A major fraud at a company of any size can have devastating effects on the employees. Most people think about the financial effects of an internal fraud, but few think much about how the employees might react to the knowledge that someone working side-by-side with them was “on the take.”
Employee morale after a fraud loss is nothing to be taken lightly. The employees may feel betrayed and cheated by the thief, especially if they worked closely with the perpetrator. The thief wasn’t just stealing from the company and its owners. He or she was stealing from every single honest employee at the company.
The honest employees may have been denied raises, bonuses, and benefits that could have been paid for with the fraud proceeds. Many times, employee perks and pay levels are based in part on the financial results of the company. With a fraudster taking money straight out of the company’s profits, it no doubt affects other employees financially.
Equally as important, an internal theft damages relationships. It creates an air of distrust, and causes employees to doubt one another. They feel violated, and the negative feelings that go along with that violation can’t help but spill over into the daily work. Employees may lose focus on their jobs and may not perform at their best.
Helping employees deal with the results of a fraud includes keeping them informed about the situation. This requires a delicate balance between offering factual and necessary information about the fraud, and protecting the investigation and future legal action.
Group meetings may be one opportunity to share information with employees. The can be given an overview of what happened and the disciplinary action that was taken. They should be given an opportunity to ask questions and share their feelings about the situation. They should also be offered the opportunity to discuss the situation in private with management.
The key is reassuring employees that everyone is in the situation together, and management is committed to emerging from the crisis. It must also be made clear that fraud by employees is not tolerated, and the company will act decisively when employees steal. This can have an important deterrent effect. When employees believe that a company is actively looking for fraud and punishing those who participate, they are less likely to engage in fraud.