Studies have shown that tips are the best way to detect fraud in organizations and those organizations with ethics hotlines are more likely to receive tips than those without (ACFE, 2014). However, for hotlines to be effective, employees and others must be willing and able to use them.

Hotlines must be regularly evaluated to ensure that they are being used effectively. There is more than one way to do this. For example, they can be evaluated against the following list of characteristics, adapted from an article last October in Insights (Libit et al., 2014).

Integrated: Effective hotlines are well-integrated with all parts of the compliance and ethics program and all parts of the program are promoted through communication and training efforts.

Anonymous and confidential: As Libit and his colleagues state, “Anonymous and confidential reporting mechanisms help foster a climate whereby company employees are more likely to report or seek guidance regarding potential or actual wrongdoing without fear of retaliation.”

Retaliation prohibited: Retaliation against whistleblowers must not be tolerated. It is against the law, leads to a lack of trust in the system, and has a chilling effect on employee willingness to report concerns.

Incentives offered: Companies may want to consider offering financial or non-financial incentives for whistleblower reports that lead to the the discovery of unethical or unlawful behavior.

Positive tone at the top: Employees and others take their cues from their leaders; board members and senior managers must demonstrate the behaviors they want to encourage.

Communicated and available: It is essential, say the authors, for companies to regularly educate employees on and publicize the who-what-when-where-why-how of reporting suspected unethical or unlawful activity via the hotline. In addition, the hotline must be available 24 hours a day, 365 days a year.

Multiple uses: It may be worth considering expanding the hotline’s scope to include more than just reports of suspected wrongdoing. For example, the hotline could be used to request and receive explanation or clarification of internal ethics policies and guidelines. If employees have more reasons to use the hotline, they may be more comfortable using it to report concerns as well.

Data analyzed: Data generated by calls to hotlines should be used to monitor useful metrics and to make process improvements as needed.

Benchmarked: To the extent possible, companies should compare their hotline reporting patternsto industry trends. Differences, if found, will need to be studied further in an effort to understand the causes.

Third-party providers: External hotline providers offer focused expertise. They can provide hotline coverage 24 hours a day, 7 days a week, 365 days a year, offer foreign language skills, assist with data analysis, deliver related training, and provide other services. In addition, employees often feel more comfortable reporting their concerns to a neutral third party.

Multiple methods available: There should be more than one way for whistleblowers to report concerns, to include a dedicated telephone line, a designated website, and a mailing address.

Regular audits: Like all processes, hotline systems should be evaluated, tested, and audited regularly to ensure they are functioning as intended.

Other stakeholders included: Vendors, sub-contractors, and other stakeholder groups also can be invited to report suspected wrongdoing via the hotline. They should receive similar training about how, when, and why to use the reporting system.

Hotline systems that exhibit the preceding characteristics will be hotline systems that are used effectively by employees and other stakeholders. This will help organizations identify and respond to fraud and support ethical behavior.

Ethical Advocate provides comprehensive ethics and compliance solutions, including ethics and compliance training and confidential and anonymous hotlines. Please contact us for more information.

References:

Association of Certified Fraud Examiners (ACFE). Report to the Nations on Occupational Fraud and Abuse: 2014 Global Fraud Study, 2014.

Libit, William M., Walter L. Draney, and Todd E. Freier. “Silence is Not Necessarily Golden: Elements of an Effective Whistleblower Hotline.”  Insights, Vol. 28, no. 10, October 2014.