Why Employees Mismanage Company Funds

"Daddy! Today I was called out in front of the school with ten other kids for not paying their school fees.” Mr Emmanuel's little daughter, Ella, cried to him as she returned from school that Friday afternoon. He was already battling with other family financial pressures, which was beginning to put his integrity to the test. His daughter's outburst that afternoon forced him to resort to taking from the company's account. “After all, I'm being paid peanuts for all the workload I handle in this office,” he muttered under his breath.

The weekend quickly rolled by and Monday arrived with a bright smile as the sun rose over the busy city. Emmanuel dropped Ella off at school, assuring the staff that her school fees would be paid before the end of the week. He waved her goodbye and boarded the next tricycle to State Estate Road, where his workplace, D'Munrose Co. Ltd, was located. 

Mr. Emmanuel did not waste time executing his plans. He began creating small discrepancies in the accounts—misplacing invoices and fabricating unnecessary expenses. At first, the management of D'Munrose's Co. Ltd brushed it off as mere oversight, but as the weeks went by, the irregularities grew more frequent and brazen. An investigation was conducted, and as it unfolded, it became clear that someone within the organization was mismanaging company funds. And the culprit was the trusted financial manager, Mr. Emmanuel.

Employee theft has far-reaching consequences, affecting both employers and employees. For employers, it can result in significant financial losses, sometimes even leading to bankruptcy. According to Metrobi, employee theft is responsible for approximately 30% of business bankruptcies, with losses amounting to $50 billion. Employees caught engaging in money mismanagement often face severe legal repercussions. 

The underlying causes of money mismanagement are complex and multifaceted, involving a combination of factors that create a conducive environment for theft. Some of these factors include:

1. Lack of Transparency and Accountability: One of the primary causes of money mismanagement at D'Munrose Co. Ltd was the lack of transparency and accountability in financial dealings. The company's accounting systems were outdated and disorganized, making it difficult to track expenses and identify discrepancies. Furthermore, Mr. Emmanuel the financial manager was given far too much autonomy, with little oversight or checks on his actions. This mirrors real-world cases where insufficient checks and balances enable fraudulent activities. This lack of transparency and accountability creates an environment that makes it easy for staff in organizations to manipulate the accounts and conceal their misdeeds. 

2. Personal Financial Difficulties: Just like in Mr Emmanuel’s experience, staff often face personal financial difficulties. This could include paying school fees, covering medical expenses for family members, managing overdue bills, dealing with personal debts, or longing for material possessions they cannot afford on their current income. These financial pressures can create a sense of desperation, which may drive the staff to engage in theft within their organization as a means of coping.

3. Inadequate Training and Support: Another factor that contributed to the money mismanagement at D'Munrose Co. Ltd was the inadequate training and support provided.  In real-world scenarios, undertrained staff are more likely to make errors or resort to unethical practices. Organizations should prioritize continuous training and equip employees with the tools and knowledge to perform their roles effectively. Providing access to updated tools, mentorship, and a culture of learning ensures the staff remain competent and confident. 

4. Low Salary and Unfair Working Conditions: Staff often justify theft when they feel overworked and underpaid. Low wages and poor working conditions can lead to resentment, causing the staff to believe the organization owes them. When job performance does not result in fair pay or recognition, some staff see stealing as a way to claim what they believe they deserve. This perception of unfair treatment often stems from frustration with the management and a lack of good working conditions.

5. Greed: Greed, coupled with the opportunity to act without immediate detection, can often motivate staff to mismanage funds in an organization. The lack of oversight in the company allowed Mr Emmanuel to take advantage of loopholes, prioritizing personal gain over ethical responsibility. In the real world, the absence of strict consequences for misconduct in the workspace creates an environment where a staff believes he/she can act without fear of repercussions.

Several factors contribute to money mismanagement by staff, as seen in Mr. Emmanuel’s case. While his actions allowed him to pay his daughter’s school fees, he was eventually caught and held accountable. 

This story serves as a reminder of how systemic issues within an organization can create an environment conducive to money mismanagement. By examining the factors that led to financial mismanagement at D’Munrose, we can draw lessons applicable to the real world, and address them accordingly.

Co-written with Etimbuk Ntekpere