Introduction
Fraud
costs American businesses, large and small, a ton of money each year.
In fact, according to the McGladrey report The Threat Within: Employee
Fraud Detection and Prevention, fraud took a huge toll on American
businesses, to the tune of nearly $1 trillion dollars, last year. The
problem only seems to be worsening with the volatility of the
economy. That’s why it’s so important to focus on prevention
rather than trying to recover losses after the fact.
In
Nigeria where data and statistics are scarce one can safely assume
that Nigerian business are losing much more than that. In the last
couple of years we have seen departments, units and entire businesses
close down due to employee fraud and unethical behaviour. A few cases
can illustrate this. A hospital had to close its laboratory because
the laboratory technicians were no longer doing the hospitals work
but were taking in 'unrecorded' work from other hospitals for a fee
that the staff privately pocketed. Patients of the hospital who were
used to a 3 day return appointment were now having to wait 3 weeks,
meanwhile the lab was always stocked out of required materials
previously purchased, and still unused, as far as the records showed.
The
hospital could not cope and decided to close the laboratory. It laid
off all the workers and now send their work to laboratories abroad.
You
may have heard of workers diverting their employers goods in
containers, diverting tankers of petroleum products or selling the
employers goods worth hundreds of thousands of Naira without issuing
official receipts. We have even heard of a case where all the fish in
a fish farm mysteriously disappeared just before harvest. The list of
such worker related fraudulent behaviour is endless. The Great
American Insurance group who provide business crime Insurance
coverage in the US, say that “Employee
fraud costs companies a surprisingly large percentage of their gross
revenues. With some employee fraud schemes spanning years, the
results can be devastating to a company's operations and its
financial results.”
Small
businesses are even more vulnerable to employee theft because they
lack the level of internal control and security that larger
businesses often have in place. For these reasons, you need to work
now to come up with an effective method for deterring employee fraud
and theft.
Problem
Statement
In
the past we could rely on young people to learn ethics at home,
re-enforced by schools and canonized by churches, mosques and
religious institutions. This is no longer the case. Little Johnny the
son of a reverend pastor and a teacher mother, 'hears' his father
preach that stealing is a sin. He then 'sees' the same father dip his
hands into the offering bucket. He listens to his mother teach that
stealing is wrong but then he sees her bring home exercise books and
pencils form the school for his private use at home. Johnny gets to
university and his lecturers are not in class because they are busy
running their private businesses during school hours. In fact some of
his lecturers engage him to run errands for their business when his
class should be holding. He obliges so that he can get a pass mark
when exams for which they are not being prepared, come up, as they
must.
Having
passed through these experiences the grown up John graduates and
because of his high IQ he passes your recruitment test and is offered
a job. John who is about to resume at your company is the same person
that switches on his TV set at home to see that some leader;
political, corporate, religious or social has just been indicted for
committing economic crimes. While the case is still on, he sees this
same person receive national awards and traditional titles in
recognition of his 'contributions' to his community and nation.
This
is the practical lesson in 'ethics' that John has learned.
Previous
Options
In many
organizations, 'on-boarding' or 'induction' is all about getting the
new employee to learn the ropes as fast as possible. The company
trusts that their list of do's and don'ts as contained in the staff
handbook is sufficient to guide the new employee as far as what is
acceptable behaviour to the organisation is concerned. To make
assurance doubly sure the new employee is asked to sign a copy of the
staff handbook to acknowledge that he has read and understood the
contents of the handbook. The company is satisfied that this aspect
of his induction has been taken care of and they now concentrate on
the 'business' of doing business itself.
Clement
Ashley Consulting's Solution
Require
Employees to Take Vacation
Train
Managers and Employees to Spot Fraud
Implement
Internal Control Systems
Create
a System of Internal Audits
Conduct
Background Checks on New Employees
Invest
in Business Crime Insurance e.g. Fidelity bonds
Encourage
anonymous whistle-blowing
Train
Employees on Employee Work Ethics and Responsibility
Clement
Ashley Consulting recommends that as part of induction, new personnel
be taken through a course on 'employee work ethics and employee
responsibility' in the context of the organizations operations.
Having facilitated this kind of training before, we are sometimes
shocked during pre-case quizzes at what employees ignorantly defend
as acceptable behaviour, when practical case studies are being handled
in workshops and training classes. These practical case studies give
the employer the opportunity to work through myths and wrong beliefs
and replace wrong values with the right ones.
We
believe that this should not be a one-off exercise. At least once
every two years all staff should have a refresher on workplace ethics
with an emphasis on the discussion of industry specific case studies
to reveal any new mendacious thoughts and beliefs, and nip them in the
bud.
When
training on work ethics for staff is combined with adequate internal
controls, segregation of duties, independent audit and examination as
well as a well designed reward and compensation scheme that is tied
to performance management and appraisals, the company stands to attain
competitive advantage over its peers who do not properly address the
issue of employee work ethics.
Benefit 1
Using
this approach training is focused is on corporate goals and
objectives, providing the best possible environment for achieving
them.
Benefit 2
Using
this approach you will be able to identify any wrong interpretations
of what is ethical and hence prevent unethical behaviour
Benefit 3
Using
this approach you are able to build a core of ethical staff who can
resist a 'renegade thinker'. It is well known fact that collusion can
override the best of controls. Wide spread training on ethics for all
staff, reduces the risk of collusion.
Benefit
4
Using
this approach you are able to reduce operational losses due to
employee related unethical activities. Training on employee work
ethics pays for itself many times over in reduced operational losses.
Summary
Training
your staff on employee work ethics and employee responsibility is
something that can give your organisation competitive advantage. As
everyone knows when something becomes scarce it becomes a source of
value. With widespread corruption and unethical behaviour as the
order of the day. Your organisation will reap enormous benefits form
having an ethical workforce.
