SUMMARY
Internal ombudsman, also known in many companies as “dial fraud”, “dial complaint”, “ethical channel”, “hot line” etc. is where collaborators or any public related to the company report or communicate actions contrary to its conduct code or any other name given to the rules surrounding your business, it can be further exploited as a valuable tool for performance improvement of organizational processes ( or “business”).
That’s because it is a rich data source that, when well worked can turn into input, to (of course) detection actions, prevention and fraud combating, procedures change, testing, review and/or modification of internal controls, etc., as well as – on a much larger scale – initiate significant changes on excellence level of a company processes. With a better generation and formatting of inputs, better level, there will be automatically better subsidies for the organization’s processes may be born or be refurbished “planned carefully”, thinking on the elimination of risks of previous processes, with proper controls already drawn, monitoring reports provided and structured according to user’s and/or owner of the process needs.
Being these processes from “personnel management” (hiring, promotion and termination), for example, once all the “historical basis” of a manager, his area and processes managed can be read and interpreted, in the case of quotes or not on the Ombudsman, to cases of operations, such as “product delivery” in customer homes, for example, since may arise complaints “of how a product is left in a client home”, just to name a few.
However, success stories will occur only “when” and “if”: 1) the Ombudsman become considered by senior management (unlike “source of problems accumulation”, also as a strategic tool for continuous self-assessment of its processes; 2) the leader of Ombudsman structure is able to show to senior management the best information for the " project processes" which can be obtained in modeling and evaluation of accumulated historical data and generate up revisions or restructuring of these, importing that they are designed so mechanisms to eliminate the same risks are already consider; 3) the company’s project management structure is near and interact with the ombudsman.
INTRODUCTION
Several studies, books and theories theses that affirm the Ombudsman is one of the most important and/or major fraud detection way and losses reducing (or, depending on point of view or treated, one of the best) are frequent and common. This is almost "common sense" within the corporate world, regardless some organizations dispose or not these units and for subject matter experts.
Figure 1 indicates this clearly, showing that it is even one of the ways most commonly used by employees, customers and other to report situations that go beyond the organizational normality and represent, in most cases, fraud risks, deviations, etc., summarizing, potential losses.
It is understood by this that one of the main structure missions is being fulfilled properly. The Ombudsman, in closest “Hot Line” concept, is even designed/implemented for this. To receive collaborators information about processes failures, eventual fraud, deviation, theft, misconduct, problems related to siege and so on. It is primarily for this that many companies implant. In some cases, only to this or to attend needs related to governance structure, laws, regulations and so on. Included in this relationship of possible “motivators” are norms attending, SOX, for example, requirements or administrative council definitions etc.
The question, however this is not this. This can and should be seen by a more “positive” side, as an “advantage”, after all, at least organizations are bothering to detect, prevent and treat your losses and possible fraud. This is documented and proven in several studies.
Figure 2, below, shows how companies advanced in Ombudsman implementation from 2010 to 2012:
The “problem” is how much can fail to avail or, using a popular corporate jargon nowadays, “optimize” this structure set up in the company and how much more it could contribute to strengthen and/or continually rethink business processes.
If the structure is limited only to this – detect, analyze and/or, in some cases, merely pass on to auditing, cases of “threats” of defrauding the company’s patrimony, potential fraud etc. – this unit will be perpetuated so much “below its potential”, ensuring the employment of some professionals for a long time, but never contributing the "maximum" that could for the organization where acts, missing daily the opportunity to “add ‘much more’ value”, using one more jargon of the corporate world, to the institution, and its processes, continuous and consistent manner.
The main purpose of this article is not to criticize, try to repair or seek to give lessons of “best ombudsmen establishment” to interested reader, but share information obtained in a practical way, which could facilitate the achievement of variations or possible additions to the scope of the ombudsman, its working papers, previously mentioned, contributing it can be even more useful every day for planning, establishment and continuous development and pursuit or excellence of several companies business processes.
It is not expected that corporations review, rethink and restructure all its Ombudsman units, merely by reading this simple article, yet even because apparently, all models have worked well until today, contributing with risks reduction, as seen before, but to understand that, if they pay more appropriate attention to these units, daily with “other looks”, may even gain competitive advantage, improving critical processes, perhaps so that they have not yet become aware or imagined.
Without showy formulas, without resorting to countless studies, this will occur in a simple way: by sharing five important and practical points, which were determinant so the unit was established, remain, grow and develop, significantly contributing (even!) for company’s critical business processes to be reviewed, rethought, redesigned, re-engineered and many other “res”, in a positively decisive way.
