Assessing Your Hotline System

Findings from NAVEX’s Annual Study

NAVEX Global recently released the annual Hotline and Incident Management Report, a key tool compliance practitioners can use to benchmark and evaluate the performance of the company’s reporting hotline. Michael Volkov provides an overview of the findings, discussing trends and assumptions.

Employee hotlines are – sorry about this – a “hot” topic these days in compliance.

NAVEX Global’s recent study confirmed the importance of an effective hotline system. Companies that implement robust and widely used internal reporting systems are more effective in identifying and responding to potential problems. Such an impact improves overall business performance as measured by return on assets, fewer material lawsuits, lower litigation costs and fewer external whistleblower reports.

Companies should use this correlation in performance and implement a robust hotline assessment program. Such an assessment should be based on regular analysis of hotline data. A company has to conduct such an assessment to ensure that the company: promotes a culture that supports employees who raise concerns, effectively communicates with employees to encourage such reporting and promptly and effectively investigates employee concerns.

NAVEX Global’s Annual Hotline and Incident Management Report is a valuable resource when assessing a company’s hotline system.

Over the last few years, overall employee reporting volumes have increased. From 2010 to 2017, the rate of employee reporting has increased when all forms of reporting (e.g., hotline, walk-ins) are calculated – a 56 percent increase, from a median report of 0.9 reports per 100 employees in 2010 to a median of 1.4 reports per 100 employees in 2017.

Interestingly, the substantiation rate for reported cases increased by 10 percent, from 40 percent in 2016 to 44 percent in 2017, reaching the highest level recorded by NAVEX Global. The highest increase in substantiation rates occurred with respect to human resources, diversity and workplace respect issues – from 38 to 44 percent.

In general, companies are receiving more employee reports and higher quality complaints, resulting in higher overall substantiation rates.

Employee reports received from sources other than a hotline had a significantly higher substantiation rate – 64 percent overall. This result suggests that managers have improved their ability to receive and respond to employee concerns.

The number of internal reports of retaliation against employees raising concerns dropped, but the substantiation rate increased significantly, from 26 percent to 32 percent. Companies need to remain vigilant in rooting out and preventing potential retaliation or harassment against employees who raise concerns.

The time to close investigations of concerns increased from an average of 42 days to 44 days. The number of anonymous reports continued to decline, however; in 2017, 56 percent of employee reports were anonymous (down from a peak rate in 2009 of 65 percent*). Such a decline reflects increased employee trust in the reporting system.

The number of HR-related cases reported stayed steady in 2017 at 72 percent. This reflects the general assumption that seven in 10 employee reports are about HR issues. With the increase in awareness over sexual harassment and assault, the number of reported cases was expected to increase. Such an increase occurred in the fourth quarter of 2017.

*Editor’s note

This article was republished with permission from Michael Volkov’s blog, Corruption, Crime & Compliance.