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April 8, 2008
Engaged Employees = Whistleblowers?
A costly scandal at a French bank recently has observers wondering why workers didn't report suspicious activity. Some are saying the scandal highlights one of the most important challenges employers face today: poor employee engagement.
In January, Société Générale announced that for years one of its low-level traders had been masking trades, which ultimately resulted in €4.9 billion ($7.2 billion) in losses for the giant French bank.
Meanwhile, the credibility of the bank's management has come under scrutiny after the junior trader told French prosecutors that his fictitious trading started as far back as 2005 -- a year earlier than the bank had acknowledged -- and French officials have berated it for lax risk controls.
Some observers are saying the scandal highlights some of the major challenges employers face regarding their workers today.
Although the scandalous -- and very costly -- fraud was perpetrated by one employee, an internal probe uncovered that many back-office employees failed to alert their supervisors of suspicious activity.
A February 20 report issued by the committee overseeing the internal probe found that the bank's controls "were carried out in accordance with the procedures, but did not make it possible to identify the fraud before Jan. 18, 2008." It added that in some cases, "operating staff did not systematically carry out more detailed checks."
"The Inspection General department has refrained from drawing any conclusions at this stage regarding the responsibility of the front office managers supervising the fraud's author ..." said the 22-page preliminary report, called Mission Green.
Now, these other employees didn't necessarily do anything wrong. But they also didn't go beyond what was expected of them as laid out in their job descriptions. The fact that staff members didn't go beyond what was expected of them may point to a larger issue of employee engagement.
Employee engagement, in which employees feel a vested interest in the company's success and are therefore both willing and motivated to perform beyond their stated job requirements, differs not only from company to company but from country to country as well.
Employers in France in particular are faced with particularly challenging engagement problems.
Consulting firm Mercer LLC recently found that only 53 percent of employees in France said they would recommend their organizations to others as "a good place to work." Forty-eight percent said they think senior managers do a good job of managing their workforce. Fewer than three in 10 feel they are paid fairly for their performance and only one in 5 indicates that their organization does a good job of matching pay to performance. Only one in 4 feels that their organization is doing a good job of retaining its most talented people.
According to a recent report by Mercer, India ranks first among 22 countries in terms of employee engagement with an overall favorable rating of 25 percent, while Mexico scored second with 19 percent. The United States ranked in the middle with a 1 percent rating, while Japan ranked last at -23 percent.
The study, which polled 12,500 employees worldwide, asked employees which of 12 factors most influenced their engagement at work.
Workers in the United Kingdom and the U.S. demand more respect and expect more opportunities for career advancement, while workers in France and India cited the type of work as the strongest driver of engagement. In France, workers also place a premium on work/life balance, and in India, where workers appear to be the most engaged, the type of work performed and promotion opportunities seem to be the biggest motivating factors; four-fifths of Indian workers say they would recommend their organizations as "a good place to work."
Chinese employees, which posted the third-highest level of engagement, place a premium on benefits, but workers indicate this is an area where they're increasingly dissatisfied. In Japan, employees rate base pay as most important. German workers, meanwhile, cited the people they work with as the strongest factor.
Mexican employees value structured and ongoing developmental activities that will prepare them for upward mobility.
Globally, respect ranks as the No. 1 factor contributing to employee engagement.
Had workers at Société Générale known about the fraud, would respect have driven them to be whistleblowers?
Overall Favorable Ratings by Country
Source: Mercer
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6 CommentsI agree that it is everyone's responsibility to report abuse and violations in the workplace, especially given the magnitude that has brought this particular French bank, and others, to their knees.
While I don't know how employee engagement is looked upon around the world, the "whistleblower" mentality here in the US, at least, is not highly regarded. From what I read, and what I have witnessed in a Fortune 50 company some years ago, making management aware of these issues brings with it a stigma that travels with that person into their next employment and beyond. I think it can be blamed on the "embarrassment" that the exposed management feels when the abuse is uncovered, usually because they did not have processes in place to reveal problems before they became catastrophic.
