It happens all the time. A person who is viewed as an important part of the team leaves the company, and in their rush to fill the vacancy, management settles for someone who is not a good fit. Then that wrong person causes problems, and the company ends up worse off than if they had left the position vacant.
The reality is, it’s a bad idea to rush the hiring process. To ensure that you hire the right person for the job, here are some of the steps that should not be skipped:
• Update the job description – Talk to the department heads with whom this person will interact. Identify the job duties, the skill sets required to perform those job duties, and the soft skills necessary to succeed in the position.
In addition, be sure your written job description includes the physical abilities that are genuinely necessary to perform the job duties. I recently heard of a company that hired a security guard who managed to hide the fact that he was legally blind. By the time the company found out, it was too late. Since the job description didn’t mention the ability to see, they could not fire him without running afoul of employment laws.
• Have a fair wage scale – Your pay structure needs to be generous enough to attract quality people.
• Ask good questions during the interview – Your questions should enable you to evaluate if the person has both the job skills and the soft skills that you’re looking for.
• Check references – Verify that the statements on the candidate’s application are all true.
• Listen to your gut – If someone looks great on paper but is really rubbing you the wrong way, or if there seems to be a big disconnect between who they are on paper and who they are in person, recognize this as a “red flag.”
• Take advantage of the probationary period – Make sure your company has a clear written policy regarding the 90-day “probationary period.” During this time evaluate the new hire every 30 days. This way you can give them an opportunity to improve, and will build a case for quickly letting them go if they are clearly not working out.
If your company, like most, is running with a lean staff, you just can’t afford to settle for mediocrity. Good hires are productive, bad hires are counterproductive, and it can be difficult to fire someone once they’ve come on board.
It’s a recurring nightmare for many business owners. Something happens, and you suddenly discover that one of your trusted employees has been cheating you. Even worse, the fraudulent activity has been going on for quite some time.
The reality is, fraud can be very hard to detect. Here’s why…
The Fraud: Overpaying for purchases
In this fraud the purchasing agent agrees to noncompetitive pricing, and then gets some type of kickback on every purchase, whether it’s cash, travel, or whatever. Even high-level employees can be on the take, such as a Controller or CFO responsible for professional services contracts.
• Why this is hard to detect: Quite often companies have complete faith in the person doing the purchasing. They do not require that this person gets competitive quotes on major areas of spending, or have somebody review those quotes.
The Fraud: Phantom employees
What typically happens in this type of fraud is that somebody adds fictitious employees to the payroll. For example, a supervisor in the field submits paperwork for someone who doesn’t exist, or for someone who exists but doesn’t actually work for the company. HR has no idea it’s a sham.
• Why this is hard to detect: Most companies will scrutinize time sheets, but will not go out and physically verify that these people were on site during the stated dates and times. This can be especially challenging for companies with labor that fluctuates based on the work load. It can be easy for someone to submit falsified time cards for real people who were not actually employed by the firm at the time.
The Fraud: False overtime claims
This type of fraud generally requires collusion between the employee and the supervisor who approves their time cards. Often the employees are legitimately on the job on the days stated on the time sheet, but are not actually working any overtime. The supervisor agrees to approve bogus overtime in return for a percentage of the extra pay.
• Why this is hard to detect: It is hard to detect a fraud that involves both the employee and the supervisor. To avoid this problem, a good control to put in place is a “labor budget.” Supervisors must keep labor costs within this budget, with additional costs requiring additional approvals.
The Fraud: Embezzlement
What I’ve seen in this area is that someone in accounting opens up a bank account for a fictitious vendor, sets that vendor up in the A/P system, and then cuts checks to them. While banking regulations make this harder than it used to be, it’s still possible. Another common embezzlement scheme is to collude with a vendor who provides bills and receives checks, but does not provide any actual goods or services.
• Why this is hard to detect: First,
many companies do not have the necessary controls in place to prevent
this type of problem, such as requiring the use of purchase orders, or
requiring that multiple people approve new vendors. Second, once checks
start regularly going out to a vendor, everyone becomes familiar with
it. If a person can get away with the fraud for a few months, it’s easy
to keep it going.
Need help getting appropriate checks and balances in place to help you avoid these scenarios? Give me a call. As an experienced CFO, establishing policies, procedures and controls is one of the many services I provide.