Ethics and compliance software and services company NAVEX Global recently released its 2017 Ethics & Compliance Hotline and Incident Management Benchmark Report, which shows that for the first time since 2010 case closure times declined from the previous year even as the overall reporting rate once again increased to a new high.

Since 2010, report volumes have increased by 56 percent.

In 2016, the median case closure time fell by nearly 10 percent to 42 days, down from 46 days in 2015. The data suggests that organizations are applying additional resources to address incident reports. The research also found a median rate of 1.4 reports per 100 employees, a slight increase over last year.

This year’s benchmark report analyzed more than 927,338 reports representing 38.5 million employees at more than 2,382 organizations.

Among the findings:

The substantiation rate of reports received via “all other methods”—which covers reporting through avenues such as open door reports, manager submissions, letters, and direct e-mail—was significantly higher than reports received via hotline and Web alone.

Despite all of the regulatory and media attention focused on protecting employees against retaliation, internal reports of retaliation were still less than 1 percent of all reports, while the substantiation rate of these reports remained steady for the third year in a row at 26 percent.

For the past eight years, there has been a slow but steady decrease in the rate of anonymous reports with the peak rate in 2009 of 65 percent. In 2016, the rate of anonymous reporting was 58 percent.

We spoke to Carrie Penman, chief compliance officer and senior vice president of advisory services for NAVEX Global, about this year’s report and what the data tells us about how companies are handling whistleblowers.

What is different about the 2017 edition of your research?

In previous years, we have reported on data from only our U.S. servers, separate from data on our European servers. This report is a combination of both. It is truly a global report.

“Around 40 percent of all of the reports that are raised are substantiated, all or in part. That is a critical data point in that it shows employees are likely to be better educated because there had been so much publicity about reporting and what is, hopefully, the safety of reporting internally.”
Carrie Penman, CCO and SVP, Advisory Services, NAVEX Global

The distinctions by region are important and will be interesting to watch as we continue to gather the data in the coming years. However, the geographic differences underscore something we’ve been advising our customers for years—that different countries and regions require varying and adaptive approaches to ethics and compliance and more specifically to discussions about reporting potential wrongdoing. For organizations working in multiple jurisdictions, this should be an important consideration.

What do you see as the most important findings this year?

Case closure time is definitely part of the story. This is something we have been very concerned about. We’ve seen case closure times driving upwards from a median of 32 days to 46 days in 2015. This year, for the first time since 2011, we saw a drop from the previous year of four days. Case closure time in 2016 was 42 days.

While it is still not close to where it was in 2011, things are finally going in the right direction.

What is interesting about the data point this year is that we did see another increase in report rates, from 1.3 to 1.4 reports per 100 employees. So even with an increasing volume of reports, organizations were still able to achieve a decrease in case closure times.

Part of this shows, I think, that organizations have had to add additional resources to address the fact that the number of reports has steadily increased over the past several years.

There is so much news these days from regulators, and in the media, about whistleblowers. Are resources at organizations, including staffing and technology, keeping pace with this outreach and heightened awareness?

Employees do display a better understanding of the types of reports to make and the information that is required.

We are seeing that in substantiation rates. Around 40 percent of all of the reports that are raised are substantiated, all or in part. That is a critical data point in that it shows employees are likely to be better educated because there had been so much publicity about reporting and what is, hopefully, the safety of reporting internally.

We still have a long way to go, however. When we look at retaliation, it is one area where we have yet to move the needle.

A 40 percent substantiation rate must be concerning for companies as they realize that so many complaints are not just malcontents or gadflies, but have merit.

Keep in mind that this represents about 1-2 percent of the employee population in an organization that is raising issues.

Still, I think that’s why we try to create easy ways for managers and other departments, such as human resources or security, to document the reports they are receiving. What we call “open door reports,” the walk-ins, are substantiated at an even higher rate.


Carrie Penman is the chief compliance officer of NAVEX Global and senior vice president of Advisory Services.
Penman has been with Advisory Services since 2003, after serving four years as deputy director of the Ethics and Compliance Officer Association. One of the earliest ethics officers in America, she is a scientist who developed and directed the first corporate-wide global ethics program at Westinghouse Electric Corporation.
Since joining NAVEX Global, Penman has conducted numerous program, risk and culture assessment projects globally for its clients and regularly works with and trains boards of directors and executive teams. She also serves as a corporate monitor and independent consultant for companies with government agreements. She is the author of numerous compliance related articles and commentary and is regularly featured or quoted as a compliance expert in press and publications.
As chief compliance officer, Penman oversees NAVEX Global’s internal ethics and compliance activities.
Source: NAVEX Global

Employees are raising very valid issues, and it is very important that boards and leadership pay attention to these reports because the numbers are going up and they are also more likely to be substantiated.

Are the statistics on open-door reporting an indication that culture is improving? What does it tell us?

It makes a good argument that organizations need to make sure that they are documenting those reports that come in from other sources because they will have an opportunity to catch a problem more quickly if they maintain a more holistic view.

Is technology keeping pace with trends?

If you are using technology to assign out cases to investigators, then you are able to potentially run an evaluation. Is there a certain department, or a certain group of investigators, that have either a high or a low substantiation rate? Is there a much longer case closure time? Which groups are more effective?

In addition to being able to track what is going on in the organization, you are also able to track how effectively systems and processes are implemented. You may be able to see where you need more resources. If you have a group that is taking a very long time to resolve cases, it may be that they just don’t have the sufficient resources needed to complete their reviews.

There has been a strong, pervasive warning against retaliation by regulators, notably the Securities and Exchange Commission. Does the data reflect that warning?

An area where I am disappointed is that organizations are still not getting internal reports of retaliation.

You can certainly see why an employee, if they stuck their head out and experienced retaliation, would not go back to that same resource to raise another issue.

We found that less than 1 percent of all of the internal reports in our database are dealing with reports of retaliation.

It is such a hot-button issue for the regulatory agencies. The SEC’s Office of the Whistleblower highlighted the issue in their 2016 report and said they were going to be looking for strong enforcement when it comes to anti-retaliation protections.  A lot of state regulations also address the problem. There is a lot of focus, but organizations are just not getting a chance to address those issues internally.

We did find a more than double jump in substantiation rates for retaliation reports in 2014, when it went from 12 to 27 percent.

We have stayed at this elevated substantiation rate for retaliation reports at around 26 percent this year, but that is still below the overall substantiation rate of 40 percent.

Nevertheless, these are very difficult claims to investigate, probably more so than many others, so we were pleased to see that the substantiation rate stayed up.

It is an indication that organizations have taken this seriously, but still need to do more work to educate, in particular, first-line and second-line managers on how to recognize and prevent retaliation and what to do with reports they may receive.

Are there notable trends by industry?

Healthcare leads in report volume. They receive the most reports per 100 employees, followed by not-for-profits and real estate.

The lowest reporting rates are in industrial manufacturing, wholesale trade, and electronics.

Education had the most anonymous reports, followed by transportation and electronics. The lowest rate of anonymous reporting, by industry, was pharmaceuticals.

The industry that has the shortest case closure times is retail. That is probably not surprising, because a lot of large retailers have local security and in-house staff that is right there to conduct investigations. The longest case closure times were in mining, computer services, and electronics.