Can You Trust Your People Too Much?

by George Hedley


 

Have you ever had the day from hell? Well, I just completed 100 of the worst days in 25 years of owning my construction business. I recently hired a new controller and as he began to take over the accounting department, he discovered some unusual situations. For example, the company cell phone bill included four phones he couldn't identify. He learned three accounting employees and the old controller's 12 year old daughter had been issued company cell phones without authorization. This was just the beginning!

 

Some People Are Sneaky!

It is amazing how sneaky, creative, and unethical people can be. My new controller continued to discover many more illegal, immoral, and improper practices had occurred on an ongoing basis. One of my key company officers, who I trusted like a brother, was found having the company pay for personal items by job charging his credit card bill to project cost codes. As he approved project invoices, and signed company checks, he paid for his lifestyle at the company's expense without detection. We also discovered payments occurred during the remodel of a key 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 previous controller had used the automatic payroll deposit feature in our accounting software to advance extra money on her paycheck. The human resource records were lacking proper documentation for vacation time taken. When certain people were on vacation, no vacation time was being noted in their records. Some office staff were being paid forty hours when they regularly left early or took personal time off. One bookkeeper was found using our company postage meter to run her mail order business.

 

How much should you trust?

I had prided myself in building a company where people were our number one asset. My motto was to build a great place to work. I delegated everything and trusted 100%. This was a mistake. Several employees were aware of or involved in some of the improper behaviors, but didn't act or report it. In the end only one person was terminated, but eight people resigned who were involved or had condoned the situation. Not only did this cost us in excess of $200,000, we lost a company president, employees, momentum, morale, and a small part of our impeccable reputation with our customers and subcontractors.

 

Do you have a clue?

As the owner and leader of our company, I set the vision, values, and goals, and then trust the key management people to implement and make it happen. I used to delegate 100% of the day-to-day business operations including signing checks, approving contracts, insurance terms, employee benefits, and compensation packages. I thought I had people who were trusted. We had a profit sharing program, open book policy, and a team approach to overall company management. But, it was obvious I didn't see what was happening right in front of me. Some of these clues I should have seen:

- people remodeling homes & building pools

- new expensive cars, trucks, boats, or R.V.'s

- 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 less hours

- personal stress not related to work

- managers not leading by example

 

To avoid this from happening to you, implement the following:

1. Never issue company credit cards or cell phones

2. Send bank statements to the owner's home

3. Owner sign all prime contracts

4. Two signatures or approvals on:

- all checks

- subcontracts, purchase orders, & change orders

- reimbursable expense accounts

- overtime and vacation requests

- payroll preparation, approval, & deposit

- project payables and job costs

5. Personnel records must be perfect

6. Follow your employee manual to the letter

7. No exceptions to the labor code or laws

8. No special exceptions for long time employees

9. Trust your people, but follow your rules

 

Today I still want to trust my people, but I have installed additional controls. A few simple checks and balances could have avoided lots of problems, disappointment, stress, and financial loss. Don't wait until it's too late to implement some of these safeguards.

 

 

ABOUT THE AUTHOR

George Hedley is the best-selling author of "Get Your Business to Work!" As a professional speaker and business coach, he helps entrepreneurs and business owners build profitable companies. E-mail: gh@hardhatpresentations.com to request your free copy of "Everything Contractors Know About Making A Profit!" or signup for his e-newsletter. To hire George to speak , attend his 'Profit-Builder Circle' academy or find out how he can help your company grow, call 800-851-8553 or visit www.hardhatpresentations.com

George Hedley   HARDHAT Presentations

3300 Irvine Avenue #135
Newport Beach, CA 92660
Phone (949) 852-2005
   Fax (949) 852-3002

Email: gh@hardhatpresentations.com     website: www.hardhatpresentations.com

 

 


George Hedley owns a $75 million construction and development company and Hardhat Presentations.  He speaks to companies on building profitable businesses, leadership, and loyal customers.  He holds 3-day in-depth "Profit-Builder Circles" open to construction company owners in an interactive roundtable format every 3 months.  His "Profit-Builder System" includes proven tools to always make a profit, build equity, create wealth, win profitable jobs, motivate your people, and enjoy the benefits of owning a profitable company.