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How Not to Hire a Guy Like Me

I’ve had a lot of memorable moments in my career. Some are good: like telling a CEO we can save his company millions of dollars or telling a business owner his company doesn’t have to fail.

Others are memorable in a bad way. Like getting shot at, twice. (They missed, twice!) Or watching a grown man attack his mother with a knife.

Today is one of my most memorable moments. A very good one. Today I announce the publication of my first book, “How Not to Hire a Guy Like Me.”

After working in the turnaround business for 30 years, I’ve gained a lot of knowledge about how successful businesses work and how to fix them when they aren’t working so well. And I’ve seen a lot of mistakes made that caused businesses big problems. That’s why the subtitle of my book is “Lessons Learned from CEOs’ mistakes.

HowNotCoverUsing real-life examples, I offer advice on how to avoid making those same mistakes. As one of my endorsers, Rafael Pastor, CEO of Vistage International wrote, “Lee Katz covers what they didn’t teach you in business school— how to avoid the land mines and what to do if you happen to step on one.”

That is one of the reasons I wrote this book: to educate people. This book is for business owners, C-level people, entrepreneurs or anyone who operates in the business world. They can all benefit from the tips in the book.

In addition to learning from the mistakes of others, a major lesson I’d like readers to take away from the book is that admitting your own mistakes and then moving forward is much better than denying or ignoring them. In fact, the title of the first chapter is “Check Your Ego.” Running a successful business is not about your ego and what you want. It’s about how to work with other people as a team toward a common goal. A one-man company doesn’t survive.

Other chapters include advice on confronting your harsh realities, how to be a proactive leader, how to make your banker your partner and how to prevent fraud.

Another reason I wrote the book is that it’s a way for me to give something back to the business community, where I’ve worked for more than 30 years. It’s the same reason I do a lot of pro bono work for organizations I believe in. I enjoy using the benefit of my knowledge to help others.

I’ve been lucky enough to work with some of the best business people in the country and they were generous enough to endorse my book. Bernie Marcus, Chairman of the Marcus Foundation and co-founder of The Home Depot wrote, “What you are about to uncover inside this book can help ensure that you, as a leader, also avoid pitfalls. Read it. Learn from it. Benefit from Lee’s many years as The Turnaround Authority.”

Alex Gregory, Chairman of the Board and President of YKK Corporation of America wrote, “You name it, Lee has done it. Fortunately, Lee has shared his invaluable experiences with us in this extraordinary book. We can learn from the mistakes of others, through the wizardry and humor of Lee Katz.”

You can purchase the book by clicking on the book cover on the right, or on Amazon.com. Yes, that’s my smiling face you see on the cover. It’s an easy read, and I hope you’ll benefit from the advice it contains. As Bernie Marcus wrote, “That way, the only time you will ever see Lee’s face is either on this cover, or smiling across the table at a philanthropic endeavor.”

Enjoy it, benefit from it. And let me know what you think. Even if you’ve never been shot at or the victim of fraud, I’d love to hear your stories. Email me at Lee@TheTurnaroundAuthority.com.

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My Number One Tip for Fraud Prevention

It happened again. Another fraud case. This time it was at UPS in Indianapolis, where an employee and a contractor are accused of stealing more than $1.2 million over a two-year period.

It worked like this. The UPS employee, Mark Gleason, set up a maintenance contract with Dayton R. Sloan II at D&S Construction in 2011 to provide general contracting services at close to 40 UPS locations in Indiana and Illinois.

Sloan had done some carpentry work around UPS facilities in the Indianapolis area and Gleason was the supervisor of the plant facilities. Apparently they hit it off well enough to become partners in crime.

visaGleason had the authority to sign off on invoices up to $5,000 so between January 2011 and December 2012, he authorized several invoices under that amount, payable to D&S. Sloan received the checks and deposited them in a corporate account.

Sloan would then use the money to purchase hundreds of thousands of dollars worth of prepaid Visa gift cards that he would share with Gleason. The two then went on quite the shopping sprees, purchasing flat screen TVs and jewelry. Gleason even used the cards for $3,000 of corrective eye surgery and more than $40,000 towards buying cars.

And it wasn’t even someone at UPS that caught them. A bank that D&S Construction used and a seller of the gift cards both became suspicious and alerted authorities, according to the prosecutors.

