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Mon, April 1, 2013
Robbing Peter to Pay Paul
The Detroit Free Press ran an article on April 28, 2011: “When All Feel Cheated, Who’ll Play Fair?” written by Brian Dickerson. The article begins: “Social scientists who study dishonesty have observed that people who cheat often harbor a deep-seated conviction that they themselves have been cheated. Dr. Anjan Chatterjee, a neurologist at the University of Pennsylvania who has conducted research into the use of prescription drugs to boost intellectual performance, says cheating is easier to justify when you cast yourself as the victim of some kind of unfairness: ‘Then it becomes a matter of evening the score,’ he explained. ‘You're not cheating; you're restoring fairness.’”

Similarly, Richard Hollinger, Professor of Criminology at University of Florida recently wrote: “Based upon numerous research studies, an economic downturn is precisely the time that loss prevention managers need to be most vigilant for dishonesty. These declining conditions foster an atmosphere in which even those employees still working can be easily tempted into dishonesty. The reason is based upon the social-psychological principles found in ‘equity theory.’ This theory posits that when inequitable situations arise, individuals take immediate action to restore equity in their lives. When retail sales associates feel unfairly treated and poorly compensated, they will take action to rectify the situation by working less productively, quitting or stealing from the workplace.”

It may be hard for most company owners and managers to fathom how employees who steal think of themselves as the victims but in my 15 years of specialized counseling with theft offenders, this is often how they think and feel. For most, their grievances weren’t so much with their employers as with their families of origin, significant others, or early perpetrators/abusers. In a passive-aggressive manner, they’d take their “revenge” at work. This displaced anger and stress happens regularly in life. How many times do we yell at our spouses or kids after a tough day on the job?

More and more, however, our feelings of unfairness, victimization, and insecurity are global. I sounded the alarm about this in 2005 in my book “Biting The Hand That Feeds: The Employee Theft Epidemic” by noting these workplace trends: layoffs, downsizing, outsourcing, decreases in salary/benefits, and dramatic increases in executive compensation.  Nowadays, many employees don’t even see theft as theft and, if they do, they simply feel: “they owe me!”
 
What’s really making people cynical now is the latest corporate bailout of the banks and investment firms. If this wasn’t grand-scale theft and fraud, what is? And who was punished or held accountable? Nobody; if anything, the culprits continue to reap bonuses. Such widespread fraud poisons the psyche of the workforce.

By comparison, the Enron era frauds at least resulted in hundreds of prosecutions and prison terms. The U.S. Senate Banking & Finance Committee, led by recently elected consumer watchdog Elizabeth Warren (D-Mass), recently held hearings (albeit belatedly) into the 2008 financial meltdown. Frustrated that not one high ranking principal from any bank or financial institution has been prosecuted, Senator Warren was quoted as saying that “too big too fail seems to mean too big to go to trial.” By contrast, Wells Fargo Bank recently fired two long-time employees after discovering that each had minor “shoplifting” charges on their records from decades ago when they were just youngsters.
 
Several years ago, the U.S. Chamber of Commerce estimated that 75% of employees steal in their workplaces and that most do so repeatedly. A more recent study asserts that employee theft has increased 50% since the start of the recent recession. This is partly due to perceived financial need and survival but a lot of it is purely a deteriorating loss of faith in the essential fairness of the system.

The Jack Hayes annual theft surveys report a “general decrease in honesty in general” as a key factor for shoplifting/employee theft. Yet another study from a decade ago reports that over half of employee theft is committed by company owners, managers, and supervisors--in other words, the higher-ups.
 
“Why do people commit fraud?” One of the answers is because there are poor controls and people don’t think they’re going to get caught. It’s the same exact reason most people speed when they drive their car. It’s the same exact psychology: they don’t think they’re going to get caught. However, most people won’t steal just because there are poor controls—in other words, just because they don’t think they’re going to get caught. There usually has to be a trigger, stressor, or event that puts them over the edge; the economy and the pattern of unfair practices outlined here provide this spark.
 