In summary, what’s meant by that is this article affirmatives are backed in author’s practical knowledge who was responsible for the conception, development, project, implementation, management and improvement of internal ombudsman model established time ago in one of the largest national corporations, and was part of the Planning manager group, Operational Control and MIS (Management Information System) of large financial group, and, having formatted the appropriate staff, some incentives – to some extent – of organization senior management, implemented an ombudsman that resulted in what is this article “model” and “motivation”. It did not mean only gains and significant development for the company’s processes, but generated even prizes for the organization at the time.
WHAT IS AT STAKE? WHY IMPROVE MY OMBUDSMAN?
With or without Ombudsman, organizations, regardless their sizes, are always subject to numerous types of risks, which many of them, mitigate, transfer, accept and/or manage its way. Among these, credit risk, image risks and various other. One of those which concern executives are operational risks. They can materialize in the form of stops in activities, decreased production rate, organization asset degradation and more. Another feared risk is fraud.
Accentuating, diversifying and sophisticated up year on year, fraud scares many organizations. The study “REPORT TO THE NATIONS ON OCCUPATIONAL FRAUD AN D ABUSE – 2012 GLOBAL FRAUD STUDY” – points out that executives in general believe that on average have losses in the order of 5% in general terms, related to fraud and defrauding.
To understand what this might mean, is just you, reader, apply this index on your company’s sales gross value and conclude yourself what may mean or what is meant by the ombudsman importance. So far, very well. As said before, if well deployed, it can help greatly reduce this rateand will comply “properly” its role.
And what else? Only decrease risk and fraud is enough for the structure? Why not use data generated by Ombudsman, the story it has accumulated in your organization, data which lead to behavior maps, what was recorded and understood of habits and customs of fraudsters, defaulters, very bad, regular, good and/or excellent administrators, and, even more important, and this article study object, of business processes knowledge? Would that not be something like a “VOP” (“Voice of Process”) “adapted” and materialized?
STRENGTHENING OMBUDSMAN. BOOSTING BUSINESS PROCESSES
Might be that most companies has a fantastic ombudsman. It may have helped prevent many problems, subsidized several high-level decisions and even “three souls watching” have been dismissed because the unit material is “determinant” for this. Or yet, on the other hand, it goes “bothering” the “board” with full of problems panels that never occurred, allegations that were never proven.
At least it is there, some will say, and is helping “a lot” the organization with detection/preventive controls. Main characters are employed and there is a “prevention” unity. It may be that the ombudsman structure way is drawn and paved. It can stabilize or develop. Regress or expand. It depends on what you want for it, passing or not by ombudsman. Experience taught you can go further. Clearly, you can do more.
The company can develop, develop its operations, procedures, people and mainly, its processes. Pragmatically, a well-established ombudsman, can greatly contribute to business processes improvement in many ways.
How to do this is the question. It’s not an impossible mission, not even so difficult, however it’s not simpleton too. Requires the board “political will” and disposition and know how of who manages the structure. More of both, always. Less “Hercules efforts” of only one of these sides. Actions, to some extent (for who know what is talking about), simple. Then, maybe, if this occurs, to achieve this article has already contributed minimally. But it is not only what is expected. It’s needed to know what are the “tips” or knowledge acquired “practical” mentioned previously.
It is to emphasize that actions presented here, known and proven worked very right with ombudsman established and mentioned in a large national group. The structure remains until today, properly established, gather many rewards of a good concept and design, built on several benchmarks, of various segments (some different of that where was established the ombudsman in question) and previous experience.
The short list following, shows, in bold, five actions that were (adopted truly) that can serve many interested as an assist input on getting this “supercharged”ombudsman. Understand these means and/or methods, not as definitive or as something that can be solution for all, but as tips (or “shortcuts”) to enable the implementation and strengthen the structure. Everything, as said before, based on practical background, backed on real results presented in semiannual, annual and triennial books. These, analyzed over the years and that supported the senior management on the need to review, rethink or (re)plan critical processes of the company’s business.
Let’s go to them:
1. Extreme care with reports treatment presented in Ombudsman.
Reports left by the organization collaborators in the ombudsman must have appropriate treatment, if possible, considering criteria similar to those of the Comptroller, for example. It should consider timing, relevance, integrity, materiality and others. This will involve or require:
a) Establishment of excellent "tree" and reports classification rules
Proper reports classification in “types” or “topics” and their proper “deployments” or “sub topics” (what can be called “classification tree”) formatted for a “petit committee” with representative people top management of necessary departments, should be established primarily so that, posteriorly, it will be able to group/list so everyone involved with receiving, targeting, processing, handling or information use knows – in entire organization – which “treats each subject.”;
This will imply that, next, these data could be linked properly and, after generating “critical mass”, may become reports that lead to conclusions or appropriate root causes, reducing the possibility of “kicks”, “speculations” or “inferences” about the issues in question, substantially.
