Focusing on an Effective Employee Reporting and Investigation System

We often hear about the “essential” elements of an effective ethics and compliance programs.  It is natural for professionals to define specific elements of an ethics and compliance framework.  This is an important way to break down a program for assessment purposes.

While analyzing the specific functions in a program, it is important to avoid a narrow review of each element. Instead, as in most issues, the analysis of each element has to incorporate a factor that captures the interdependency of various elements.  For example, the effectiveness of one element may enhance or improve the operation of another element.  A simplistic way to express this idea is — the whole is often larger than the sum of the parts.

In practical terms — an example is the interdependency of employee reporting systems, investigations and specific training programs.  Let’s start with the reporting system.  There is no question that a company’s compliance program operates more effectively when the company maintains an efficient and trusted mechanism to report allegations of misconduct (either anonymously or confidentially).  As part of this element, a company has to embed multiple avenues for employee reporting of potential misconduct, publicize the reporting avenues to increase reporting, and train managers on how to respond to employee concerns when directly raised by employees.  When all three of these sub-elements are operating effectively, the sum of the overall performance will exceed the performance of each individual sub-element.  In other words, the three distinct sub-elements are interdependent and can be leveraged to produce positive results by recognition of this important relationship. 

In reviewing each element (or sub-element), a company needs to ensure that employees know that the company encourages employee reporting, are aware of the various reporting mechanisms, and that they are receiving tailored messages to promote understanding and awareness of reporting systems. 

By themselves, these are important issues to assess.  These issues, however, cannot be viewed in isolation.  Any employee reporting system is dependent on an effective internal investigation program.  If concerns are raised and they are not promptly investigated and fairly resolved, employees will quickly lose trust in the system. 

Thus, as an important corollary to an employee reporting system, companies have to implement an effective internal investigation program.  The analytical interdependency is obvious — employees will report more concerns when they trust that their concerns will be investigated fairly, resolved promptly, and appropriate actions are taken when the investigation is completed.  This logic demonstrates how elements (and sub-elements) operate to enhance each other and improve the overall performance of the ethics and compliance program.

From a broader perspective, the link between an ethical culture and employee reporting can be easily demonstrated.  When employees report concerns, their trust in the overall system will increase when the company’s culture supports and promotes employees who report concerns.  A culture of ethics and compliance, by definition, should support and encourage employee reporting to uncover issues, conduct an investigation, and remediate any substantiated claims.  The interdependency of these issues, when coordinated and performing optimally, ensures that the overall operation of an employee reporting system is effective.

On a more granular level, companies that train mid-level managers on how to respond to employee concerns are building an effective relationship between employees and management in responding to employee concerns, referring matters for internal investigations and promoting a system that is working on all cylinders.  Recognizing the interdependency of ethics and compliance functions ensures that companies prioritize ethics and compliance issues to maximize efficiency, remediation and overall performance.

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