It’s also getting harder for company owners, managers, and supervisors to catch employees who will steal, lie or cheat in pre-employment screenings as well as post-hire as time is pressed and human resources and loss prevention measures are pinched. Studies suggest only 15% of applicants may have criminal records that turn up on background checks; besides, it’s often the star employee who is led out in handcuffs!

Certainly a good portion of employee theft may be attributable to plain greed as well as employees at all levels chasing an increasingly high lifestyle which puts pressure on them to “rob Peter to pay Paul”. Here Peter represents the employers and Paul, the credit card companies to whom many become indebted.
 
So, what can a company or business owner or manager do in the face of this increasingly stressful and ethically challenged world?
 
Jack Hayes outlines 7 easy steps to protect your business in his new book Business Fraud: From Trust to Betrayal. These steps are in the following areas:
  1. Risk Assessment/Identification of Improvement Needs
  2. Leadership Philosophy
  3. Recruiting Principles
  4. Management Awareness
  5. Fraud Vigilance Strategies
  6. Internal Controls
  7. Proactive Oversight/Monitoring
 
Gary Zeune, an Ohio State University professor and corporate consultant, of www.theprosandthecons.com, asserts: “There’s no such thing as 100% prevention because you have humans involved in every business, every transaction, and every environment. But the most important strategy is '“unpredictability” (keeping oversight schedules and techniques fresh and not patterned). The second most important strategy is called ‘ tone at the top’ meaning that people will behave the way the top level people act. Seeing business owners use their business as their personal piggy bank—even if it’s just a small amount—gives everybody else permission to do it, too.”
 
The third most important fraud deterrence strategy is the compensation structure, an element that is overlooked more often than not. What are people being paid to do? This is different than what they are being told to do. (Don’t just pay people to do a job, pay them or give them commissions based on results). Zeune also suggests company owners publicize their salary/compensation so employees at least see transparency.
 
Some other management strategies include putting these words on the top of any job application: “By filling out this application, you are giving us permission to do both a criminal background check, a credit check and to investigate whether you are involved in any civil lawsuits.” Zeune believes that about 80% of employees who see this on an application won’t turn in their application. It’s called “self-selection”—they just take themselves out of the running. This can eliminate a lot of problems from the get-go.
 
A couple other simple changes include having more than one person oversee finances, accounts payable and accounts receivable and having bank and financial statements sent to the boss’s home rather than to the workplace where they can be intercepted or altered. Yet, Zeune frequently encounters resistance from companies, especially smaller businesses who commonly state they don’t have the money to invest in good shrink control systems. But he’s not buying it. He says it’s not about money, it’s about fear. Many company or business owners or managers would rather take the risk of a long-time employee stealing them blind than making changes that might hurt the employee’s feelings or make him/her feel not fully trusted.
 
Like the 12-Step group serenity prayer asserts, the key lies in adhering to what we can and cannot control. We may not be able to control the culture of honesty in the world around us or the adopted, hidden attitudes of our employees. We can, however, control the culture of our company by modeling honesty, integrity and treating people with dignity by “trusting and verifying” and doing our best to walk that fine line between micromanaging and carelessness.
 
“Honesty is its own reward” is an old saying and many of us were brought up believing this. Then something went awry. If honesty was so great, how come there were lies and secrets? The good guys didn’t always finish first. At some point most of us learn not to be so naive about life. We learn things aren’t always one or two dimensional. Rules, laws, commandments, and guidelines are meant to give us some direction and assistance. But giving up on honesty is a dangerous decision.  Honesty promotes trust, self-esteem, being given responsibilities, good relationships, admiration and respect, spiritual connectedness, serenity, and others being honest with you!

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Featured Contributors

Bloomington thunder in USHL #22/ Michigan State Hockey commit
Dave Berk is a long time recruiting analyst for Scout and is the managing editor of Spartan Digest.
Javon Bess is a high school basketball player and 2014 commit to Michigan State University.

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