Moreover, as important as the establishment of these rules structure and classification tree is the update of this, that is, the structure should not be “tight”. As time passes and more data are accumulated, and more knowledge, must suffer update to adequately serve the company and subsidizes it more current, reliable and accurate information possible. Yet, this rule will be often associated and/or dependent on the posterior (b).
b) Establishing appropriate rules for data storage and handling
Fundamental for one to follow the history “of that kind of event” over time, trends, event behavior by region, by site, by post, by process, activity etc. It is how to monitor determined subject based on what is “heard” or not on what was or was not registered.
It’s meant by that, that must be kept (appropriately, within the established rules), even incomplete data/information. In the future, they may be supplemented, associated and/or crossed with other information and “close some circuit” in order to bring/form any better or higher information.
2. Excellent data modeling, using appropriate BI cube.
All data continuously generated in ombudsman should be associated with related topics, areas, divisions, related positions, according to the previously mentioned tree, as seen before.
This will be the “input” for generating “live panels” indicators of “trends”, “performance” whether units, positions and, clear and mainly, processes. There are with this, maps identifying which processes has more compliance fragility, vulnerability, facility being defrauded and so on.
In addition, modeling will bring a character response performance monitoring, when mentioned in ombudsman, and consequently, the process(es) where the problem correction (disposition), corrective and/or preventive action are slower/more difficult, for example.
Still can be generated exquisite information for Process Improvement unit, along with Projects, consider, when elaborating operational planning, the activities annual planning establishment and tasks book.
For all this to materialize, it is vital that information generation system is driven by BI (Business Intelligence) tools. Without a well formatted information “cube”, based on a classification tree and data maintenance rules (as mentioned before), the task becomes more difficult. It is essential to "invest" in speed and quality assurance formatting the company’s appropriate information.
3. Enforcing Ombudsman condition as other units (mainly IT) business client and also input source for process improvement
In a practical case, once the ombudsman proposed, and established, a system where all warning, suspension, termination and other events related to collaborators’ behavior management and monitoring was recorded and maintained automatically, with appropriate profiles rules and access/use restrictions. Thus, the shutdown process has become more rational, taking into account also, “quantitative” aspects that were never considered. It became also less “emotional”, lighting, and exposed to more looks than just the manager in question. “Personal” aspects for shutdown, suspension, etc. become more easily identified and more visible to People Management Process Owner, the HR. Policies formatting has become more refined, considering aspects previously unknown.
The collaborator historic began to be analyzed more precisely, wider. Besides that, another smart defense mechanism appeared, for those who contacted Ombudsman. It (Ombudsman) took into account different aspects, in order to identify even if the person who reported an error was not trying to “cover up” or “transfer” his guilt in unfit acts for others.
Ombudsman could also contribute with information to management, in cases where a collaborator that had “reported” something to ombudsman, suffered damage or undue punishment, without the relevance assessments be completed.
Were created then, detection mechanisms, protection and company interaction, where Ombudsman could change the organization procedural structure in a positive way. A “repository” of “behavioral statistics” that could be “read” and seen whenever necessary, by concerned parties.
4. Consideration of ombudsman as guardian agent of company’s conduct code of and key piece in management and operating policies development
In direct mode, the experience and practice have shown that “designate” the Ombudsman (even though it was implanted after) as main guardian and company’s “major rules” development source (conduct code and related) and important character to its development is an excellent deal. Process improvement comes as a bonus.
Some processes improvements real examples that occurred as a result of improved code of conduct, which generated better controls, better policies and, ultimately, better processes:
a) Establishment of Company’s Receiving Gifts Policy.
Generated threshold values establishment for receiving suppliers’ gifts, culminated with the need for better controls, brought process visibility, resulting purchasing policy, delivery and revised sales.
b) Collaborators transfer Policy settlement among states.
Like the previous case, generated threshold values establishment for collaborator rental payment transferred to other states, also led to the need for better controls, brought greater visibility to process costs, consequential revised employee transfer policies.
