I was skiing the weekend before last in the Swiss Alps and as luck would have it, a rather interesting conversation developed on a chair lift. A pretty long lift as it happened . . .
The only other person on the chair was a guy who introduced himself as Peter who asked what I did for business. I told him, expecting the usual glassy stare, and got a far more interesting reaction.
“Monitoring, you say? Unusual patterns of activity? I’m glad you don’t work with my company!’. He seemed like a fairly senior chap in his late 40’s. His exposure and involvement in both the sales and spend activities implied a pretty broad role.
My interest piqued, I quizzed him a little and he gave me a full blown account of some of HIS more ‘unusual’ paterns of business activity.
‘Find suppliers you need on a consistent basis who you can overpay ’, he told me. ‘Then I get the cash back later, minus a ‘consideration’. Helps with all those exceptional expenses.’. ‘Like skiing trips?’ I ventured. ‘Surely there are controls though, both in your company and with your suppliers?’ He informed me that you need to deal with senior people . . .
He has 2 or 3 of these special suppliers . . . .
‘Then, I have a couple of very good customers’, he went on (it sounded like they were distribution agents). I cut special deals with these customers where they get our product well below the price they should get. A lot of ‘promotional goods’ in his business perhaps. They keep an account for me with 50% of the undercharge.
He didn’t seem remotely guilty about this, I even sensed some pride or entitlement.
‘How long have you been doing this, Peter?’ I asked. ‘About 15 years’ . . . .
Of course, when we got off the chairlift and said our ‘au revoirs’, i shouted after him ‘who do you work for?’. He sped off on his skis with a laugh, and that was the last I saw of him.
Perhaps I am naive. I was stunned by the relaxed way he described his activities. He obviously felt smug and smart about how he maintained this situation. I was reminded of that article, I think in Fortune magazine, entitled ‘The Smartest Guys in the Room’ about the Enron debacle . . . .
And as coincidence would have it, CFO magazine today published a fascinating article that is another example where executives all think they are above average. The article observes that experts estimate that internal fraud costs companies 3% to 5% of revenue each year. But executives are prone to underestimating the amount of fraud that exists within their company. They want to believe that their internal controls are better, their employees are more honest, and their ability to stop fraud is more effective than that of executives at other companies. CFOs and other top executives should not get caught in the trap of believing their company is much better than average . . . Read the full article at CFO magazine here.
Thanks for reading . . .