Business owners never want to think that their employees would steal from them.
Small companies, in particular, often feel as though their employees are part of the family. They trust them. They believe that their employees have the business’s best interests at heart.
In many cases, this is true of employees. But not always. Some employees think they have the right to share in the good fortune of their employer – even without authorization to do so. This sense of entitlement is perhaps one of the most difficult fraud-related challenges to identify and counteract.
The entitlement attitude may develop because of lax policies within the company. Particularly in family-owned businesses, family members may be afforded perks and benefits that aren’t meant for all to enjoy. This may be because the family members are part of the ownership group, even if they operate as employees during the business day. When family members take longer lunches, come in late and leave early, use personal email at work and so on, other employees may feel that there is an implied right for all to enjoy these benefits.
They may believe that, because they work as hard as the family members do, they are entitled to the same perks.
When this attitude is taken to an extreme, the employee may submit bogus expenses, book time not actually worked and take cash in other forms – actions that are, in essence, fraudulent.
Another entitlement issue is broader based. Because of abuses by a few businesses, the public today sometimes makes all business owners appear greedy and selfish. The rhetoric implies that the business owner has no more right to profits and benefits than employees do. There is little or no accounting for the risk-taking that is required to generate profits.
With these sentiments in play, employees may begin to feel that they are being underpaid and underappreciated by their business owner. Some employees will respond appropriately and either ask for more compensation or leave the company for one they feel is more fair.
Other employees, however, may decide that they can increase their compensation in other ways by taking advantage of the company. In the most extreme cases, they may embezzle or take property. In milder cases, they may behave as indicated above and take benefits in more subtle ways. Again, in both cases, fraud is being committed.
For companies to combat this attitude, it is important that policies and procedures on compensation and benefits are clear and well enforced. It is also important that companies pay attention to fair wages and how they compare to other companies in the area and industry.
With information readily available online, employees can easily compare their compensation levels to other companies. If your company’s pay and benefits are much lower than average, an entitlement mentality may develop. Companies should also develop a system of evaluation and rewards that are based on goals and performance. If employees are given a reasonable way to take some control over their earning potential, they may be less likely to feel entitled outside of the established processes.
Leadership also needs to demonstrate the behaviors they expect their employees to mirror. It is difficult for most employees to follow a rule that is ignored by the people who make the rules. Double standards are distasteful.
Company owners and leaders should take an objective look at the standards that are in place – and how well the leadership adheres to the standards.
While some would say, “Yes, but the employees don’t see all of the work we do after hours. That’s why we come in late,” that does not solve the problem. Perhaps more openness about how and when the leaders work is in order.
The point is, you can’t expect employees to intuitively understand the differences. Either share information or adhere to the same set of rules others are expected to follow.
Employees who feel that they are treated fairly and that the rules apply to all will be less likely to take advantage. Set up your team to feel good about their work and their rewards. – Denise Altman, CPA, M.B.A.