Recent revelations in the marketplace demonstrated disaster plans go beyond natural disasters such as the hurricanes in Texas or the fires in California.
Disaster plans today for any small to mid-size business business ) now must include sexual misconduct, dishonesty, substance abuse and violence.
Adam Yore, a finance professor at the University of Missouri, examined 325 instances of bad behaviors by executives in larger firms. If managers made these mistakes, there was an average loss of $110 million. For bad behaviors by executive, that loss rose to an average of $226 million. What this research also revealed is violence, though not as common, was the most damaging bad behavior.
Currently, according to the Equal Employment Opportunity Commission, there has not been a substantial increase in sexual harassment complaints. In 1992, the EEOC received 5,607 complaints and for the most recent year, 2015, received 6,870 complaints.
Substance abuse is another costly line item for many small businesses. The National Safety Council (NSE) revealed employees within one year of being hired who abuse prescription drugs are two to five times more likely to take unexcused absences, be late for work and may even be violent.
Beyond purchasing liability insurance, and now including the additional cost within your just doing business fixed costs, there are some strategies as well as tactics to reduce or eliminate these costly bad behaviors.
First, if your small business doesn’t have a written and shared positive core values statement within its strategic plan, now is the time to take that action. This statement must be shared with all employees and even vendors.
Second, make sure within your employee handbook there is information about these four bad behaviors. This information should be taken from your own HR policies. Any employee handbook should be reviewed by a labor attorney to ensure compliance with both state and federal laws before distribution to employees.
Third, schedule training for all employees. Given that 97.7 percent of all U.S. businesses have fewer than 20 employees, any bad behavior that results in a single complaint can be disastrous to the bottom line.
Fourth, reinforce that training through your own behavior as the small business owner or executive. Make sure people adhere to the written policies. For example, gossiping could be viewed as sexual misconduct by someone depending upon the context of the gossip.
Fifth, conduct audits of your financials on a regular basis. Keep confidential information secured this includes changing passwords on a regular basis. Consider mailing bank statements to your home address and not to your business address. These actions help to potentially avoid dishonest (fraudulent) behaviors.
Sixth, consider a risk analysis to determine the most probable threats to your small business and then analyzing related vulnerabilities such as not having a HR policy against sexual harassment. Your insurance company may be able to assist you with that analysis.
Seventh, have a plan of action ready in case your small business becomes involved in one of these bad behavior issues. By having taken action through the previous six suggestions, you may have potentially reduced your liability.
Yes, doing business is more costly that in the 20th century. The 21st century has brought many innovations through technology and other tools. However some of these same tools may create unexpected bad behaviors. Your role as the small business owner or executive is to reduce if not to eliminate the causes of these costly organizational disasters.
Leanne Hoagland-Smith is an author, speaker and executive coach. Her weekly column explores issues that impact the bottom line of firms with fewer than 100 employees. She can be reached at 219-508-2859.