Organizational Control Management
Ineffective or inadequate control management system is one of the major reasons for fraud among employees. The lack of experience, a large scope of a company’s performance, irresponsible managers, and pressures of competition contribute to the development of a weak control system. The presented cases of the companies that have already faced fraud help to understand the meaning of effective organizational control management and its nature. The rising market tension should be the primary trigger motivating modern companies to integrate effective organizational control systems. Otherwise, the company will have to handle the negative influence of fraud and suspicious activity from the employees. The complex nature of the control system makes it necessary to consider every element before implementing it. The experience of the companies presented in the case study shows the possible gaps in the control system and ways to reduce them by complex revision of the existing organizational control management principles.
Control Management Issues
Every company involved in these cases faced a complex problem due to the long-term character of fraudulent activity that top management did not detect in time. Unfortunately, the cases involve first level, middle level, and top level management and they inability to see the issue. It became easy for a postal worker to commit fraudulent activities due to the poor standards and regulations existing in the company that should have measured his performance. It is a problem for all management layers due to several reasons. Top management did not take care of creating effective performance standards, which could have limited the performance of the employees at the lowest level. Middle level management, in its turn, did not take care of the precise evaluation of the department’s performance, which could reveal the problem. The lowest level of employees did not find it necessary to look at the performance of their colleagues without effective standards to refer to. The case involving the employee from Calgary Transit has the same explanation, which proves that the companies in question preferred not to waste their time on the development of an effective control management system, finding it redundant. However, the losses caused by fraud are much higher than the expenses on control system improvement.
The case unites the stories of different companies by emphasizing their inability to perform one of the main management functions, including financial control. This management function is crucial to meeting the objectives and goals of the strategic planning according to the company’s financial performance and sustainability (Bartol et al., 2011). The theft-prevention specialist, who became the initiator of fraud, was hired to take care of the financial flows reflected in checks. Nevertheless, he became the one making up checks due to the lack of supervision from upper level managers. The blind trust in employees and their pure intention to work for the benefits of the company without any guarantee of their honesty leads to fraudulent activities among employees. Without effective supervision of the employees’ actions in managing financial documents, the company risks facing missing financial resources or inventory (Bartol et al. 2011). The cases prove that fraudulent activity at the lowest level of management is hardly detectable, which means that the company should always strive for control improvement.
According to the presented case, it is possible to see the same characteristic features of management systems. The companies have problems in defining their financial issues due to inappropriate concurrent and feedforward control. Every company involved in the case did not implement clear and effective performance standards, which could prevent employees from finding alternative ways of earning money at the expense of the company (Davidson et al. 2009). In terms of concurrent control, it is possible to detect gaps in performance. However, none of the employees of the company could immediately detect deviations in the employees’ performance.
Control Management Strategies
As long as the lack of standards is the primary issue of the companies, which suffered from fraud, it is worth implementing changes by creating a clear system of financial objectives and performance standards. Every company uses reports of the financial activity, which means that forecasting is the most valuable element in the prediction of the future balance sheet. This way, it is possible to make financial reports more detailed in order to reveal the financial side of every process. A commonly shared financial report design will help create a framework for the performance of every subordinate (Davidson et al. 2009). It is easy to implement this initiative by developing an online-based electronic system, which will inform top management on the latest changes in the financial structure of the company. In combination with regular inventory checkups, it would be possible to avoid gaps between financial resources and available products.
Direct supervision is another way of solving the problem. It works by preventing employees from doing secondary actions in the workplace. A precise and deep analysis of the activity of every employee helps detect suspicious behavior based on the assigned job responsibilities. Managers should continuously control the performance of subordinates in order to respond to inappropriate activity on their part. The primary position in these corrective actions should refer to making mandatory checkups of all financial documents flowing between employees. However, direct supervision is costly enough to demotivate small companies. This is why they do not implement this initiative as the primary fraud-prevention method (Robbins et al. 2012). The companies should implement cost-effective decisions, which will not devastate their budget. In combination with direct supervision, it is worth developing a reporting system, which will allow every employee to contact top management in an anonymous way in order to tell them about caseы of fraud. It will encourage employees to keep workplace environment fair, ethically appropriate, and morally healthy. It will create limits in the employees’ activity because they would feel fear of facing the legal consequences of their actions.
Another initiative, which can save the company from fraud and financial machinations, is regular screening. For example, inventory control can become the target point in the implementation of screening. It will ensure the consistency between registered items and available items. The case involving theft of phone books is just another proof that screening should be a mandatory practice in protecting the company’s financial sustainability. Top management should recognize that one of their main responsibilities is making sure that employees do not devastate their budget with personal fraudulent activities (Robbins et al. 2012). Regular inventory checkups save costs of the company and set borders in the actions of employees. This way, implementation of screenings should save the company from wasting its resources on restocking needs.
