Monday, January 14, 2008
Are they enough?
Recently I was approached to prepare a program for CEOs. One of the things they want to know is how to avoid embezzlement. It seems that many of them have experienced employee theft. How can you avoid this dilemma?
The quick answer, especially from folks like me with a CPA background, is financial controls; putting controls into place like:
- separation of duties so that no one person has access to all aspects of a given transaction
- mandated vacations
- random, periodic reviews of various accounting records
- monitoring trends in customer profitability, vendor utilization
Unfortunately, there are two disadvantages to financial controls. First, they're after the fact. They will only help you identify theft that's already occurred. Second, as with any system, there are always ways around the controls. Is there an alternative?
I don't know that I'd call it an alternative. Good financial controls make is more difficult for people who might be tempted to steal to act on that temptation. There is another approach, one that allows CEOs to get ahead of the curve.
The approach is outlined in Ken Blanchard's book, Raving Fans. Create an environment in which your employees have a chance to:
- shine, to feel that they are a valued contributor to your company's success
- enjoy the satisfaction and recognition of a job well done
- enjoy higher levels of compensation than is traditional for your industry
It's counter-intuitive, but the reason many employees steal from their employers (without remorse) is that they feel that they're simply balancing the scales for some perceived slight. Get ahead of the curve, create an environment that supports high morale; then monitor employee morale and make adjustments quickly when you see it declining. That's how you minimize the threat of theft in your company.
If you have practices that have helped you avoid employee theft, please share them with other Invaluable Leaders by posting your comments.
3 Comments:
Great point, Dale, about making your employees feel they are ahead of the game. I disagree a bit about all the financial controls being after the fact.... for example, when you require two signatures for a check over $x, you prevent one person from writing a huge check.
One of the things we always found when we audited the large companies was that they used technology really well to segregate the functions that individual employees had access to.... it's a little tougher sometimes for the smaller companies but definitely worth the time to set up.
Julie,
Great points! Thank you.
For a small company the best protection is awareness. If you are on top of income and expense, large scale abuse is difficult.
Dave,
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