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Why failing to set the tone at the top can prove costly

Thursday, 18 August 2016 13:42

In recent years many organisations up and down the country have implemented whistleblowing arrangements and other controls, with the aim of encouraging staff to speak up and help stamp out fraud and other wrongdoing. However transparency in the workplace must come from the top of an organisation right down to the bottom. Failure to set the tone in this way can prove costly.

The link between unethical behaviour and the “tone at the top” of an organisation has received much attention in recent years. Tone at the top refers to the ethical environment that is created in the workplace by the organisation's leadership. Whatever tone management sets will have a trickle-down effect to employees of the company.

If the tone set by managers upholds ethics, employees will be more inclined to uphold those same values. However, if senior management appears unconcerned with ethics and focuses solely on their profit margins, organisations will be more vulnerable to fraud and wrongdoing as employees may feel that ethical conduct is not a high priority within the organisation.

Just ask construction contractor Balfour Beatty who recently paid out a six-figure sum to a whistleblower who accused his employer of unethical behavior by deceiving the Welsh Government and costing taxpayers significant sums of money. The whistleblower, claimed he was hounded out by his bosses after he made a disclosure about an £18.5m office building project in Cardiff.

The Welsh Government awarded a contract to Balfour Beatty to construct a building in Callaghan Square as part of a regeneration on a vacant site. The project was later halted but the firm was paid about £600,000 for work carried out.

The whistleblower said the firm’s true sub-contract costs had been hidden from the Welsh Government. Balfour Beatty told the Welsh Government its profits would be 3.3% of the total cost of the job, however, the firm had not submitted the lowest quotes received from sub-contractors and, unknown to the Welsh Government, would be making an additional £768,000.

The whistleblower raised concerns internally through the company’s whistleblowing procedures to his line manager, the company compliance officer and the commercial director who sits on the board – but was met by a mixture of bullying, denial and exclusion.

In November 2015 Balfour Beatty finally admitted liability for unfairly dismissing and failing to support their employee. They argued that it had not carried out criminal activity or breached legal obligations. Nonetheless, failing to set the tone at senior level within the firm has proved costly. The company paid £137,000 before the case was due to be heard at the tribunal.

In this instance the whistleblower should be applauded for showing courage to stand up and speak out in accordance with his firm’s whistleblowing arrangements. Transparency and effective support are fundamental requirements for leadership when setting the right tone and is key to providing a safe mechanism for reporting violations.

Failure to provide this for whistleblowers will leave organisations counting the cost.