Whistleblowers are the single most effective source of information in detecting corporate fraud. This was the conclusion of a 2007 study by PricewaterhouseCoopers on economic crime which added that “While professional auditors were only able to detect 19% of the frauds on private corporations, whistleblowers exposed 43%. Executives surveyed estimated that the whistleblowers saved their shareholders billions of dollars.”
Fifteen years on, the most significant factor in whether an employee reports misconduct they have witnessed comes down to whether they believe it will work out well for them.
The Gartner survey of 901 employees in April showed that in a new normal of lower misconduct reporting since the pandemic, it’s important for compliance leaders to understand what drives employees to report misconduct (see Figure 1).
Figure 1: Impact of Beliefs on Likelihood to Report Misconduct
“It may surprise many compliance leaders to know that just 54% of employees felt that reporting misconduct is the right thing to do,” said Chris Audet, senior director, research in the Gartner Legal, Risk & Compliance practice. “Employees understand it is what they are supposed to do but, in many cases, they aren’t sure that doing so will work out well for them or their teams, so they choose to keep quiet.”
“Compliance leaders typically focus on driving trust in reporting and emphasising anti-retaliation policies,” said Audet. “But often highlighting the ways that a speak-up culture can benefit individual employees or their teams is overlooked.” and this is the most important factor driving a decision to report.”Chris Audet
Drivers of Misconduct Reporting
Compliance often assumes that employees report misconduct because it is simply the right thing to do, and leaders tend to play to this by emphasising how misconduct reporting helps the company. Yet around half of the employees take a more pragmatic, rather than idealistic, approach to reporting and only pursue it if they see no harm or even some personal benefit to themselves.
“Compliance leaders need to drive the pragmatists to report too,” said Audet. “Instead of assuming all employees will be compelled by the moral value of reporting, companies need to build a value proposition for reporting. That is a shift from what many compliance leaders have emphasised in the past.”
The value proposition - what will drive an employee's personal responsibility to report - has three core components to it: trust, safety and benefit. Trust and safety in reporting are areas that are routinely addressed by compliance already through such things as anti-retaliation policies. But very rarely do compliance teams create or emphasise a personal benefit for the individual reporting or their teams.
The current situation is that employees have very poor perceptions of reporting being beneficial for them. Only a third believe reporting will lead to a better work environment or improve their team’s morale or performance. Just over one in five employees think reporting will be good for their career.
Audet says addressing the benefit of reporting is a big untapped opportunity for compliance leaders. He believes that it is the biggest single factor driving a sense of personal responsibility to report, yet employee perceptions in this area are typically negative. It is rarely a prominent component of speak-up messaging from compliance teams.