Whistleblowers and the risk to reputation

Whistleblowers are a well-recognised possibility in most organisations. But how the organisation responds to a whistleblower can help determine whether the problem raised becomes a reputational crisis.

Take the recent case of CEO Jes Staley of Barclay’s Bank who provoked regulatory ire after he ordered bank security staff to try to identify a whistle-blower who raised questions about a friend Mr Staley appointed. The issue was relatively minor but regulators began investigating whether the CEO had breached rules relating to the treatment of whistleblowers. Staley apologised, but the bank now faces investor disquiet and unwanted reputational damage.

Or consider the quality recall currently underway by Hyundai, involving well over a million vehicles, which arose after a corporate whistleblower released internal documents about alleged engine defects. While the recall is serious enough, the New York Times reported the whistleblower was fired for allegedly leaking trade secrets, but later reinstated by Hyundai following a South Korean government ruling to protect whistleblowers. Then the company filed a criminal complaint against the man, which it dropped after he quit the carmaker last month.

Or finally, consider the Fairfax Media report late last year which claimed senior executives at Leightons (later renamed CIMIC) were under investigation by regulatory authorities after failing to respond to an employee who raised allegations of a bribery scandal in India. The report said the whistleblower was sacked in 2014 and his concerns were ignored. It added that the Federal Government and Opposition both subsequently urged consideration of whistleblower reform in the private sector.

The important lesson from such cases is that how a whistleblower is handled can sometimes trigger reputational damage even greater than the original issue.  Management experts advise that whistleblowers typically try to raise concerns using the “normal channels” before taking the “nuclear option” when they believe no-one is paying attention.

So what can be done to protect the organisation? Effective issue management and crisis prevention involves identifying problems early and taking steps to address them. This means whistleblowers should not be seen as a threat, but as a warning that something is not right. Organisations should encourage blame-free upward communication rather than a culture of “shooting the messenger,” plus have a formal process by which individuals can legitimately raise concerns.

The American writers Nystrom and Starbuck suggest that top managers should listen to and learn from what they call “dissenters, doubters and bearers of warnings” to remind themselves that their own beliefs and perceptions may well be wrong.

Similarly, the Australian disaster expert Andrew Hopkins agrees that leaders should not rely on assurances from subordinates that all is as it should be. He describes problems as “lying in wait to pounce,” and says mindful managers should use every means available to probe for these problems and expose them before they can impact detrimentally on the organization.

Indeed, Hopkins goes even further, arguing that mindful leaders should actually welcome bad news. “They recognise that it is often difficult to convey bad news upwards,” he says, “and they develop systems to reward the bearers of bad news.”

Welcoming bad news and rewarding Jeremiahs might seem a stretch for some executives, but there is no doubt that crisis proof organisations have formal systems in place to identify and respond to concerns before whistleblowers feel the need to act. That’s how planned issue management and crisis prevention help protect reputation.

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About managingoutcomes

Issue and crisis management expert
This entry was posted in Crisis Prevention, Issue Management, Reputation risk and tagged , , . Bookmark the permalink.

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