By George Hedley
Have you ever had the worst day possible? One of my construction company coaching clients recently told me a long and winding tale of employee theft and deception too horrible to believe. He had recently hired a new controller. As the controller began to take over the accounting department, he discovered some unusual situations. For starters, the company cell phone bill included three phones he couldn’t identify. He called them and found out the office manager’s children had company cell phones without authorization. This was just the beginning!
Some People Are Sneaky!
It’s amazing how sneaky, creative and unethical people can be. The new controller continued to discover that many more illegal, immoral and improper practices had been occurring on an ongoing basis. One of the key project managers, who had been there for 20 years, was having the company pay for his personal items by job-charging credit card expenses to project cost codes. The controller also discovered excessive job costs were incurred during the remodel of a project manager’s home. He was approving invoices and job-charging labor, materials and subcontractors who worked on his home to company construction projects he was responsible for.
The controller then found out the payroll manager had used the automatic payroll deposit feature in the accounting software to advance extra money on her paycheck. The human resource records were lacking proper documentation for vacation time taken and not charged to her account. Additionally, when certain people were on vacation, no vacation time was being noted in their employee records. And some office staff were being paid 40 hours when they regularly left early or took personal time off. One bookkeeper was even found using the company postage meter to run her mail-order eBay business. To make matters worse, the controller discovered that many field foremen were using company gas cards to fill up their personal vehicles on a regular basis.
How Much Should You Trust?
The owner had prided himself in building a company where people were the number-one asset. His motto was to build a great place to work, and therefore he tried to delegate and trust key employees 100%. This was obviously a mistake without having proper controls in place. Numerous employees were aware of the rampant inappropriate actions but continued to condone the behaviors, and didn’t report them. Discovering this long-term problem was a shock to him — his trust in people was shattered, and many people were terminated as a result.
Do You Have a Clue?
As the owner and leader of your company, you set the vision, core values and performance goals, and then trust managers and employees to implement and make them happen. Too often, busy business owners and managers don’t want to address problems and deal with the procedures required to run projects and manage people. They therefore delegate or ignore important day-to-day management roles such as making people accountable, addressing poor performance, stealing, or following company policies and rules without proper procedures or checks and balances in place. When you trust too much, greed and entitlement can creep into the culture of companies and start to become the norm.
Some clues to watch for include:
- Employees remodeling homes and building pools.
- New, expensive cars, trucks, boats or RVs.
- Marriage difficulties and separations.
- New marriages with big weddings.
- New family pressures or children starting college.
- Staff buying new or bigger homes.
- Plastic surgery or makeovers.
- People leaving work early or working fewer hours.
- Personal stress not related to work.
- Managers not leading by example.
To prevent this from happening to your company, consider implementing the following procedures:
- Install GPS on every company vehicle.
- Track and verify all company credit card charges. Verify all charges and look at the GPS records to see where the charges occurred and what time of day.
- Don’t always issue company credit cards or cell phones. If possible, have employees use their own cards and reimburse them within 24 hours for approved charges.
- Send all bank statements to the owner’s home. Review all cancelled checks, automatic payments, transfers and deposits.
- Owner must sign all prime contracts, subcontracts and change orders.
- If the owner can’t sign, two signatures or approvals required on all checks, subcontracts, purchase orders, change orders, reimbursable expense accounts, overtime, vacation requests, payroll preparation, approvals, deposits, project payables and job costs.
- Personnel records must be perfect. Use cell phone time card systems to track location of work, start time, and time finished every day. Leaving early and arriving late must be deducted from pay.
- Follow your employee manual to the letter. No exceptions even for family or long-time employees.
- No exceptions to the labor code or laws.
- No special exceptions for long-time employees, relatives, special circumstances, etc.
- Review all job cost payables, credit card invoices, and company accounts every month.
- Trust your people, but follow your rules!
Everyone wants to trust their employees, but you must have controls to keep honest people honest. A few simple checks and balances will avoid lots of problems, disappointment, stress and financial loss. Don’t wait until it’s too late to implement safeguards.
As a professional construction BIZCOACH and popular industry speaker, George Hedley helps contractors increase profits, grow and get their companies to work! He is the best-selling author of “Get Your Construction Business to Grow & Profit!” available at his online bookstore at www.HardhatPresentations.com. E-mail GH@HardhatPresentations.com to sign-up for his free e-newsletter, join a peer mastermind BIZGROUP, implement the BIZ-BUILDER BLUEPRINT, or get a discount for online courses at www.HardhatBizSchool.com.
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