Where do traditions come from? The answer to that question might depend on whom is asked. According to Dictionary.com, tradition is defined as “the handing down of statements, beliefs, legends, customs, information, etc. from generation to generation, especially by word or by practice” or “a long-established or inherited way of thinking.” 1 So, what does tradition have to do with business? It’s more than many might think. When a business tradition is questioned, many times the answer to the question is “that’s just the way we do things; why change?”
That response can indicate issues with policies and procedures, as well as the “tone at the top” of the organization. As reported in an article published in Forbes. “we have always done it that way” may be the seven most expensive words in business.2 Policies, procedures and job duties are set up not only to protect the company, but the employee as well. These requirements provide guidance for an employee to do their job, and so that they are not accused of doing things they are not supposed to be doing.
The issue of moving the “normal” begins when an organization’s polices are not enforced, and employees find simpler ways of doing things. The norm for the business is then moved to the new way of completing a task. After a while, this new way of completing the task becomes known as “that’s how so-and-so does it,” and no one seems to mind. This new way becomes the norm, and the original idea or policy becomes lost in translation. The longer this new norm is allowed to stay in place, the further removed the original norm becomes. After some time, no one seems to remember what the original norm or policy was at all.
Many businesses, no matter the size, do not review how their written policies or procedures are actually being implemented during day to day operations. Just because something seems like a good idea on paper does not mean it is the most efficient way to complete the task. A simple visual explanation for this concept is;
If we take this deviation a little further, when someone is allowed to manipulate the procedures and/or their job duties in an organization, the organization opens itself up to additional concerns. One of these concerns is employee misconduct, or fraud, since fraud is a hidden crime that requires individuals to be able to manipulate their job duties. This stretching of the norm can provide the “opportunity” side of the fraud triangle. Locating the opportunity to manipulate the system can be the hardest and most likely the most time-consuming aspect. Once the first side of the triangle is complete, the two remaining sides (pressure and rationalization) can be connected with ease. When all three sides are completed, the fraud begins and can last for years. An example of a long-term fraud can be found in Dillion, IL, where a $53 million embezzlement took place over the course of 20 years.
In order to reduce an employee’s opportunity to manipulate their position and/or job duties, business owners should keep the following thoughts in mind when reviewing their organization for potential weaknesses:
Of these points, holding employees accountable for their actions may be the most important of all.
Contact your local Eide Bailly professional for more information.
Take a deeper dive into this Insight’s subject matter.Fraud & Forensic Advisory