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Employee Ethics – The New Source of Competitive Advantage

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.

Introduction

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 and 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

  1. Require Employees to Take Vacation
  2. Train Managers and Employees to Spot Fraud
  3. Implement Internal Control Systems
  4. Create a System of Internal Audits
  5. Conduct Background Checks on New Employees
  6. Invest in Business Crime Insurance e.g. Fidelity bonds
  7. Encourage anonymous whistle-blowing
  8. 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.

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