The two men now are being tried and face up to 20 years each on counts of wire fraud and up to 10 years on counts of money laundering in addition to fines and restitution. Kudos to UPS for prosecuting them. Another one of my fraud prevention tips is to always prosecute people who steal from you.

Which leads me to my number one tip for fraud prevention: Always poke around your books. If you are a CEO or business owner, you need to occasionally ask questions about items in your budget. How often do we pay for that? What does that company do for us?

Unless your company has a full-blown audit, these type transactions will go unnoticed. And even if you do have an audit, auditors often set the level at which transactions are reviewed. In this case, they most likely looked at invoices exceeding $5,000, and may have done a statistical sampling of transactions slightly below that level. So Gleason was able to continue his scheme until people outside of UPS caught him.

In addition to periodically asking questions and poking around your books, make sure your CFO or your auditors regularly conduct a statistical sampling at 80 percent below the transaction level. I have found that is the sweet spot for a lot of people committing fraud.

That may not have caught Gleason in his gift card scheme. But checking into the services that D&S was providing would have.

Never be afraid to ask questions about financial transactions in your company. And never hesitate to prosecute people who do steal from you.

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The Top Reasons That Start-ups Fail

People in the United States love to start new businesses. In 2009, the last year that figures are available, 552,600 small businesses were started. And 660,900 shut down. These are according to numbers from the U.S Small Business Administration.

There are a lot of reasons businesses fail. Like anticipating a market that just doesn’t materialize. Pets.com poured money into its website that sold pet supplies. The company spent millions on an extensive marketing campaign with a popular sock-puppet mascot, whose name, according to an interview on CNN was Pets.com Sock Puppet.  It made an appearance in the 1999 Macy’s Thanksgiving Day Parade and even starred in a commercial in the Super Bowl in 2000.

(Here’s a fun fact: In January 2000, during the dot-com boom, 19 online start-ups bought Super Bowl ads. Eight of them are no longer around. Only one had an ad in Super Bowl XLV. Got a guess who it was? I’ll give you a hint — their ads feature talking babies.)

A cute mascot and a multi-million dollar marketing campaign doesn't guarantee a company's success.

A cute mascot and a multi-million dollar marketing campaign doesn’t guarantee a company’s success.

While people enjoyed the Pets.com advertising, the market just wasn’t there for online pet supplies. Launched in 1998, Pets.com went from an IPO on NASDAQ to liquidation in 268 days. At least Pets.com Sock Puppet found work. He moved over to BarNone, replacing Fran Tarkenton in its advertising. If you’ve ever lost a job, just console yourself with this thought. At least you weren’t replaced with a sock puppet.

In my work with failing companies, I’ve seen many other reasons start-ups fail. Here are just a few of them.

• The entrepreneur is inflexible during the start-up process.

Products, product lines or services will most likely morph or change as they become further developed in response to consumer demand. Some entrepreneurs are unwilling to embrace the necessary changes and end up standing in the way of their own success.

• The entrepreneur doesn’t have enough in reserve or doesn’t borrow enough to keep the business going.

When changes occur it can take longer for a company to break even than the business plan indicated. More time means more money. You may have to keep people on the payroll longer and incur more manufacturing and development costs. The entrepreneur either has to have a large enough reserve to cover it, borrow more money than he thinks he needs initially or bring in new sources of money in time to cover the additional expenses. Failure to do so means the business can become one of the approximately 1/3 of all start-ups that fail within the first two years.

The number one piece of advice I give to anyone considering a start-up: No matter how much money you think you need for the venture — double it! Every start up needs a contingency fund.

• The entrepreneur has no contingency plan.

With most start-ups people leverage a lot of their personal assets to get the business going. While I never advise betting everything you own on the success of a new business, if an owner does put a lot of his personal assets into a business, what happens if he gets in an accident? What if he becomes disabled and unable to work, or dies? He needs to have disability and life insurance policies so his family is not left with no viable business and a mountain of debt.

• The entrepreneur fails to bring in a partner when necessary.

Whether it’s for an additional source of funding or because a partner has a needed area of expertise, there can be good reasons to bring a partner into a business to ensure its success. A piece of pie is better than no pie.

If entrepreneurs understand why most businesses fail, they can take steps to ensure that theirs is one of the businesses that succeeds. As author Maria Robinson said, “Nobody can go back and start a new beginning, but anyone can start today and make a new ending.”

