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Building trust: Whistleblowing systems as a core element of Speak Up Culture
In 2019, Pia Michel founded the company LegalTegrity together with Dr Thomas Altenbach and Maraja Fistanic. The company offers a digital whistleblowing system for medium-sized companies. Previously, Mrs Michel had seen many companies from the inside as a consultant and experienced the whole spectrum of different corporate cultures and their advantages and disadvantages: from a culture of openness to a culture of fear. Based on her experience, she is convinced that whistleblowing systems are a relevant tool to promote speak up culture in companies.
What is a Speak Up Culture?
Can you start by explaining what is actually meant when talking of a Speak Up Culture?
Pia Michel: Speak Up Culture means that employees openly address sensitive issues, but also ideas or suggestions. This is possible when they feel secure that they do not have to fear negative consequences. This subjective feeling is called psychological security. The prerequisite for this feeling is trust in colleagues and superiors as well as in the company as such. Ideally, this is even explicitly desired and encouraged by the company.
Relevance of Speak Up Culture for companies
Mrs Michel, why should companies consider the topic of a Speak Up Culture?
Pia Michel: Trust is built up very slowly and can be destroyed very quickly. As a management consultant, I have experienced very few teams where there was real trust and a good Speak Up Culture. It usually fails because of individuals with big egos who only pursue their own interests. Unfortunately, these people exist in almost every company.
The current labour market offers a lot of choice, especially for highly qualified employees: if they are not satisfied with the conditions at their current employer, they can quickly find a new job with a new employer. Some companies therefore have a precautionary tendency not to raise unpleasant issues and to tolerate even unacceptable misconduct. However, this shot quickly backfires.
There is no such thing as a “perfect” Speak Up Culture in the entire company. I think that is an illusion. However, a company can contribute in many ways to continuously promote a Speak Up Culture.
Companies benefit from such a culture of trust because…
… they thus learn about relevant developments at an early stage.
… their employees are involved in the process and make suggestions for improvement.
… their employees feel emotionally attached to the company.
How do you recognize a company without a Speak Up Culture?
Pia Michel: Without the subjective feeling of psychological safety, employees are reluctant to speak out if they do not agree with what is perceived to be the conventional wisdom. In the worst case, a company has a culture of fear with “yes-men”. Employees in such a culture primarily want to be inconspicuous. There are no controversial discussions, employees tell as little as possible about themselves and do not take risks: Service by the book.
Gallup research shows that this attitude translates into high absenteeism and low productivity. The current Gallup Engagement Index shows that every third employee has not expressed even serious concerns to their supervisor at least once in the past twelve months. Of those employees without an emotional attachment, almost one in two (45%) even remained silent.
Mrs Michel, could you give us a specific example?
Pia Michel: Imagine the following scenario: You are a manager and realise that a lot of material is disappearing in the company. Too much. You negotiate with the works council to be allowed to temporarily install a camera in one place and are actually able to convict the culprits. You find out that it is systematic theft. Then you realise that you were the only person who did not know about it. All the employees knew about it. But no one dared to say anything to you because they didn’t know how you would handle it. Sounds unrealistic? One of our clients experienced it exactly like that and was really frustrated.
However, it is not only about systematically planned and premeditated crimes. A lack of Speak Up Culture carries the risk of passive resistance. Over time, this develops a negative, incalculable momentum of its own. In the beginning, it is usually just little things like ” playing hooky” or “stealing office supplies”. But just like the systematic theft at our client’s, such a “nobody cares what I say or think” attitude can have the consequence that the company ends up in the headlines. At least as risky is the demotivating effect that this unsanctioned behaviour has on other colleagues.
Are companies aware of this correlation?
Pia Michel: The culture in a company is essentially shaped by the people who work in the company. Thus, the corporate culture can even differ depending on the area and the people working there. Most entrepreneurs assume that everything is running smoothly at their company: the working atmosphere is good, the employees speak openly about everything and they are not affected by violations of the law.
When it comes to the assessment of culture, an interesting phenomenon takes hold: although the Gallup studies do not primarily examine the topic of Speak Up Culture, they show very clearly that there are large discrepancies in the perception of culture depending on the group of respondents. For example, it is not mathematically possible that 69% of employees state that they have had a bad supervisor at least once, while at the same time 97% of supervisors consider themselves to be good managers. As a consequence, it can be assumed that a management can hardly perceive objectively which culture prevails in the company.
Introduction of Speak Up Culture in the company
As an entrepreneur, how can you successfully establish a Speak Up Culture in your company?
Pia Michel: At first glance, it seems easy to establish a Speak Up Culture. However, the reality is different: Employees have different, sometimes conflicting goals and interests, dependencies arise and private issues mix with professional ones. As a result, employees tend to be more cautious than open. Trust cannot be prescribed. A Speak Up Culture only develops when employees repeatedly have positive experiences, for example: An employee points out a mistake in a process and makes suggestions for change. If the supervisor deals with the suggestion constructively, regardless of the quality of the suggestion, the experience is evaluated positively and creates a feeling of security. Raising critical issues, i.e. violations of the law, such as theft or corruption, requires a very high level of perceived security among employees and the conviction that reporting will not result in any disadvantages.
