Whistleblower system: opportunity and risk for companies

Whistleblower system Opportunity and risk for companies

Once again, there is a new EU directive that is to be implemented by the German government. The Draft bill on the so-called Whistleblower Protection Act, which was actually supposed to be implemented by December 17, 2021, has now been presented by the Federal Ministry of Justice. In line with the published draft law, more and more providers are appearing who present ready-made solutions for whistleblower systems. The establishment of such "ready-made solutions" would quickly put the issue to rest, but is it really that simple?  

If one is only looking for "following the guideline", i.e. compliance, such solutions seem very attractive. But is one aware of the consequences that can arise? 

Whistleblower: Modern Hero?

The term and whistleblowers themselves often have a negative connotation. Whistleblowers of wrongdoing in companies or of questionable, governmental procedures are usually not considered heroes who bring an inconvenient truth to light. They face disciplinary proceedings, summary dismissal and, in extreme cases, even a life on the run. It makes sense and is the right thing to do to protect these people from reprisals by their employers.  

However, the establishment of a whistleblower system also demonstrates a change in culture and the company's innovation management: employees can and should speak out, impending grievances are identified and can thus also be eliminated at an early stage. 

In theory, this makes the company more attractive and even shows it to be open and modern.  

Whistleblowers and the danger of defamation

However, the rash and ill-conceived establishment of a reporting office also entails risks that quickly become a danger to the company. 

A previously open corporate culture can turn into a slander culture. A team culture that has been built up over many years can be wiped out in a very short time. A completely different type of feedback suddenly develops: Instead of talking face-to-face in a team meeting about challenges or points of friction, tips are forwarded anonymously. Communication shifts to the whistleblower system. 

Moreover, such a system is not suitable "per se" for all regions, times and cultures. In particular, if one operates in cultures where there is no experience with feedback traditions in companies, whistleblower systems are often misused for internal company conflicts and/or power struggles. Thus, damaging the reputation of colleagues or superiors may well be used as an instrument of one's own career planning. The anonymous accusation that a company is corrupt, for example, is also (unfortunately) one of the usual "weapons" of competition in some markets. 

Of course, this is a scenario that does not have to occur. But it can happen, as we have already experienced ourselves in our practice.  

Here are some examples/further risks: 

  • Whistleblowing in India: A medium-sized company with 250 employees in Germany and 80 employees in India wanted to take an innovative direction and set up a whistleblower system in its production facilities. Within the first year, this system was used once in Germany and 277 times in India.

    The high number of reports led to a (time) overload. With our help, we tried to determine how many of the cases contained valid allegations and how many were empty. Our investigation revealed a rate of less than 1% valid reports. The problem: There is a decline in management's acceptance to care about the reports, so the relevant 1% are in danger of being lost. There is a risk that such a system will become "cluttered" and that the true beneficiaries of protection will be weakened or even overlooked because those responsible can no longer distinguish between genuine and spurious reports.
  • With another medium-sized companies a new owner had found a way of working characterized by a lack of transparency and feedback exchange from a rather contentious team in the administration. It took almost two years of intensive team building measures, etc., before the company culture improved significantly. Then, when a whistleblower system was set up a year later, the team culture again deteriorated drastically in the following months and more and more whistleblowing occurred.

Whistleblower system: a curse and a blessing at the same time!

Every company, institution or authority has its own "lived" system of corporate culture and values. Some have a more open communication culture, where all kinds of issues and problems can be addressed directly. Others, on the other hand, still operate in a strictly hierarchical manner, making it more difficult to send "real" feedback upwards. Accordingly, it seems logical to be cautious about hastily adopting an existing whistleblower system without considering whether it even meets the needs and fulfills the company's internal requirements. The system should, in our opinion, be developed and established individually. Employees must also be introduced to the system through intensive training.  

To develop this suitable solution, the entire corporate system must be considered: What processes and mechanisms are already in place? Where or what do we need to readjust? Which solution on the market fits our needs and should ultimately be introduced? 

Do we need different reporting points? For example, do we distinguish between a tip that involves theft and a tip that involves sexual harassment? 

A holistic, strategic view helps to ask the crucial questions and find the answers. 

You have already integrated a whistleblower system or would like to deal with the topic and have questions about it? Write to us:

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