Small Business and Employee Ethics- Avoid Disaster!

May 06, 2019

Small Business and Employee Ethics- Avoid Disaster!


Have you taken the appropriate measures to makes sure that you are protected from the dishonest actions of your employees?  Employees ethics is a HUGE risk for all small businesses.  Make sure that you are protecting yourself and your business.   


For most small businesses, employees can be the businesses most significant risk.  According to The Association of Certified Fraud Examiners estimates that companies lose 5% of their annual revenue to employee fraud and abuse.  Unethical employee actions hit small businesses the hardest.  Most small businesses do not have the financial ability to sustain the hit of significant employee fraud or theft occurrence.  Unfortunately, the cost of employee theft isn’t only the cost of the theft.  Employers also need to factor in the additional expense of legal fees, employer time spent on legal action, loss of employee productivity, and much more.  The cost of unethical employees is a HUGE expense. 


If you are sitting here thinking that this will never happen in your business, think again.  The US Chamber of Commerce states that 64% of all small businesses fall victim to employee theft and 75% of all employees steal from their employers at least once.  No one is immune.  It doesn’t matter how long your employees have been with you or how well you treat them.  It happens.  It happens a lot more frequently than you would think.  And, it is likely that it has happened to you and you didn’t even realize it.  We know that you trust your employees (that’s why you hired them), but I hate to say it- trust just isn’t enough. 


Here are some great ways to manage the ethical behavior within your small business.


Develop Internal Controls

There are a variety of internal controls that you can put into play to ensure that you reduce your ethical exposure.  Here are a few controls that every small business should consider:

  • Know your employee and closely supervise them
  • Regular audits and inventory counts
  • Track and double-check business checks and payroll
  • Closely monitor accounts receivables
  • Use employee vacation time and make sure there is nothing “fishy” going on


Ethics Training

Ethics training within your business can be especially helpful when your employees deal with money or sensitive information/ processes.  You don’t need an elaborate ethics training series.  Addressing expected employee behaviors and allowing employees to ask any questions is a great way to make sure that they are on the same page as you.


Model Ethical Behavior

Employees emulate their leadership, plain and simple.  If employees get the sense that ethical boundaries are blurred, they will run with it. Make sure that your employees only see that you are acting in a very ethical way. 


Hold Employees to an Ethical Standard

Holding employees to an ethical standard starts with communication.  The best place to communicate your ethical standards is in the code of conduct policy within your employee handbook. This sets the foundation to expectations going forward.  If at anytime, an employee does not follow your ethical guidelines, hold them accountable.  If you let it slide, they will follow that pattern… and it is likely that other employees will follow too.  On the other side of the coin, make sure to reward positive ethical behavior… other employees will follow that queue too. 


When employees act with ethics on your behalf, they create and foster a business that clients can trust and build a lasting relationship with.  The world of small business is hard enough; managing your ethical workforce only ensures that your business is set up for success now and in the future. 


Need help with creating a Code of Conduct policy, employee handbook, employee discipline process or rewards program?  Become an HR Branches member today! 

For Colorado employers, becoming an HR Branches member will keep you compliant with state-specific employment laws and give you access to our on-site startup that is included in our Platinum package. Please visit the HR Branches Store to learn more.


Disclaimer: HR Branches provides general information about Human Resources. Please note that the information provided, while reliable, is not legal advice. Please seek legal assistance, or assistance from State, Federal, or International governmental resources, to make sure your legal interpretation and decisions are correct for your location and circumstances. The purpose of this information is for guidance, ideas, and assistance on general HR matters.

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