleblowing system can give you are not limited to the reputational aspect. You can take advantage of the key data provided and extract it from your whistleblowing platform to include in extra financial reporting, which is mandatory in an increasing number of countries. Legislations requiring companies to disclose ESG information are introduced around the world to meet investor demand. In 2021, a study identified 25 countries that introduced ESG mandates, mostly for financial institutions, state-owned and large, listed companies, but smaller businesses are also facing pressure to disclose their ESG metrics.
- Reduced risk and cost of staff churn: The hidden costs of staff churn are difficult to measure, but by applying basic mathematics when looking at staff turnover and using the salary range, we can have an estimation of how much money goes into staff churn. A report from the Society for Human Management (SHRM) showed that it costs a company 6 to 9 months of an employee’s salary to replace them. Moreover, it gets more expensive to recruit people for companies that have acquired a bad reputation.
By reducing the risk of your employees leaving the company, you will be able to protect and maximize profits. These savings alone can offset the investment put into enhancing your whistleblowing system.
With positive repercussions on risk management, reputation, legal liability, and performance, a whistleblowing system doesn’t limit itself to simple reporting of wrongdoings for companies.
Benefits for the employees
On the employee’s side, a tool such as a whistleblowing platform can drastically change their everyday work life. The benefits include:
- Protection from retaliation: a well-designed whistleblowing platform can offer employees protection from retaliation for reporting potential misconduct or unethical behavior. This can help employees feel safe and secure in reporting concerns without fear of losing their job or being penalized in some other way. Providing anonymity is a good way to remove some of the barriers to speaking up.
- Empowerment: a whistleblowing platform can empower employees to make a difference in their workplace and contribute to a culture of transparency and ethical behavior. This can lead to increased job satisfaction and a sense of purpose in the workplace. Ultimately, this sense of empowerment will tend to show itself in increased productivity and a healthier work environment, which will lead to better employee retention and facilitate recruitment.
- Improved workplace safety: a whistleblowing platform can allow employees to report safety concerns or hazards that may go unnoticed, leading to a safer and healthier work environment.
- Fair treatment: by providing a way for employees to report concerns, a whistleblowing platform can help ensure that all employees are treated fairly and that issues are addressed in a timely and effective manner. This can lead to greater trust and respect between employees and management.
- Positive impact on society: by reporting potential misconduct or unethical behavior, employees can help prevent harm to the company, its customers, and the wider community. This can lead to a sense of pride and fulfillment in knowing that they are contributing to the greater good. Oftentimes, when employees are on the fence about blowing the whistle and potentially harming the career and life of other people involved, the knowledge that they are doing the right thing is what pushes them to speak up.
Benefits for customers and investors
While a whistleblowing platform is internal to the organization, its benefits will go beyond its direct stakeholders and impact the public and external parties such as customers and investors. The benefits include:
- Enhanced trust: a whistleblowing system can enhance trust among customers and investors by demonstrating an organization's commitment to ethical behavior and accountability. This can help build long-term relationships based on mutual trust and respect. In consequence, your organization’s notoriety and reputation will positively increase and induce a virtuous cycle of trust.
- Compliance with regulations: a whistleblowing system can help organizations comply with regulatory requirements related to reporting and addressing unethical practices. This can help avoid legal and financial penalties and maintain good standing with regulators.
- Mitigation of reputational risk: by enabling organizations to detect and address potential issues before they become public, organizations can avoid a lot of legal, financial, and reputational damage. A whistleblowing system can help protect an organization's brand and reputation, which can be critical for maintaining investor confidence and attracting new customers.
The cost-benefit balance of a whistleblowing system (ROI)
How much does a whistleblowing system cost?
Now that we have established and structured the benefits of implementing a whistleblowing system, it’s time to talk about its cost. A whistleblowing system can be a loose term that can refer to an open-door policy, an email address, an external telephone hotline, or complex advanced software allowing secure reporting, the set up of custom workflows, and data analysis.
Depending on your company, your specific needs will vary, and so will the overall cost of your whistleblowing system. Several factors need to be taken into account, such as the size and complexity of the organization, the scope and features of the system, and the level of support and resources needed to operate and maintain it.
The main cost pools for a whistleblowing system include:
- The technology required to implement the whistleblowing system itself. This can cover IT infrastructures, in-house development or purchase of the software, and any hardware needed to implement and maintain an efficient system in the long term.
- The personnel involved in running and maintaining the whistleblowing system. They will be responsible for receiving reports, investigating cases, providing legal or compliance advice, and ensuring regulatory compliance. This can be an in-house cost, or outsourced to a third party.
- Communication and promotion around the reporting channels. This includes the cost of creating and distributing informational materials, training stakeholders on how to use the system, and developing communication campaigns to encourage reporting. How you manage change will greatly impact the effectiveness of your whistleblowing system.
