Characteristics of Whistle-Blowers - Research Paper Example

Whistle Blowing: Analysis and Recommendations Table of Contents Table of Contents 1 Executive Summary 2 Introduction to whsitle blowing 3 Types of Whistle Blowing 4 Nature of wrongdoings 4 Characteristics of Whistle-Blowers 5 Individual Characteristics 5 Job Characteristics 5 Work-Group Characteristics 6 Organizational Characteristics 6 Theories of Whistle-Blowing behavior 6 Whistle-Blowing based on Power Relations 7 Whistle Blowing on the Basis of Justice Theory 7 Whistle Blowing on the basis of prosocial behavior perspective 7 Other Theories 7 Myths Surrounding Whistle-Blowing 8 Myth1: All Whistle Blowers are Crackpots 8 Myth 2: All Whistle-Blowers suffer from retaliation 8 Federal Protection for Whistle Blowing 9 A Case Study: PepsiCo 10 Conclusion/Recommendations 11 References 13 Executive Summary Whistle blowing can be defined as a disclosure of illegal, immoral or illegitimate activities by some employee of an organization. Generally, wrong doings may be in the form of wastage of funds, mismanagement, misuse of power and authority and so on. A Whistle blower may make use of internal or external channels to report the wrong doing. A wrong doing may be based on ethical, legal or financial perspectives. The wrong-doings are often based on the perspectives of the whistle-blower. Many individual and situational variables may have an effect on the likelihood of whistle-blowing by an employee. Individual variables include value system, status in the organization, job satisfaction, and performance, while situational variables includes job characteristics such as role, organizational characteristics such as policies, ethical standards and work-group characteristics such as group norms and size. As with the measure of wrong-doing, the measurement of retaliation also depends on the perspective and behavior of the whistle-blower. Whistle blowing may be explained using a lot of organizational theories such as power theory, justice theory, group dynamics theory, theories of attitude changes and social persuasion, cognitive dissonance, and moral reasoning theory. Laws governing whistle blowing are inconsistent and insufficient for private sector employees. The next section of the report showcases an example of efficient whistle-blowing in a company using the case of You Speak! at PepsiCo. To sum it whistle blowing is an efficient and important mechanism to prevent wrong doings in an organization. There is a need to promote internal whistle blowing and establish efficient communication channels to report wrong-doing. Besides this, it is important to have support from the top management and an environment conducive to whistle-blowing. Introduction to whsitle blowing Defined in simplest of terms, whistle blowing can be defined as a disclosure by a former or current employee of any illegal, immoral, or illegitimate practices by their employers (Ashwathappa, 2008). Thus, whistle blowing plays an important role by filling the existing gaps in the regulatory arrangement that is intended to stop the misuse of organizational power. There are essentially four important elements of whistle blowing (Boyle, 1990). The disclosure of any information must be made in good faith. The disclosure must be made by current, past or a prospective member of the organization. The disclosed information must relate to employer misconduct The whistle blower should have sufficient evidence of the reported misconduct. The misconduct reported may be of mismanagement, misuse of funds, abuse of authority, unethical behavior, violation of federal laws, and rules, or harm to the social welfare. Whistle blowing, on one hand has helped detection of fraudulent activities worth crores of dollar has also been used by disgruntled workers to blackmail their employers on the other. Whistle blowing also presents a classic conflict between society’s and company’s interest. Whistle blowing may lead to huge turmoil in the company thereby leading to its fall. Besides this, whistle blowing makes an employee to speak against their employers which may lead to harassment for the company. All these differing viewpoints make it necessary to understand whistle blowing and find out ways to improve its efficiency and utilization. Types of Whistle Blowing A Whistle blower may either make organizational misconduct public, or inform it to top-level executives of the company. These are the two types of whistle-blowing. Internal Whistle-blowing allows the company to correct the wrong-doings without having any drastic affects. Internal whistle-blowing however makes it necessary that the company has a policy of fair treatment, and takes the appropriate corrective action. Miceli and Near (1994) in their study suggested that internal whistle-blowing can increases the safety and well-being of the company. It also enables companies to reduce waste and mismanagement, boost employee morale, and avoid damage claims. External whistle blowing however may have drastic implications on the organization as well as the society. Often, employees go to the public, only if previous internal attempts have failed. Studies have found that external whistle-blowers are more likely to suffer from retaliation as compared to internal whistle blowers (Dworkin & Baucus, 1995) Although empirical studies show similarity in internal and external whistle-blowing process (Miceli, and Near, 1992), yet the two are given different status in the legislature. Some laws protect whistle-blowers only under use of internal channels, whereas others protect whistle-blowers using external channels (Near, Dworkin, & Miceli, 1993). This inconsistency is one of the major reasons for employees to suffer and stop from whistle-blowing. Nature of wrongdoings The nature of wrongdoings that shall be reported in cases of whistle-blowing has three perspectives: The legal, The Auditors’ and the Ethical. The law suggests that a wrong-doing is worth reporting as a case of whistle-blowing in case if it has large implications for some portion of society. Auditors on the other hand suggest that a whistle-blowing case shall be pursued only if the wrong-doing is sufficiently costly. Ethicists such as Bowie (1982) mention that “The act of whistle-blowing stems from appropriate moral motives of preventing unnecessary harm to other”. All the three perspectives suggest that