A healthy ethical culture leads to more internal reports on wrongdoing. This is the main lesson we take from Muel Kaptein’s article ‘From inaction to external whistleblowing: the influence of the ethical culture of organizations on employee responses to observed wrongdoing’ (2010). We want to bring this article to your attention because it proves the positive correlation between a healthy ethical culture and the number of internal misconduct reports.
This is relevant because a misconduct reporting line is sometimes – especially in Europe – perceived as being incompatible with a culture of open transparent communication. Kaptein’s article clearly indicates that a healthy ethical SpeakUp culture and the number of (anonymous) misconduct messages in fact are two sides of the same coin. Even though we see the level of naivety decreasing with the introduction of anti-corruption legislation (such as the UK Bribery Act) and with this the need for effective detection tools, we still sometimes encounter companies being ‘relieved’ when no or few messages come in. Whether that relief is justified or not is thus a valuable question.
Kaptein: The Eight Dimensions of an Ethical Culture and the Willingness to Report
In 2008 Kaptein developed the eight dimensions of the Corporate Ethical Virtues Model[1]. The model was developed to understand and explain unethical behavior by employees. In textbox 1, the dimensions are summed up.
Clarity. The extent to which the organization makes ethical expectations, such as values, norms and principles concrete and understandable to employees.
Congruency with local management. The extent to which local managers apply organizational standards to their own behavior.
Congruency with senior management. The extent to which senior managers apply organizational standards to their own behavior.
Feasibility. The extent to which the organization makes sufficient time, budgets, equipment, information and authority available to enable employees to fulfill their responsibilities.
Supportability. The extent to which the organization stimulates identification with the ethics of the organization among employees.
Transparency. The degree to which wrongdoing and its consequences are visible to those who can act upon it internally.
Discussability. The extent to which ethical issues, such as ethical dilemmas and alleged wrongdoing can be discussed internally.
Sanctionability. The extent to which employees believe that unethical behavior will be punished and ethical behavior will be rewarded.
Kaptein[3] tested these dimensions to see whether they can also be used to understand and explain the response of employees when they observe wrongdoing. To evaluate this, Kaptein conducted research, based on 5.065 US individuals working for organizations that employ at least 200 people. In his research, Kaptein differentiated between five ways of responding: inaction, confronting the wrongdoers, reporting to management, calling an internal hotline and lastly external whistleblowing. For now, we will focus on one way of responding: Calling an internal hotline.
The Results; How Reporting to an Internal Hotline Relates to the Dimensions of Ethical Culture
Regarding calling an internal hotline, Kaptein found a positive relation between five of the dimensions: clarity, congruency of senior management, feasibility, supportability and sanctionability. A negative relation was found between the level of congruency of local management, transparency and discussability.
Clarity
Kaptein found that the greater the clarity (the extent to which the normative expectations are concrete and understandable to employees), the more employees will take action. Kaptein expected that the cause for this correlation lies with the effect that comes with clarity; the clearer these values are, the more employees will feel responsible to uphold these values and, as a result, take action when they witness that these values are being violated.
Employee using internal hotline: “She held a meeting for about an hour and a half, where the involved person was present and where our code of conduct was explained, what can and cannot be done.”
Employee using internal hotline: “That is a direct violation of our code of conduct, where one can read that any form of bribe is forbidden, like the following quote from our code of conduct shows: “…””
Supportability
Kaptein detected that the greater the supportability (the extent to which employees identify with the ethical values of an organization) the greater the likelihood is that employees will report through an internal hotline. Kaptein explains this finding on a personal level: the more a value has become part of a person’s identity, the more this person will feel threatened or harmed when he/she witnesses these values being violated and the more likely this person will take action to stop and correct the violation.
Employee using internal hotline: “Today, I am writing to you, not just to report a case that happened in this organization, but also an appeal for transparency, justice and compassion – the very qualities that I would value for a great place to work.”
Congruency of senior management
Kaptein found that the greater the trust is in senior managers the more likely employees will use an internal hotline. At the same time, Kaptein found that when there is a great amount of trust in local managers, employees are less likely to use an internal hotline. Kaptein explains this finding by looking at the purpose of an internal hotline: an internal hotline can be seen as a means to report directly to senior management and go beyond local management. Therefore it indeed makes sense that when trust in local management is low and the trust in senior management is high, employees try to cross the bridge and report to senior management, as a means of last resort, directly through an internal hotline.