Unfortunately for the whistleblower, it's a small world, especially when it's industry specific. With corporate buyouts, mergers and acquisitions, the do-gooder could be met at his new employ with a reputation of not being trusted to keep their mouth shut, and shunned from a industry where they have built all of their marketable experience. The price of their revelation could be ultimately quite costly, both financially and socially.
April 8, 2008 3:00 PMCoop, I couldn't have said it better.
April 8, 2008 6:33 PMI become totally angry when I read such comments about employee disengagement as those expressed in your article and the one by Jessica Marquez (http://www.workforce.com/section/09/feature/25/44/42/index.html ) following such events as the so-called fraud at the Societe Generale. It is a gross and totally unjust attempt to displace the burden of culpability from the general to the soldier. It is a laughable reversal of the legal defense of the accuseds at the Nazi trials that were claiming to have simply obeyed the orders. That would make me laugh if this was a particular event. Unfortunately, it is not; it is, rather, discouragingly widespread.
This particular case is representative of a number of similar attempts by the class of corporate top managers (I do not blame the writers themselves) to blame the rank and file for the disastrous and widespread results of their own decisions and behaviour. Greed and pride has gradually grasped the majority of the managing and professionnal class and has destroyed almost all sense of professionalism, of social responsibility and even of personal dignity. And they top it now with lying. Let me expose it.
Let's start with the Societe Generale since this is the starting point of Marquez.
Facts first. The trader was young and a relatively junior employee and one of a group of similar positions. Those traders had been given authority to enter into standardized trades on a specialized market with other equally competent traders in other similar companies. He was trading contracts on very abstract values that have been developped in the frenzy of the so-called financial engineering of the last twenty years. This trading activity was regulated and controlled if not daily, certainly not more than monthly. The traders were given a certain latitude to make their own decisions risking the money of the bank on this market in a kind of betting game on the direction of the markets. And they were paid generous year end bonuses (more than a few times their annual salaries) if they succeeded in making a profit for the bank on those activities. Mr Kievel, the trader in question, was given a large bonus for 2007. Certainly because his trading activity has brought millions (two billions according to his lawyers http://www.marketwatch.com/news/story/rogue-ruined-financial-system-one/story.aspx?guid=%7BCFAE684D-689E-44BD-8983-0ED22469A6F9%7D; read this excellent article to get a more dispassionate analysis) in profit for the bank.
Now, tell me how you can conclude that the fellow employees somehow were not fully engaged when they did not denounce his behaviour which was tightly supervised and controlled by management, and who was paid excessive bonuses by that same management? Can�t you for a moment put yourself in their shoes and think that whatever question you would have had was very insignificant in front of such display of favorable judgment by the top management who were to supposed to have all the facts? I think that you would not have done anything different even if you were totally engaged to the company.
Let�s consider next the case of Enron, the most well documented and known case of corporate fraud by the very few at the top. The facts are that all the wrong and illegal actions have been committed in secrecy and conspiracy by the handful of powerful individuals at the top of management, with the obvious collaboration of their counterparts at the top of the organizations of accountants and bankers that were essential in carrying out the scams. No doubt the other large corporate scandals have the same characteristics.
Now, what was the answer of the authorities? The institution of a law (Sorbane-Oxley) that forced the companies to review all their activities extensively, from the CEO to the payclerk. You have to have been the witness of the enormous time and money spent in an organization on one hand and to have informed yourself of the origin of the new law on the other hand, to appreciate that the cure was not applied to the disease alone, but to the whole organism. It was a joke, alas sad, to watch all those expensive accounting experts poke the clerical personnel in order to extract from them all the possible ways they could fraud the shareholder and to spend as much time concocting written descriptions of all the procedure of checks and balances they would put in place and enforce to prevent � another Enron �, as if the middle management, the clerical personnel and similar functions had been in cause. Or as if they had more than the actual capability to maybe make themselves a little richer, but certainly not to bring the company down the drain within a few months of activity, like happened at the Societe Generale. Do you really think that this futile, infeffective and misdirected exercise to protect shareholders have done anything toward making employees more engaged towards their employer? If you were treated as the potential culprit by those that have failed initially, what would be your attitude? I doubt you would answer that your engagement had improved.