the constituents of wrong-doings are dependent on the perceptions of the whistle-blowers. This enables under performer employees to whistle-blow to avoid facing justified personnel sanctions (Westin, 1981). Characteristics of Whistle-Blowers Whistle-blowers can be categorized in four ways: Individual characteristics, job characteristics, work-group characteristics, organizational characteristics (Murphy, 1993). Individual Characteristics Research suggests that individuals with characteristics like egalitarian value systems, strong professional orientation and high tolerance for rejection are more prone to whistle-blowing. An individual having more status in the organization, support from professional peers, and high education levels is more likely to go for whistle-blowing (Randall & Gibson, 1991). On the other hand, individuals having fast growth goals may ignore wrong-doings (Hacker, 1978). Besides this, an employee having a high degree of identity with the organization, or low job competence also has a low probability of reporting a wrong-doing (Greenberg et. al, 1987). Job Characteristics The role and position of a person in his/her job also have significant effect on his/her tendency to whistle-blow. Positions such as internal auditor, inspector, designers, and engineers have high levels of information and are governed by a professional code of ethics. This encourages them to go for whistle-blowing (Miceli et. al., 1991). Government employees may be governed by a code of ethics that prescribes reporting of wrong-doings (Porttmyer, 1987). Work-Group Characteristics Whistle-blowing is more likely in case there is a large group that identifies the wrong-doing and it cohesively supports the reporting of the same (Murphy, 1993). Besides this, difference between a group’s goals and organizational goals may also have a large impact on the tendency to whistle-blow. Also, groups having high empathy amongst group members may also oppose the reporting of the wrong-doing (Gordon, 1993). Organizational Characteristics Many organizations have clear policies encouraging employees to whistle-blow. Organizations may keep ethical behavior as a part of performance appraisal, thereby increasing job and pay satisfaction and encourage whistle-blowing. Other characteristics like organizational bureaucracy, organization’s responsiveness to employee appeals, the size of the organization and the climate also have an impact on the likelihood of whistle-blowing. Amongst the characteristics, the job, work-group and organizational characteristics are generally referred to as situational variables affecting the probability of whistle-blowing. Theories of Whistle-Blowing behavior Whistle-Blowing based on Power Relations This theory suggests that the whistle-blower is seeking to exert some power over the organization in order to stop the wrong-doing being done. The management then may either stop the wrong-doing or may retaliate against the whistle-blower, so as to change the power balance. The two parties try to reduce their dependence over other and to gain the power balance. This theory has been the focus of many studies (Dozier and Miceli, 1985; Farrell and Petersen 1982). Whistle Blowing on the Basis of Justice Theory The theory of organizational justice proposes the relation between: procedural justice and level of satisfaction with the system; and distributive justice and outcome satisfaction. Thus, satisfaction with the organizational system will depend upon the perceived fairness of the treatment of the whistle-blowing. Whistle Blowing on the basis of prosocial behavior perspective The large rewards given by many organizations to whistle-blowers means that whistle-blowing can not only benefit the organization and the society, but also benefits individuals who do it. This is suggested by researchers explaining whistle-blowing though a prosocial behavior perspective. Other Theories Besides, these group dynamics theory, theories of attitude changes and social persuasion, cognitive dissonance, and moral reasoning theory can be used to explain whistle blowing in specific instances (Victor, Trevino, & Shapiro, 1993; Petty & Cacioppo, 1986; Festinger, 1957; Kohlberg, 1984). Myths Surrounding Whistle-Blowing Myth1: All Whistle Blowers are Crackpots Managers who are responsible for decision making in an organization may be biases and it is unlikely that the managers will consent that the decision was wrong. Instead, it is much easier for them to blame the whistle-blower and term him as crackpot questioning his judgment. Empirical studies however point otherwise. It has been proved that both individual as well as other situational variables such as job characteristics, organizational characteristics and work-group characteristics with more importance on situational variables. There is no statistical proof that whistle-blowers are not different from other employees who may observe a wrong-doing but may not report it. This implies that whistle-blowers are not a crackpot. Fundamentally, they just happen to be present at the wrong place at the wrong time to witness a wrong doing. Myth 2: All Whistle-Blowers suffer from retaliation It shall be argued that there is small fraction of employees that might observe a wrongdoing may actually whistle-blow. A very small fraction of these actually get retaliation from the employer. Seeing press for the cases of whistle blowing may indicate that all whistle-blowers suffer from retaliation. Surveys of random samples of organizational members point to something else. Near et al (1995) proved that retaliation rates are as low as 6% to a high of 16-38% among government employees. Intuitively, categories of employees not protected sufficiently suffer a slight more retaliation. As with wrong-doing, the measurement of retaliation also depends upon the personality of the analyzer. This makes it difficult to measure the accuracy, severity, and relevancy of whistle-blower’s allegation of retaliation. Many research studies aimed at measuring this and the causing variables have failed to show any consistent relationship of personality variables to retaliation. Some of the variables that have shown to affect the degree of retaliation seem to be the salary, education levels, employee performance, and his job role. However situational variables such as use of external channels to report the wrong doing