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Companies Need to Own Up to How They Are Doin’

“How’m I doin’?” was one of the phrases that Ed Koch was famous for. The infamous former mayor of New York City died last week, and I doubt we’ll ever see his like again: a politician who speaks his mind and damn the consequences.

One of his most entertaining quotes is, “If you agree with me on nine out of 12 issues, vote for me. If you agree with me on 12 out of 12 issues, see a psychiatrist.”

But the one quote I read by Koch that resonated with me in my position as a turnaround authority is, “I’m the sort of person who will never get ulcers. Why? Because I say exactly what I think. I’m the sort of person who might give other people ulcers.”

Ed Koch, outspoken former mayor of New York City, died last week at the age of 88.

Ed Koch, outspoken former mayor of New York City, died last week at the age of 88.

Now, I hardly go around trying to give people ulcers. But I am hired to give my expert opinion on what needs to be done to turn failing companies around. And that often involves telling people things they don’t want to hear.

In my new book, “How Not to Hire a Guy Like Me,” (available in a few weeks on Amazon.com), I have devoted an entire chapter to how CEOs and business owners of failing companies need to face their harsh realities.

One of the biggest mistakes CEOs make — whether or not they are in trouble — is refusing to recognize challenging situations. They need to have contingency plans for worse-case scenarios and act on them if those scenarios arise.

Sometimes I don’t need to dig too deep to discover the problems — they may be staring a CEO right in the face. But he has been refusing to recognize them because doing so would mean having to handle them. Though tackling a big problem might seem taxing, I assure you that not dealing with it is worse.

Here are just a few of the harsh realities I address in the book:

• Markets are changing and evolving and your business is not. If you’re out of ideas and your new ones aren’t working, it’s time to confront your harsh reality. Don’t get stuck on played-out ideas, especially if you’re in the technology industry.

• Your employees are losing faith in you and your company. If your employees show up in the morning looking like they’d rather be washing dishes at the local diner than work for your company, you’ve got a problem you need to deal with.

• You have lost track of your personal guarantees. When I ask a CEO or business owner about any personal guarantees they have that are still in force, they often tell me they don’t have any. That’s a big red flag to me. Personal guarantees come in the form of business loans, American Express business cards, and agreements to process credit cards, just to name a few. It is crucial that you know about all your personal guarantees, so if your business does go under you won’t lose everything you have.

These are just a few of the many harsh realities I force people to face when they are dealing with a failing or faltering company. You can’t anticipate all the issues your company may face, but you do need to be prepared to acknowledge them and react quickly and nimbly.

Ed Koch left his mark on New York City during his 12-year tenure as mayor from 1978 to 1989 and among his other accomplishments, is credited with restoring the city’s fiscal integrity. That’s one of my goals as well, when I work with companies as a turnaround authority. And I try hard to not give anyone ulcers.

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Trust Your Gut

I enjoy reading “The Ethicist” column in the New York Times each Sunday. People ask the columnist, currently Chuck Klosterman, questions like “Should I get a flu shot so others don’t get sick?” and “Do I have an ethical obligation to stop patronizing a business that has been in trouble for employing undocumented workers?”

Some of the questions are tough and I’m glad I don’t have to answer ones that address issues like problems with cat custody and which of two brothers should donate a kidney to their dad.

url-1Fortunately, in my business, I’m rarely faced with what I’d call ethical dilemmas. While I do see plenty of questionable ethics, for me they are rarely dilemmas because the answer is invariably clear on what course of action to take.

I mentioned in my most recent column, “Trust Your Gut,” that I turn down work if I am asked to do something unethical. I have never regretted it.

When you consider what is at stake in involving yourself in something wrong, it’s an easy choice. First, it’s wrong. And secondly, why would I risk my reputation for a short-term salary, no matter how large?

I subscribe to what a former client, Henry Kravis, once said, “If you don’t have integrity, you have nothing. You can’t buy it. You can have all the money in the world, but if you are not a moral and ethical person, you really have nothing.”

In one case I was interviewed to take over as president of a large healthcare business. The previous president had been fired when the board found out that they had overbilled Medicare and Medicaid to the tune of several million dollars.

I knew I had the job, as I was the only person they were talking to and I knew people on the board. The position would pay a lot of money.

My advice was that they had to be up front about the overbilling and develop a plan to pay it back. When I asked how long it would take to pay the money back, they said they had estimated two to three years.