What first steps do you recommend to introduce a Speak Up Culture?
Pia Michel: In my experience, the basis of a functioning Speak Up Culture is the empowerment of all leaders and their awareness of the relevance of their behaviour. After all, the risk of misbehaving on critical issues increases not only for employees but also for leaders. Therefore, dealing with it requires some learning. Training should enable managers, for example, to listen actively, to express constructive criticism and, in particular, to receive feedback and information on unpleasant topics in a professional and appreciative manner. These competences contribute to the fact that employees experience their managers as trustworthy contact persons and see them as role models.
Another important point is the designation of neutral people of trust in the company. Employees can turn to these persons if they have problems with their superiors or are unsure whether they will react appropriately to their concerns. Such confidants could be, for example, ombudspersons, members of the human resources department, the works council or a compliance officer.
Some people prefer not to have personal contact when dealing with very critical issues. In this case, a whistleblowing system is the ideal communication channel. Employees should be informed about the different communication channels offered and motivated to use them when needed.
What else is involved in the strategic introduction of a Speak Up Culture in the company? How can it be strengthened?
Pia Michel: To find out how your own employees feel about the company culture, you can conduct an anonymous employee survey. It has a confidence-building effect if the results are communicated in any case, even if they do not turn out as “bright” as the company would have wished. On this basis, a strategy can be developed to suit the company’s situation and a multi-dimensional catalogue of measures for implementation can be defined. It is crucial that the company repeatedly transports relevant messages via different communication channels and makes them tangible. In my many years of consulting experience, I have seen that most companies find it difficult to accept that a cultural change is a continuous process and cannot occur overnight.
Whistleblowing system and corporate culture
Mrs Michel, you referred to whistleblowing systems as an instrument of Speak Up Culture. Why are whistleblowing systems so important?
Pia Michel: A whistleblowing system, especially if it guarantees anonymity, is a low-threshold communication channel for very critical issues, such as violations of the law. Employees should not have to struggle with whether a report may pose a personal or professional risk to them. The goal is to be able to make a report as quickly and easily as possible.
Violations of the law are a reality – in every company. Let’s use concrete figures: statistically speaking, every fourth employee steals, most of them even several times. And they should all be in other companies, but not in yours?
Violations of data protection, IT security, quality guidelines, theft, price fixing, taking advantage – the list is long. Such violations of the law are noticed by employees and perceived as not being right, but very rarely addressed directly. However, an anonymous whistleblower system would allow those who report such violations to do so without personal risk.
It is not only about protecting whistleblowers. Another important aspect that is often neglected is the question of liability. If you as management cannot prove that you have done everything to prevent violations of the law, you are personally liable in case of emergency. In addition, there is the enormous loss of trust among customers and other stakeholders if such a violation ends up in the press and becomes a scandal with media impact. Accordingly, from a company’s perspective, it makes more sense to take precautions than to trust in “…nothing will go wrong”.
How should the introduction of whistleblowing systems be implemented in the context of corporate culture?
Pia Michel: It is not enough to “simply” introduce a system. Successful implementation requires some consciously planned steps. It is recommended – if not already existing – to create a code of conduct that defines how employees should behave. I have seen some codes of conducts that were so complex and long that they are definitely not read and certainly not understood. Therefore, I recommend when choosing words and drafting them, to make sure that they are formulated as simple as possible and are reduced to the minimum.
For the successful implementation of a whistleblowing system, it is advisable to have a strategy considering the people involved as well as the timing.
- Who is involved and when?
- Through whom is the communication carried out?
- How, when and how often will communication occur?
Based on our practical experience, we recommend involving stakeholders such as the works council and data protection officers at an early stage. On the one hand, this ensures that data protection requirements are fully taken into account, and on the other hand, you ensure acceptance at an early stage.
Unfortunately, the topic of whistleblowing usually suffers from a rather bad reputation, keyword “denunciation”. Therefore, it is all the more important to counter and refute these prejudices from the very beginning. This also includes communicating the introduction of a whistleblower system to employees through as many channels as possible. This can be done, for example, on the notice board, the intranet, in a communication from the management as well as in regular communication and also directly when hiring new employees. As a confidence-building measure, it is important to explain how the whistleblowing system works, who receives the reports and what the process looks like when a report is submitted through the system. To avoid receiving general complaints about the system, it is advisable to have a clear delimitation:
- Which reports should employees submit via the system?
- Which issues can be addressed, for example, via customer service or other complaint management tools?
What else should be considered for a whistleblowing system in order to have a positive impact on the Speak Up Culture?