- The audit and evaluation of the whistleblowing system’s performance must be conducted regularly. This is needed to ensure that it remains effective and efficient through time. Once you have a whistleblowing system in place, you will need to provide some metrics of its effectiveness, which can then be included in extra-financial reporting to shareholders and potential investors.
The cost of not having a whistleblowing system
When arguing for the implementation of a good whistleblowing system, one cost that often goes undiscussed is the cost of NOT having a whistleblowing platform available in your organization. Many whistleblowers’ cases that have made the news over the years had one thing in common: most of these damaging events could have been prevented entirely had the whistleblower been properly heard within the organization. To better approach these hidden costs, we can break them down into three main categories:
Making headlines is generally the opposite of good news when it comes to whistleblowing. Once a whistleblower turns to external channels to speak up because they didn’t have the appropriate tools and/or conditions to do so internally, the organization loses control over the situation. Bad news tends to impact and stick longer in people’s minds, costing your organization its reputation in the marketplace.
Crisis communication has to be deployed, which is already a considerable expense short term. In the long term, the reputational damage caused by media coverage, word of mouth, and public opinion, is often impossible to overcome.
Legal and financial costs
We touched on the cost of crisis communication, but it will not be the only expense your organization has to take into account. The company may incur legal fees to defend itself against any legal action that may result from the whistleblower’s allegations. In addition, regulatory fines can apply in case of violation of any law or regulation. These costs, added to the reputational costs, often lead to the downfall of the organization.
Finally, not having an adapted and effective whistleblowing platform can be very expensive in terms of employee turnover. Letting a toxic workplace or bully go undetected will push your employees away. Without knowledge of the situation or any means to investigate and solve the problem, you will continually have to hire and train new employees. The new staff will then shortly know the same fate as their predecessor and your organization will get stuck in a vicious cycle, where the cost of replacing staff will continue to increase while the reputation of your company will attract fewer and fewer candidates.
Many organizations, of all sizes and industries, have illustrated how expensive a poor or non-existent whistleblowing system and policies can be.
No matter the price of implementing and maintaining your whistleblowing system, it will always be lower than the costs of not having one.
Whistleblowing success stories: changing the narrative
Famous whistleblowing stories are often the ones uncovering scandals in the news and stories of organizations’ downfalls.
To illustrate the necessity of a whistleblowing system to your management, you can also leverage the success stories of companies that made this investment. Organizations from every type of industry and of every size are seeing advantages and benefitting every day from their whistleblowing systems. Here are some examples.
Whistleblowing at a global level
When your business has activities across multiple countries, making sure employees are heard and nothing gets lost in translation can be complex.
This was the case with big retail groups such as Auchan Retail and Decathlon.
For both of these organizations, the added value of their new whistleblowing system was quickly felt:
- The trust in the platform can be confirmed by the increase in the number of reports from year to year: +105% of reports were received between 2020 and 2021 at Decathlon
- Compliance across multiple jurisdictions is easily managed thanks to a scalable solution, tailored to meet the organization’s requirements
- They both gained a better vision and understanding of the Group’s culture and ethical risks and were able to detect trends and eliminate root causes of dysfunction within the organization
- They both enjoyed record levels of reputation and notoriety
Allowing whistleblowers to speak up from their workplace
For some industries or professions, solely relying on reporting channels that aren’t mobile can make reporting wrongdoings difficult. For example, hospital staff are almost never behind a computer, or have enough time to go through the often lengthy process of reporting through a telephone hotline. Workers in factories or construction sites might not have access to a work computer altogether.
With a responsive solution paired with a mobile app, the French group Onet, a company hiring maintenance staff, is able to give a voice to its 68K employees across 350 agencies in 9 countries.
Reaching your people where they are is primordial for the success of your whistleblowing system, because they are first in line for detecting any dangerous behavior or risk.
For Onet, the success of their whistleblowing system relies on an accessible and easy-to-use platform with a mobile application encouraging anonymous exchanges with whistleblowers. Automatic translation of the system is also facilitating international reporting and analysis of the Group’s ethical climate by country.
Investing in your people is good for business
The return on investment of your whistleblowing system will be quickly apparent to your organization. Setting up healthy foundations by placing trust, accountability, and transparency at the center of your values and policies will make a huge difference in your turnover, reputation, investor relationships, and risk management.
Having a good whistleblowing system in place will also save you costly fines, crisis communications, and litigation costs, as well as all costs associated with wrongdoings discovered too late (fraud, conflict of interest, etc…).
By the end of this article, you should be well-equipped to convince your management to implement a whistleblowing system.
However, every organization is different, and so are its requirements. Don’t hesitate to book a 30-minute call with one of our advisors and whistleblowing experts for more insights!
Speak with one of our experts
Talk directly with one of our team members and discover what a whistleblowing system like Whispli can do to help your business in 20 minutes