In this case, were rethought the transfer criteria, that were considered to be mainly “forward sales”, with a “feasibility study”, depending on the sales potential that this exchange could generate, based on performance history reviewer. The transfer process was reconfigured.
c) System Structuring Withdrawal/Merchandise Delivery in Stores
A project, motivated by fraud reports in goods withdrawal step in the store, by customer, an automated confirmation mechanism of purchase order, (reading a receipt with barcode), was implemented. Thus, was earned the certainty that goods delivered to customer was “that” and “only” that, never different or duplicated front of what was actually purchased.
5. Consideration of ombudsman as a member agent and/or process evaluation and review committees establisher
The Ombudsman, in a structured organization, really worried about processes excellence pursuit, should have leading roles in charge of meetings related to a poor performance in compliance matters and adherence to standards and rules (this may indicate a poor environment rules establishment that support processes) and deviations at processes goals.
This is because it can be information sponsor that lead to identify causes for such occurrences, as to source of information that can be added to its database and process intelligence and, therefore, anticipating problems, trends, risks and related.
What’s meant by that is, if ombudsman participate in both training and development (promoting these initiatives) of company’s business periodic evaluation committees of policies, as in actual meetings, will contribute absurdly (and automatically) to strengthen organizational processes.
What can be gained from it?
- Built policies considering historical data of cataloged events in unit;
- Adherence to these policies control occurring easier way, once, if the unit participates in political formatting, know in advance the possible vulnerable points, generating greater focus on adherence control and compliance;
- Better planned controls, which “talk” to each other.
CONCLUDING, AN EVOLVED OMBUDSMAN CAN BE SYNONYM OF BEST PROCESSES AND EVEN “BEST IN CLASS”
Not always a formula applied in an organization, the whole professional experience and/or knowledge acquired can be fully applicable to other persons, organizations. But in some cases, depending on how data, formulas, experiences are used, many organizations avail themselves of mistakes and successes of other institutions, to gain ground, gain speed in their improvement projects and operations processes. This is this author’s text desire. Share some small success experiences, acquired throughout his career, with those seeking to make their best processes through best tools, techniques and/or possible structures
There is no partisanship here to the maxim “the end justifies the means” (“so what matters is that the processes are ‘improved’ and no matter how?”). Matter that the processes are improved to the level next of excellence, always, but making use of tools, duly appropriate techniques and structures. This means EFFECTIVENESS, referring to “right to do the right thing” and this includes having appropriate sponsors, supporters on several fronts, the key areas properly distributed on the board, crystal clear definition of roles and authority by senior management, among many other means.
Over the years, more than seventeen dedicated to improving processes and operations, structures, areas and/or organizations, this article author met, used and made use of diverse knowledge and techniques accumulated during this trajectory, whether related to Six Sigma in processes review, Lean, Kaizen and several others, but all should be added and/or used properly, in the right amount, at the right organization, at the right time.
By the time it was necessary to understand how were the process structure and the company’s management, the organization climate, communication and processing information that circulated in the company (too “decentralized” in certain aspects and too “concentrated”/”restricted” in other), since the mission was to “improve operations”, the question arose: “Where to start?”. By the simple drawing of a VAC (Value Added Chain)?
Mapping, documenting and “optimizing” all, the whole organization?
Hence, the best technique, was the establishment of an ombudsman unit. The VOC (Voice of Process) was implanted, not known whether in its “state of art”, if in accordance with the best methods, or even in its purest essence, but in the end the processes were, through a giant “stethoscope”, heard and duly improved.
As a basis for this statement, see Table 1, showing mapped and reviewed processes before ombudsman unit implementation and thereafter, in organization in question.
[table id=2 /]
It is clearly seen that after 2007, the number of mapped processes, reviewed, revisited, rethought and improved increases measurably. The organization begins to “see” better the need to rethink their controls, review processes, establish projects unit to order projects and manage them properly. Processes controls will be then impacted, positively. Will be noted. And this alone, is already a great gain.
It’s meant by that the ombudsman was – proven – one of the most crucial tools for process improvement and there is no doubt. It is a conclusion as easy to reach as walking or talking. This article hopes have facilitated this affirmative search to all readers too.
FIGURES, TABLES AND ILLUSTRATIONS.
Figure 1: Impact of Hotlines.
Figure 2: Frequency of Anti Fraud Controls.
Figure 3: Summary of Findings – CFA.
Table 1: The processes evolution of certain company after ombudsman implementation.
REFERENCES.
REPORT TO THE NATIONS ON OCCUPATIONAL FRAUD AND ABUSE. GLOBALFRAUD STUDY. ACFE – Association of Certified Fraud Examiners. 2012.