Feedback Control Initiatives
The company cannot achieve success in the improvement of control management practices without incorporating feedback control. In management, feedback is crucial to building a relationship between the company, employees, and customers. Feedback helps determine the areas, which still require improvement or show effective results after changing the pervious way of performance. All management layers should have a system of feedback control, which will have an informative character showing a consequent transformation of the management framework related to financial and non-financial issues. First-level subordinates should report to their managers in a timely fashion regarding their opinions on changes. It is the point, where change management and control management interact in a beneficial way, contributing to the company’s sustainability. This way, first-level employees will be capable of sharing their workplace experiences in terms of the implemented changes, including the reporting system and supervision.
Departments should also conduct a thorough analysis from on the part of the middle level management. Feedback control meetings should have a private character and aim to analyze the effectiveness of implemented changes. The company should coordinate the schedule of meetings with all subordinates in order to make them aware of the meetings and meet their needs. All these components are necessary for making changes according to the interests and needs of employees. Otherwise, employees will be dissatisfied and will lose their motivation. Feedback control meetings should be the primary element in making the performance of employees transparent and free from fraud (Schermerhorn & Holbrook 2006). If this initiative will have a complex level involving all management layers, it will gain success. Employees should learn how to value transparency, which brings fairness to the performance of every employee. Meetings should also incorporate checking financial reports in the presence of employees in order to ask the appropriate questions if there are mistakes. It will help understand the core of the problem as soon as it occurs. Every employee dealing with financial operations or inventory management should attend such meetings. Modes of behavior during meetings and answers to the questions will show the possibility of the employee’s involvement in fraudulent activity. Aggressive, dissatisfied, or tacit employees may also be the ones thinking about staring suspicious financial activity. In this way, the company should use effective detection tools in order to predict the outburst of illegal activity among its subordinates. It is the only way of reaching clarity in the decision-making process penetrating the company at different levels. Thanks to frequent feedback, the company will also gain a highly communicative environment, which will make it difficult to hide the negative intentions of its participants. As a result, the company will take care of making its performance sustainable and productive with the help of ethical performance of employees.
Implications of Poor Control
The evaluated companies and their competitors are not the only companies that faced fraud. Unfortunately, the contemporary businesses frequently face fraud regardless of their size, which means that financial machinations are common. Financial machinations have a significant influence on the company with its external and internal environment, employees in particular, and customers in general. First, the company, which detected fraudulent activity or feels that some of the employees started financial machination, loses the precious peace of the internal environment. The workplace climate and morale of the employees decreases due to the continuous distrust affecting the nature of the performance (Waddell, Jones, & George 2012). Employees do not trust their colleagues, and the company does not trust any of its employees. As a result, the quality of products and services may decrease along with team spirit. If fraud is obvious and becomes widely spread in society, the company faces the damage to its brand, image, and reputation. The situation becomes even worse if the company could not detect the problem until FBI agents found the employee guilty of fraud. This way, the company has to admit that it does not have enough resources, experience, or knowledge to detect the issue without external help.
Employees also suffer from inefficient management control functions. If the company does not have a commonly accepted system of standards, employees will feel confused. The myriad of company processes will make employees feel lost due to their inability to understand whether their performance meets the company’s requirements or not. It will become the trigger of dissatisfaction among employees who do not understand their role in the organization. Finally, in case of fraud, innocent employees may feel the embarrassment due to working for the company, which could not solve its internal issues at once. This way, the company may face a rapid increase of the employee turnover rate.
Concerning the customers, they may turn to another company for the services and products in order to ensure that they receive high quality goods. It is the probable result of a damaged reputation and inappropriate control. In addition, the lack of employees will result in long hours of customer service, which will lead to customer dissatisfaction. As a result, customers will withdraw their loyalty.
Coles became one of the companies that endured fraud on the part of its employees who started stealing flybuys points from customers (Coles goes hi-tech 2014). The company could not detect the problem due to the employees’ scanning their own cards when customers forgot their card at home (Coles goes hi-tech 2014). This became the gap in stealing flybuys points, which further transformed to financial devastation of the company’s budget. It is obvious that the lack of supervision and standards became the trigger of fraudulent activity preventing management from timely detection of employees engaged in financial machinations.
The presented cases show the essence of fraud, which has a complex nature. Regardless of the company’s size, it is difficult to build a system, which would meet the security measures. Nevertheless, it is impossible to build a sustainable environment without standards, performance measurement techniques, and an effective report system. The companies that decide against investing their financial resources in the informational and financial security further face significant financial losses. It happens due to their inability to detect fraud as soon as it occurs. Thus, a company should continuously improve its control management techniques in order to avoid budget devastation.