According to Dave Slovin, Vice President of The Network, one of the largest providers of hotline services, the field has become crowded with new entrants clamoring to provide services to companies. However, while installing a hotline may seem like a very tangible and easy to deploy solution that will meet regulatory requirements, companies are well advised to be sure that the solution maps well with their culture.

As with any compliance strategy, success of a hotline is as dependent on how the tool is integrated into the company's overall compliance strategy as it is on the qualifications of the service provider or the technology used internally to support it.

In the recent trial of former HealthSouth CEO Richard Scrushy, the former CFO Weston Smith was quoted as saying that reporting an accounting fraud to its hotline "would have done no good. According to Smith, the employees taking calls on the hotline reported directly to Scrushy. Smith said "the hotline was a joke."

It is imperative that the hotline be positioned as an important tool that benefits the entire organization. Careful thought must be given to how the hotline is publicized and what cultural barriers may exist that will prevent employees from feeling safe in making a very difficult and emotional call.

And creating the environment where employees feel comfortable making that call couldn't be more important.

According to the American Institute of Certified Public Accountants, hotlines play one of the most important roles in preventing fraud, especially the most common and damaging fraud caused by managers overriding a company's internal controls.

A recent white paper issued by the AICPA noted that a key defense against management override of internal controls is a whistleblowing process that typically incorporates a telephone hotline. "Respondents to a 2004 survey by the Association of Certified Fraud Examiners (ACFE) revealed that various forms of fraud are detected 40 percent of the time by tips, which made this the leading method for detecting fraud."

The report goes on to say that "the audit committee can assist in creating strong antifraud controls by encouraging the development of a culture in which employees view whistleblowing as a valuable contribution to an attractive workplace of integrity and their own futures. The reporting mechanisms must demonstrate confidentiality so potential whistleblowers are assured that their concerns will be properly considered and that they will not be subjected to retribution. Successful whistleblowing procedures require strong leadership from the audit committee, the board of directors, and management."

One of the key success factors for organizations deploying ethics and compliance programs is in how well the various components fit together. For example, merely publicizing the hotline's number is not enough. Leadership must understand how employees feel about the hotline. Is it perceived as a snitch line? Would employees use it if they didn't feel intimidated by managers? Do they trust that the hotline is truly confidential?

These issues must be factored into an overall training and communication program to support the hotline as part of the company's overall ethics and compliance program. Many communication efforts are nothing more than announcements the company is meeting a regulatory requirement to provide a reporting capability. Without going further to understand the questions on employees' minds that might be keeping them from using the hotline, the employees just might agree with Weston Smith, that the company's well-intended efforts are "a joke."

DAVID GEBLER is the President of Working Values, Ltd., a Boston-based business ethics consulting and training development firm.  More articles by David Gebler

WORKING VALUES LTD. is a business ethics and training company. Through a variety of products and services, including Web-based compliance and ethics programs, on-site training, video and award-winning ethics games for employees, Working Values aims to align employee behavior with company values. For more information as to how Working Values can narrow your company's Behavior-Standards Gap, visit www.workingvalues.com or contact cgebler@workingvalues.com. For news on ethics in the workplace, visit SmartPros Ethics & Compliance.