Running a construction company involves not just managing projects but also ensuring a trustworthy workplace. A recent story from one of my clients highlights the importance of vigilance when preventing employee theft and unethical behavior.
My client hired a new controller, and what they uncovered was a shocking level of deception. In one case, the controller found unauthorized company cell phones linked to the office manager’s children!
This alarming discovery marked the beginning of a landslide that revealed significant financial misconduct across the organization.
The new controller discovered an essential project manager was charging personal expenses and home renovations expenses to company jobs. The payroll manager was increasing her paycheck without documentation, and her employee friends took unrecorded vacations. Some field foremen were abusing company gas cards, filling up personal vehicles at the company’s expense.
Other employees may have been aware of these unethical practices, but chose to stay silent, further perpetuating the problem.
Understanding the risks
My client had always prioritized a trusting work environment, believing that delegating responsibility to employees was the best approach. But without proper oversight, this trust led to rampant misconduct and significant financial loss.
As leaders, construction business owners establish vision, core values, and performance goals, expecting employees to follow through, yet it is crucial to recognize that too much trust can lead to a culture of entitlement and greed.
Warning signs and countermeasures
Here are some red flags that should raise concern:
- Employees undertaking home renovations or building pools
- Sudden purchases of luxury vehicles or recreational items
- Signs of personal distress, such as marital issues or financial pressures
- Excessive personal leave or inconsistent working hours
To protect your business, consider implementing the following safeguards:
- Install GPS in company vehicles to monitor locations, which helps ensure accountability.
- Audit company credit card charges and verify all expenses against GPS data to validate the legitimacy of charges.
- Direct bank statements to your home, not the shop, so you can review all transactions without fear of tampering.
- Ensure the owner signs all major contracts and approvals. If unavailable, require dual signatures on checks and significant documents.
- Maintain accurate personnel records. Implement timecard systems to track work hours, ensuring proper deductions for late arrivals or early departures.
- Enforce employee manuals rigorously. All employees, regardless of tenure or relationship with management, must adhere to company policies.
- No exceptions to labor laws. All employees must abide by established legal and company protocols.
- Monthly job cost updates. Regularly review invoices and financial records to catch discrepancies early.
- Trust … but verify. Have confidence in your team while ensuring accountability through established rules.
And if I had to add one more, make sure you hire a really good controller!
Trust and monitor
Building trust within your team is vital, but so is implementing robust checks and balances to protect against dishonest actions. By recognizing the potential for misconduct and establishing clear procedures, you can safeguard your construction business from costly mistakes.
George Hedley, CPBC, is a certified professional construction business coach and speaker. He helps contractors build better businesses, grow, profit, improve estimating and field production, and get their companies to work. He is the best-selling author of “Get Your Construction Business to Always Make a Profit!” available on Amazon. Visit Construction Business Coaching to schedule a free introductory coaching session, receive his monthly Hardhat Hedlines Biz-Tips e-newsletter, download his template package, or watch his webinars and online video courses.
