Yes, Whistleblowers are Good for Your Company. Here's Why

At first glance, a whistleblower may seem like a huge headache for the HR department of any company. In the past, this was accepted wisdom and employees were discouraged from coming forward and reporting wrongdoing they came across in the business. In fact, many who did often had their complaints ignored.

Now, a new attitude is being taken that involves organizations embracing the benefits of whistleblowing.

Why is whistleblowing such a dilemma?

Janice Bellace, Wharton professor emeritus of legal studies and business ethics, said acting out of conscience to wrongdoing can seem like “a very risky proposition for an employee who would like to stay working at the company”. This is because it’s hard to predict the outcome when there’s no roadmap laid out for workers wanting to speak out.

The majority of whistleblowers have no experience of the process and while they innately understand that wrongdoing has occurred or is happening, they don’t necessarily know what laws have been broken. This can make them unsure of how to proceed and the period during which an investigation is being carried out can be very unsettling for the individual who’s waiting to see if their position is validated.

Over the years, a number of protections have been brought in to encourage whistleblowing, but they’re not always enough to help employees overcome their fears. Most staff members have built up relationships in the workplace and part of their decision to blow the whistle is likely to be based on how interactions with others might be affected in the future.

Whistleblowers must be able to see the route forward in order to make the decision to report a complaint. Without seeing what the outcome is likely to look like and how the problem should be solved, employees might decide it’s not worth risking being seen as disloyal by speaking up and therefore keep quiet on the subject.

Julian Jonker, another Wharton professor of legal studies and business ethics, said that when wrongdoing is very serious, whistleblowing “can be thought of as a way of saving the organization”. Unless this is communicated clearly to staff, they’re likely to feel the weight of making that decision themselves and could come down on either side of the ethical line.

Why are whistleblowers important?

Instead of viewing whistleblowers as a sign of poor internal controls, they should be seen as an opportunity to deal with issues before they get worse or become entrenched. Companies that encourage internal whistleblowing have been found to develop a culture of trust, where all members of staff know they can raise problems in a safe environment.

A large-scale study analyzed the records of employee complaints filed between 2004 and 2016 from 936 publicly traded US companies to look at the correlation between whistleblowing and negative outcomes. The Evidence on the Use and Efficacy of Internal Whistleblowing Systems study concluded that those with strong internal reporting systems fared better.

In fact, these firms had 96% fewer material lawsuits brought against them and were made to pay 20.4% less in settlement amounts. While these figures demonstrate that internal whistleblowing can be beneficial in the long run, attitudes to it need to change if companies are to take advantage of the gains it can offer and persuade employees they won't face repercussions when coming forward.

How to promote self-regulation in the workplace

For whistleblowing to work as a form of self-regulation within an organization, a number of steps must be taken. These include:

• Setting up a whistleblowing system that’s available to the entire workforce
• Establishing procedures to ensure all reports are taken seriously and escalated when necessary
• Educating managers on handling complaints
• Addressing any concerns staff have about recrimination
• Shifting the culture from one of blame to problem solving
• Encouraging employees to use the channels set up for reporting issues
• Thanking those individuals for coming forward
• Contacting staff about investigations to show problems have been dealt with
• Ensuring minor infractions are investigated but kept in perspective
• Offering a selection of routes to whistleblowing as different employees can feel more comfortable with a variety of channels

Approaches to managing whistleblowing

How you approach setting up a system to deal with whistleblowing will depend on many factors within your organization. These can include its size, the resources available to you and any cultural legacy that could act as a barrier to the project's success. In some businesses, the HR department is responsible for managing complaints, while others employ an external agency to help reassure employees they’ll be treated fairly.

The most important thing to remember is not shutting whistleblowing down but channeling it into a productive process. That way, more employees are likely to come forward in the future without feeling they are risking their careers by speaking up. Switching to an open-door policy in terms of whistleblowing can feel like a significant culture shift for any company, but it can lead to significant improvements in operations.