I said, “Go to Medicare and Medicaid, tell them what has happened and that you have fired the president and hired me and then present the plan on how we will pay them back.”

Their response? No. They had decided that the downside of admitting the problem was too great, so they did not want to notify anyone and weren’t planning on paying the money back. But they would bill correctly going forward.

I was stunned. My initial response, which I may or may not have uttered aloud was, “Are you crazy?!”

They said, “This is what we are going to do. We want you to start Monday and we need your commitment that you will follow our plan.”

While they saw a path out of their troubles that allowed them to keep millions of dollars of stolen taxpayer money, I saw a group of people taking a very bad situation and making it much, much worse.

Beyond the ethics of the situation, had I been president of that company when the government found out, I would have been held responsible. The choice was an easy one.

In the ensuing years I kept up with what happened to the company. It wasn’t pretty. The government found out about the overbillings and sued the board of directors, CEO and the CFO. They also lost their licenses.

It’s a sad story, but hardly an uncommon one. And I didn’t need to write to “The Ethicist” column at the New York Times for an opinion on what to do.

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Trust Your Gut

The freelance writer is a man who is paid per piece or per word or perhaps.
— Robert Benchley

In my job as a Turnaround Authority, I’m just like any other freelancer or contract worker. If I don’t work, I don’t get paid. I enjoy holidays and vacation time just as much as the next guy, but my bank account doesn’t grow during my time off.

I’ll go to great lengths to get new business. I once flew to Paris on a day’s notice at the request of a former client who said he needed me to meet face-to-face with someone at a manufacturing operation where he was experiencing a problem.

But there are other times when I’m offered work a lot closer to home. Work that would pay really well. And I turn it down.

Here are a few of the reasons I turn down work.

• I’m being asked to do something illegal or unethical. Not agreeing to do something illegal is an obvious one. But the ethical area is not always so clear cut to people. (I have a great story for that one that I’ll share later.)

• I don’t think the person trying to hire me is really committed to making the changes that will be necessary to meet the desired goals. Sometimes it’s someone who has a big ego and I can tell he or she won’t want to implement the changes I’ll be suggesting. I don’t want to set myself up for failure.

• I sense a personality conflict. I get along with just about everybody, but every now and then I’ll meet someone and I can tell right away that our relationship will not be smooth sailing. Many of my jobs involve working closely with key personnel at a company and it’s much easier to accomplish our goals (and more enjoyable) if we have good working relationships.

• I don’t trust the person who is trying to hire me. Sometimes this is based on just a sense I get about someone when I speak with him or her on the phone or meet with them in person.

Other than being asked to do something illegal or unethical, the rest of these reasons are pretty much based on my instinct. After almost 30 years in this business, I feel like I’ve learned to read people pretty well.

It really comes down to one thing: I trust my gut. If I make a decision against what my gut tells me to do, 99 percent of the time it turns out badly.

George Zachary, a partner with Charles River Ventures who has had more than $1 billion in returns on investments in companies that include Twitter, Trulia and Shutterfly, believes in trusting his gut too.

“Listening to my gut is the right thing to do for me. It doesn’t mean it’s going to work out.  But it does mean that’s what I should follow,” he said in an interview recently. “That’s my passion. When I’ve done that it has worked well. When I’ve followed my brain and not my heart it’s resulted in disaster and failure every time. I’ve had no success operating from making a rational decision or a decision based on fear. It’s all come from listening to my gut and intuition.”

The late Steve Jobs shared a similar philosophy during his Stanford Commencement speech. “You can’t connect the dots looking forward; you can only connect them looking backwards. So you have to trust that the dots will somehow connect in your future. You have to trust in something — your gut, destiny, life, karma, whatever. This approach has never let me down, and it has made all the difference in my life.”

It always works for me as well. My gut told me to go to Paris for a three-hour meeting. And that was the right decision. I didn’t make a lot of money on that trip — I only billed him for the time I spent in the meeting. But 18 months later when that client needed help again? He called me.

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The Lesson of the Brown M&Ms


You’ve heard the jokes about the outrageous demands rock stars make for stocking their dressing rooms during performances. Madonna requests new toilet seats; David Hasselhoff wants a life-sized cut-out of himself; Prince wanted everything in his dressing room covered with plastic wrap and James Brown is said to have requested two girls under the age of 21 and a lady’s hairdryer.

