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Information is Power

Interesting article in the Harvard Business Review  today about a study conducted to determine the keys to creating and maintaining an effective internal accountability, or whistleblowing, system. 

The goal of any accountability system should be to avoid a major negative outcome - litigation, government fines, etc. The study yielded three main, and possibly surprising, lessons: (1) the system should encourage more, not less internal reporting; (2) secondhand reports are more valuable than firsthand reports; and (3) reports with fewer details can still be very valuable.

In essence, the study found that the most effective accountability systems are not designed to reduce reportable behavior to zero - they are designed to create an open line of communication between management and the rest of the organization so that management possesses the information it needs to address issues before they become the subject of litigation or government investigation.  

Internal whistleblowing systems are a tool to see what you otherwise wouldn’t. Not all problems are observable in operations metrics and accounting reports. Daniel Garen, principal at Pivot Point Compliance Management and a former compliance officer at Danaher and Siemens, notes, “Employee hotlines have been the single greatest source for uncovering problems at the organizations I have worked with.” * * * ...Managers who seek to have fewer reports submitted should know that companies with fewer reports actually tend to have worse outcomes in terms of litigation and fines.

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conflict management, litigation, turnaround, startup, entrepreneurship, venture capital, investment, securities, investor finance