The twisted logic of the above proverb is too–often employed by fraudulent individuals to explain their reprehensible behaviour, and if you are in business, I am sure you have been exposed to such behaviour and its justifications. You have either been victim to villainous behaviour, known someone who has been victimized, or have done some disgraceful thing of which you never thought yourself capable. It’s an ugly part of the human condition—if you don’t believe me, you can look it up in a book you may have heard of called The Bible.
Individuals under extreme pressure, particularly under financial pressure, will do almost anything to fix their immediate problem, often without regard for long–term consequences. Individuals in such a situation are like addicts looking for a fix—there is no hurdle too high to dissuade them from their destructive behavior. Unfortunately, those “individuals under pressure” could be part of your organization, and you could be the victim of their desperate fraud. So how can you protect yourself from the inevitable misconduct of employees you trust?
There is no simple answer to that question, but I do have some tips that will help to minimize your risk. Tip number one: Complacency can destroy your business. Business owners often continue to employ under performing individuals because it appears costly to replace them. Of course there’s the time to interview new hires, training, a new employee on the benefit plan, the uncertainty of a new individual in the company, and many other costs associated with a new employee. But more important than these costs is the truth that, if an individual in your organization is dragging down the company, it is never to soon to excise that individual.
Employees are often more aware than owners of such problematic individuals, as they likely have more day–to–day contact with other employees than you do. But ratting out a colleague is rarely a good strategy for fostering office harmony, so they often just endure bad behaviour on the part of co–workers. As an employer, you must be attuned to employee performance and enforce benchmarks. Be aware that poor performance is often the first indicator of a greater problem.
Tip number two: Lock the cookie jar. Implement basic internal controls which will protect your company from waste, fraud, and inefficiency. Generally, the simplest controls are the best. They are easy to understand, easy to implement, easy to comply with, and most important, easy to monitor.
Give some thought to your business and the rules that are circumvented by your staff under the banner of expediency. Then think about how much your staff’s expediency is costing you. Each time a transaction is made into special case, it inevitably needs more time, more attention, more record keeping, and is inevitably susceptible to error or worse. These special transactions may mask improprieties that, left unchecked, will allow a fraudster to rob you.
Tip number three: Lack of respect is fraud’s midwife. If your employees don’t respect you as the business owner, and show disdain for you to your face or behind your back, you’re really in trouble. Remember that Spanish proverb. In their eyes, it’s your fault! You left the cookie jar unlocked and conveniently situated, so it was inevitable that they should dip into it. And when you didn’t notice a few cookies were missing, well that was tacit permission for them to dip in some more.
See how lack of respect can quickly spiral into a disaster? If you have an employee who consistently exhibits disrespect, my advice is to lay them off now. Such a layoff serves many purposes, not the least of which is increasing your remaining employees’ respect for your decisive action.
As with any advice, the tips above only have value if you practice them. Often, just a bit of guidance, like lines on the highway, is enough to keep employees moving in the right direction. Don’t give your employees the opportunity to wrong you—put a lock on the cookie jar.
Sid Karmazyn is a Chartered Accountant, author and speaker, who lives and works in York Region.
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