UnknownMany people trace these outrageous requests back to Van Halen. The band was mocked for famously requesting that the bowls of M&Ms in its dressing room had all the brown ones removed.

Rather than the ridiculous, egotistical request it may seem on the surface, it was actually a very clever way to ensure the band members’ safety.

At that time Van Halen had a sophisticated stage set-up and played in some older arenas that may not have been up to code. All the technical specifications on how the equipment needed to be set up safely were included in the tour rider that contained the request for a no-brown-M&M dressing room.

When the band and their managers walked in their dressing room and saw no brown M&Ms, they knew that the crew had read through the document carefully and their equipment would be handled correctly. If they did see brown M&Ms, they knew they’d need to check the entire production.

Fast forward a few decades and I’ll tell you what I can use as an indicator of whether a company has its act together and is taking care of business. Its website.

When I am called about consulting with a company, during the phone call I pull up the company’s website. I look to see if the site is being updated and includes new products. Are there any recent awards or press releases on there? Do I have to hunt for an address or a phone number to contact someone? Is it easy to navigate? Can I locate what I need to find quickly? These are just a few of the things I look for in that initial perusal.

A website is vital as a company’s online business card. And if the website isn’t being taken care of, then I can guarantee you other issues at that company are not being addressed either.

If a company isn’t taking care of the basics, like maintaining an updated and accurate website, it’s an indicator of shortsightedness and I know I’ll be finding other important tasks that have been neglected as well.

I worked with one guy who ran a $50 million manufacturing company. But the company had no website to purchase its products or even locate where a customer could find its products. I have plenty more stories like that.

I hear all the excuses: We’re working on it. The person who updates our site left. We don’t have the passwords. We’ll do it tomorrow. We can’t afford it.

But somehow tomorrow never comes.

Think of the saying: You only get one chance to make a first impression. Your website is often that first impression. What kind of impression is your company making?  If it’s not a good one, make it a priority to improve it.

I’m thinking of adding a new clause to my contract when I work with a company. I will request a box full of mixed nuts, trail mix and peanut M&Ms. And colors are fine. If I find these items when I show up, then I know people at the company are paying attention to detail and will most likely be cooperative.

If not, well, I may have a harder time getting the cooperation I need to get that company turned around. And I’ll just bring in my own snacks.

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Business Impossible: How My Job is Like a Reality Show

I’m not much for watching reality shows, but I did catch an episode of one called “Hotel Impossible” recently. And I realized the premise of this and similar shows, like “Restaurant Impossible” and “Tabatha’s Salon Takeover” are actually very close to what I do for a living.

The premise of all these shows is that the host of the show goes into a failing business with the goal of turning it around and making it successful. Which is exactly like I do.

Although in my business, we don’t accomplish everything in two days and we don’t have lots of corporate sponsors donating goods and services. Oh, and I don’t have a hair and make-up person to make me look pretty all the time.

But there are a lot of similarities between what these hosts and I do. Here are just a few:

In the show "Hotel Impossible" the host goes to failing hotels to whip them into shape, much like I do with failing companies. But with less decorating involved.

In the show “Hotel Impossible” the host goes to failing hotels to whip them into shape, much like I do with failing companies. But with less decorating involved.

• We have a lot of experience in our respective businesses.

Anthony Melchiorri is the star of “Hotel Impossible.” He has 20 years in the business and has developed and repositioned some very high-profile properties in the United States, including the Algonquin in New York.

I’ve been in the turnaround business for more than 30 years and have served as an interim executive officer and reorganization director for both large and small companies, public and private, with annual revenues from $1 million to $5 billion.

• We force people to face their harsh realities.

Anthony told the general manager he isn’t doing his job and that the property was falling down around him. He told the owners that they were treating this Alaskan fishing lodge as their own personal vacation spot, not like a real business. He doesn’t sugarcoat anything and gives it to them straight.

I have to tell CEOs and business owners things they don’t want to hear all the time. A lot of them, like the owners of this failing hotel, have been ignoring their problems or living in the land of denial. And I don’t mean the river in Egypt. They can’t fix anything until they acknowledge that there is an issue and their businesses are failing.

• We see ways to help a business that have been overlooked, ignored or dismissed by the CEO.

Anthony told the owners of the fishing lodge that they had to have a way to book the property online. He also looked at the shipping costs for provisions and determined that if they cut their monthly shipments to quarterly ones, they could save more than $20,000 a year.