had a positive impact on the retaliation. Thus it can be concluded that there are no proven predictors of retaliation. It can however be said that retaliation against whistle-blowers is not a common happening, and may take the many forms from less sever to highly severe. The level of retaliation is also dependent on the personal perspective of the whistle-blower and it does not stop them from whistle-blowing (Near & Jensen, 1983). This may however affect the level of use of external means to report the wrong doing. Federal Protection for Whistle Blowing There are four categories of federal laws meant to protect whistle-blowers. All employees working for organizations are covered by a variety of federal statues that protect those who exercise their rights and obligations. The First and the Fourteenth Amendments provide whistle blower primarily for public sector employees, but also for private sector employees on an extended basis. Under certain categories, whistle-blowing activities can be protected by the provisions of National Labor Relations Act. Besides these, employees also are protected by the Civil Service System. These mechanism however exhaustive they look are actually fragmented and do not provide sufficient protection for the private sector employees. Besides these legal protections, whistle blowers are also assisted by private organizations A Case Study: PepsiCo PepsiCo has a formal whistle-blowing hotline that can be used by both domestic as well as international employees for reporting a violation of Organization’s Code of Conduct. This mechanism called “Speak-Up!” is intended to promote employees to directly report issues that may have the potential to affect the organization adversely. Launched in 1999, the system was made available to all employees of the company worldwide in 2004. The system supports the company’s goals of create a culture of integrity and is directly reflected in the mission statement of the organization (PepsiCo, 2009): “PepsiCo's responsibility is to continually improve all aspects of the world in which we operate – environment, social, economic – creating a better tomorrow than today." Our vision is put into action through programs and a focus on environmental stewardship, activities to benefit society, and a commitment to build shareholder value by making PepsiCo a truly sustainable company.” The hotline is operated by a third-party vendor and runs 24 hours. Callers have the option of being completely anonymous. Besides the hotline, employees can also make use of a website, and report the wrong-doing anonymously. Employees are asked a number of questions while reporting: if anybody else has been told about the incident, the number and characteristics of the group or individual, the availability of proofs such as documents, videos, or audio. Each call is given a case number and is reviewed by the Legal, HR and the Audit Department of the company. The case is then exhaustively analyzed through methods ranging from interviews to review of communications and other documents. Employees can also use the hotline to find the status of their case. The cases of Speak Up! are reflected throughout the organization by changes in its policies, and processes. This includes the PepsiCo Values statement and the company’s Code of Conduct. The issues are also added to the Leadership Model which is the basis of the 360-degree feedback process that takes place 2 times in a year. Thus this mechanism enables the company to integrate the values of integrity and ethics in the workplace. It also provides employees with a perceived “safety-value”. Thus, it can be seen the importance of whistle-blowing in establishing the culture of integrity and ethics in the processes of a company. Conclusion/Recommendations For whistle-blowing to be an effective tool in reporting the wrong-doings of an organization, it is necessary that the top management creates an environment of support for the practice. The management shall take a proactive position as most of the employees do not expect any response to whistle-blowing. There is also a need to change the viewpoint of employees towards whistle-blowing. It shall be viewed as an attempt to improve the organizational processes and not as an activity that needs to be punished. Efficient channels need to be established through which an employee can report the wrong doing. Such communication channels may be through hotline, confidential questionnaires, or ombudsmen. Strong policies are needed to deal with the wrong-doing and protect whistle blowers from retaliation. Policies shall lay down specific clauses of preventing wastage. Policies shall have specific examples of wrong-doings and the steps that need to be taken if a wrong doing has been observed. The organization shall try to enhance the employer-employee cooperation through mechanism such as Committees, Quality circles etc. There shall be attempts to increase job satisfaction, employee participation, employee wellness and a sense of justice in the minds of employees. Employees shall also be trained to report the wrong doing and understand the desirable and undesirable behavior. The companies shall also intend to increase the awareness and teach employees in all positions that it is their duty to report wrong doing. Companies shall try to avoid external whistle-blowing. This means that companies shall establish a climate conductive to internal whistle-blowing and efficiently address an issue once it has been raised. Companies shall also try to establish efficient internal communications channels and boost intra-organizational trust and faith in the system. Whistle-blowing is often considered as a threat. However, the benefits of whistle-blowing activity in terms of employee morale, reduction in litigation expenses and fines, and the corporate image can outweigh the costs. Therefore managers must establish an environment that promotes internal whistle-blowing and efficient action taking in case of whistle-blowing. References Aswathappa, K. (2008). Human Resource Management: Text and Cases, 5th edition. New Delhi: McGraw-Hill Publishers. Bowie, N. (1982). Business ethics. Englewood Cliffs. NJ: Prentice Hall. Boyle, R. (1990). A review of whistle-blower protections and suggestions for change. Labor Law Journal, 41, 821-830. Dozier, J., & Miceli, M. 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