Pia Michel: The impact depends very much on how the management and top management in particular talk about the whistleblower system and whistleblowers. Sensitisation and training of these responsible persons is therefore a prerequisite for a positive impact. I will give you two examples:
According to the EU Whistleblowing Directive, companies are obliged to acknowledge receipt of a report within 7 days. This can be done neutrally with a sentence such as “We hereby acknowledge receipt of your report.” or positively with the following wording: “Thank you for your report. We will investigate your report and would be pleased if you log into the system again within the next 2 weeks. This will enable us to ask you further questions about your report if necessary.”
A good example of the positive evaluation of whistleblower reports occurred a few years ago at an international car company where high inventory discrepancies were uncovered through a whistleblower. The whistleblower had revealed himself in the course of the investigation. The CFO of the affected division then criticised the whistleblower in front of all his colleagues and asked his employees not to submit any more reports via the whistleblower system in the future, but to address him directly about grievances. This attitude did not meet the group’s expectations of its leaders. As a consequence, they dismissed the CFO without notice. This dismissal was confirmed by the labour court. News of this quickly spread throughout the scandal-ridden company.
In order to have a positive effect on the Speak Up Culture, employees must be able to trust in the fact that their message is truly anonymous. Depending on the system, this cannot be taken for granted. There is often a fear: Isn’t there always a smart IT person who can find out who the report came from? I once worked in a company where employees were asked anonymously about certain topics using an app installed on their company mobile phones. The app was said to guarantee anonymity. Afterwards, it turned out that the survey results could be filtered by age, company sector and location. This had a major impact on trust in promises made by the management.
Advantages of digital solutions
You have highlighted digital whistleblowing systems. What are the benefits of digital whistleblowing systems for companies and how do they strengthen the Speak Up Culture?
Pia Michel: The first step many people take is to consider whether they could not create a simple, quick solution themselves as a whistleblowing system. An e-mail box, a telephone number or an internal ombudsman seem obvious. However, the EU Whistleblower Directive, which has been in force since December 2021, sets very clear requirements for whistleblower protection and the associated data protection. The safest and easiest way for companies to meet these requirements is with a digital solution.
In contrary to home-grown solutions, most digital solutions guarantee complete anonymity to the reporting person. If it is a software-as-a-service solution that is completely independent of the company’s IT infrastructure in the cloud, this creates additional trust. Especially for smaller companies, it can be advantageous to involve an external body (such as a law firm or ombudsman) as a recipient of a report. This signals to employees that their wish for anonymity is respected, that reports will be seriously investigated and not swept under the carpet.
Digital solutions are available from anywhere and at any time. Many employees prefer to submit their reports from home in the evening or at the weekend. In other words, whenever they are undisturbed and feel safe or unobserved. They can neither be observed nor interrupted by colleagues or superiors when submitting their reports. The system can be accessed, for example, via a QR code or a link. Companies can additionally recommend their employees to use their private mobile phones for reporting.
The EU Directive also stipulates the possibility of telephone reports. Again, anonymity can be guaranteed if these reports are not recorded by an internal unit but, for example, by the operator of the whistleblowing system and entered into the system. Of course, the operator must fulfil the data protection requirements and be able to prove this.
An unbeatable advantage of a digital whistleblowing system is the possibility to communicate with the whistleblower while maintaining anonymity. This facilitates the processing of a report immensely, as the whistleblower can be asked questions. A digital system also simplifies the legally compliant observance of deadlines.
The use of a digital whistleblowing system should be so simple and intuitive that neither whistleblowers nor recipients need training to use it.
My recommendation are cloud-based whistleblower solutions hosted in Germany: The hosting by a European cloud service provider, such as Deutsche Telekom, ensures that the highest IT security and data protection requirements are maintained. Some of these SaaS solutions do not require IT implementation. They are resource-saving and cost-efficient, easy to use and always accessible. With these advantages, they are unbeatable compared to analogue solutions and pay off very positively in a Speak Up Culture.
Conclusion on the positive influence of whistleblowing systems on your corporate culture
Mrs Michel, could you summarise the most important aspects of a Speak Up Culture for us once again?
Pia Michel: Employees deal with the processes in the company every day and they know where there is a need for optimisation. You have a Speak Up Culture in your company if…
- employees address suggestions for improvement of weaknesses or ideas for further development and market adaptation even at a very early stage.
- take suggestions seriously, regardless of the position of the person making the suggestion, and constructively review them for relevance.
- Offer anonymous communication channels such as whistleblowing systems.
With the latter, you can also significantly reduce the risk of damage due to violations of the law and scandals.
The interplay of these behaviours and measures can significantly accelerate your positive corporate development. A living Speak Up Culture is an important signal to your employees that your company is interested in their opinions and ideas and at the same time values compliance with guidelines and laws. In this way, you retain valuable and, above all, value-oriented employees. If employees do not experience genuine interest, you will quickly lose them or they will withdraw and become risk-averse “yes-men”. Therefore, I cannot emphasise enough the importance of valuing an employee in the company.
Find out more about introducing a whistleblowing system in our guide “How to comply with the Whistleblowing Directive in your company”. If you still have questions, feel free to contact one of our experts for a personal consultation.