It is ironical that it is the class of accountants and of their large firms that benefited from the windfall in activity brought on by S-O following the collapse and demise of the venerable and most renowned of the few giants onto which the public and the shareholders relied for the proctection of their interests. For a few years following the enactment of the S-O law, accouting was the profession to be in if you wanted to make an excellent pay quickly. What a waste of talent and time!
Indeed, why all those new countless procedures, controls, checks, etc.? Would it not have been more effective to enact (re-enact?) and enforce a few simple rules for the top managers and accountants that were their accomplices such as the following.
� Do not change the rules in the middle of the game. If you do then divulge them clearly and visibly.
� Do not let yourself in conflict of interest. (You cannot serve two masters at the same time: the shareholders and top management.)
� Be fair and honest: if you risk losing one dollar max, it is not fair that you pretend to be entitled to one hundred (thousand?) if you merely achieve your work better than most people.
� Do not lie. (For example, to sell your shares while you recommend to others to buy.) This means that you should not, as the head of a company, cash in for short term by selling your shares because you know that they are not worth their price on the long term.
In short if some simple common sense rules such as those had been imposed and make functional and effective, indeed there would have been self-regulation. But when some wisecracks have devised some remuneration schemes that in essence were corruption of the guardians of the interests of their clients (all the stakeholders), there was no surprise that everyone closely involved became contaminated, corrupted and succumbed to the temptation of greed; regulation went overboard. A small, close group benefited. Not the mass of employees. So please put the onus where it belongs and let the employees alone!
In conclusion, I hope that, one day, those that made so much damage to the capitalist and free entreprise system by not respecting the rules and the values upon which this system was built, especially as defined by its early theorician Adam Smith, in order to fill their pockets by cheating and deceiting, will amend and attempt to repair what they have damaged. I hope but I am not an optimist. But at least, dear writers, please do not let yourself be deceited also�
Jacques Racicot, engineering consultant
Sorel-Tracy,
Qu�bec
Why is this called "whistle blowing" does anyone agree that it should be titled doing your job! Being a nit picker maybe, or simple good people looking out for what's important ... thieves and liars.
April 9, 2008 4:08 PMWhile any article that promotes the importance of organizational culture and management practices as essential for employee engagement is an important contribution by itself, I am not so sure that employee engagement and whistle blowing are on the same continuum.
In my experience, I have witnessed whistle blowing coming from more disgruntled and disengaged employees than from engaged people. How they became disgruntled and disengaged is a different matter and for another time. When there are complaints in organizations involving unethical conduct or harassment or abuse the focus is often on the complainant as to whether this is a good or bad person and what their motives might be. There are times that bad people complaining gets in the way of organizations digging deeper into unethical conduct unless there is a clear cut case staring them in the face that they can't avoid.
For whatever reason, whistle blowing in society today is one of the great unresolved dilemmas that begins way back in the early school years. The two extremes are parents who deal with an unwanted kiss of their grade 5 daughter by a class mate with a call to the police and the kindergarten teacher who keeps a "tattle box"� requiring informants to write out the complaint, sign their name to it, and then be ready to read out the complaint when the teacher schedules a tattle tale session and the 'handle the bully yourself' approach where the kid in grade 6 stands up to the bully and finds a new best buddy.
This does not address the incidents at the company in question but I hope it serves to add to the discussion.
Greg Basham
CEO, eeVoices Limited.
The corporate system is inherently corrupt because of greed. I do not know if there is any solution to this. Corporations/corporatism have/has been a disaster for the human race!