Employee using internal hotline: “Some of my co-workers told me that this line is reliable, but I’m afraid of putting our jobs at risk”
Feasibility
Regarding the relationship between feasibility (the extent to which the organization makes sufficient means available to enable employees to fulfill their responsibilities) and calling an internal hotline, Kaptein expected two effects to counterbalance: When the level of feasibility is low, the number of reports would be lower since employees would not have/make time to report and would not believe that reporting is effective (meeting targets is more important). On the other hand however, the number of reports could be higher since employees would have more reason to report (the level of dissatisfaction is higher). His results showed a positive relation which supports the latter argument.
Employee using internal hotline: “I am making this call trying to take care of this company because I love it, because it has given me something.”
Sanctionability
Kaptein found that the more employees believe that unethical behavior will face consequences, the more likely employees are to report to an internal hotline. When employees feel that their report will be effective they are more likely to make that report than when they feel their report will not be followed-up and the situation will not be dealt with.
Quote from SpeakUp messenger: “I can see a positive change in the conduct of the person who was reported in the case, and I’d like to make sure that the case is finally closed and that this positive outcome is a result of your action.”
Overall, Kaptein sees a positive relationship between the ethical culture and responding through an internal hotline. Most of the findings from Kaptein are supported by our practical experience with clients and the messages we see coming in from employees through the SpeakUp Communication System.
Only one of the findings of Kaptein surprises me: The negative relationship between discussability and reporting to an internal hotline. In our practice we often hear from our clients that since the introduction of the SpeakUp system they have seen an increase of discussing ethics. Also, they see reports that come in via other more conventional methods rise. Perhaps the difference lies in the fact that the participants in Kaptein’s research were part of the US working environment. In the US the practice of calling an internal hotline has been integrated in the day to day practice for several years. Moreover, calling a hotline is positioned as the initial and often the only (and mandatory) method of raising ethical concerns. It is understandable that a hotline then distorts the level of conventional discussability on the workfloor. Completely different are the European companies that position the SpeakUp system as an instrument of last resort: Only those reports that otherwise cannot or will not be reported. Reporting to the SpeakUp system is part of the entire scope of discussing/reporting ethical misconduct.
Yvonne Celsing, Director Human Resources of Loomis: “After launching the Loomis Integrity Line in 2010, we noticed a steep rise in concerns raised. Not only were concerns reported via the new SpeakUp system, but employees also reported more via conventional communication channels. Discussing integrity and raising integrity concerns openly, has become more common within our organisation.”
In summary
Kaptein’s research clearly shows that a right balance within the various dimensions of an ethical culture is very important to allow employees to speak up and report wrongdoings. Employee tips and warnings are the most frequent ways to detect misconduct[4]; Making sure that the ethical culture is such that employees will choose action (speak to the involved person directly, go to management or use the SpeakUp line as a last resort) instead of inaction or even ‘exit’ is a challenge that should not be taken lightly. Kaptein’s findings show that a higher number of reports does not have to be negative; It can be a positive reflection of the ethical culture of an organization; It tells you that employees are willing to report. Because they trust that management can affect change.
Marrit Mulder
Client Services Manager People Intouch
About Muel Kaptein:
Muel Kaptein is partner at KPMG where he supports organizations in auditing and improving their integrity, soft controls, fraud risk management, and compliance. Muel is also professor of business ethics and integrity management at the Erasmus University of Rotterdam. Muel is author various books including Ethics Management (Springer, 1998), The Balanced Company (Oxford University Press, 2002), The Six Principles for Managing with Integrity (Articulate Press, 2005), The Living Code (Greenleaf, 2008), and Workplace Morality (Emerald, 2013). See for more information: www.muelkaptein.com.
From Inaction to External Whistleblowing: The Influence of the Ethical Culture of Organizations on Employee Responses to Observed Wrongdoing – download article.
References
[1] Kaptein (2008) Developing and Testing a Measure for the Ethical Culture of Organizations: The Corporate Ethical Virtues Model. Journal of Organizational Behavior
[2] Ibid.
[3] Kaptein (2010) From Inaction to External Whistleblowing: The Influence of the Ethical Culture of Organizations on Employee Responses to Observed Wrongdoing. Journal of Business Ethics.
[4] KPMG (2007) Profile of a Fraudster Survey 2007; Ernst & Young (2012) Growing Beyond: a place for integrity. 12th Global Fraud Survey; PriceWaterhouseCoopers (2007) Economic crime: people, culture and controls. The 4th biennial Global Economic Crime Survey; Transparency International (2009) Alternative to silence. Whistleblower Protection In 10 European Countries