I look at the operations and finances of a company and often find ways a company can improve or make money by making simple changes. In one case I found out that a client had a 90 percent market share on a product but hadn’t raised the price on it in years. One of my first actions was to raise the price by 25 percent, which made the company profitable on a going forward basis.

• We deal with dispirited and disheartened employees.

It’s no fun to work in a hotel property that is literally falling apart around you and where guests are often unhappy. The same is true of a business that is failing. Anthony wants to make people proud of where they work again, and I feel the same way. One of the most rewarding parts of my job is not just helping a company get back on its feet, but helping the employees keep their jobs.

• We leave the company is better shape than when we started.

Anthony leaves his properties with some common areas and at least one room made over, and gives the owners a plan for continuing the improvements so they can be on the road to success.

I don’t hang new curtains, or renovate bathrooms but I improve the operations and finances of a business so it can either succeed again or at least be in a better position to be sold and recoup some of the investment for the owners.

The last similarity? If you work with someone like Anthony or me, you’ll never end up as “The Biggest Loser.”

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Two Ingredients for Success Never Change

“I’m a greater believer in luck, and I find the harder I work the more I have of it.”

― Thomas Jefferson

“Innovation distinguishes between a leader and a follower.”

— Steve Jobs

Our society is always looking for the next thing that will lead to success and while theories on what makes people successful may vary, I believe there are two ingredients for success that never change: hard work and creativity.

In Malcolm Gladwell’s book “Outliers,” he writes about the 10,000-hour rule, which was based on a study by Swedish psychologist K. Anders Ericsson that claimed it takes 10,000 hours of practice to master a task.

He uses examples like the Beatles. While he acknowledges their talent, Gladwell claims that an invitation the band received to play in Hamburg, Germany, while they were starting out is what led to their monumental success. In Hamburg, the Beatles played five hours a night, seven hours a week, and honed their skills, preparing them for worldwide stardom.

The Atlanta Crackers minor league baseball team played in this stadium on Ponce de Leon Avenue

The Atlanta Crackers minor league baseball team played in this stadium on Ponce de Leon Avenue

I’m a big believer in the value of hard work. I’ve been working since I was 12 years old. In the warmer months I dragged a lawn mover around the neighborhood and cut lawns. When I was 15 I got a paper route, waking up at 4:00 a.m. to make sure my customers had the latest news from the Atlanta Constitution when they woke up.

While I learned valuable skills from these jobs — responsibility, reliability, how to land a newspaper squarely on a front porch and collect from delinquent customers — the job where I honed many of the skills I would use the rest of my life was as a peanut vendor at the Atlanta Crackers baseball games.

The Atlanta Crackers, a minor league team, played from 1901 to 1965, prior to the Braves coming in 1966 from Milwaukee. The games were played in Ponce de Leon Park, destroyed long ago and replaced by a shopping center.

I sold peanuts for a penny a bag commission. The top seller for each game got a $20 bonus for selling the most peanuts. It didn’t take me long to figure out that even if I threw away 100 bags and paid the $10 for them myself, I’d still come out ahead if I sold more than anyone else.

So during every game I’d try to track the other boys’ sales and then would buy whatever additional bags I guessed I needed so I could be the top seller and win that coveted $20. I won it every time and some weeks there were multiple games, so that extra $20 really added up.

While walking up and down those stands week after week, handing out bags of peanuts to baseball fans in the 20,000-seat stadium, I learned then that two of the keys to success are hard work and creative thinking.

I could have just worked hard selling the peanuts. But it took the creative thinking to land that additional $20 a game.

It’s that creative thinking that is often called into play in my work as a turnaround authority. It’s not that I’m the smartest guy in the room. It’s that I bring a level of experience at rescuing failing companies — there’s that 10,000-hour rule — and I bring a fresh perspective that is conducive to a creative approach.

Here’s just one story I tell in my upcoming book, “How Not to Hire a Guy Like Me: Lessons Learned from CEOs’ Mistakes.”

On one of my assignments we had a big problem with theft from a warehouse. Lots of merchandise was disappearing and I didn’t have the time or money to install a security system.

But I could install a dummy camera, wire and blinking red light. No guts or recording equipment, but it worked! Theft was reduced and with the savings I could buy a real security system.

There are plenty more examples where the combination of hard work and creative thinking by a team challenged with saving a failing company was able to succeed.

That’s what I do as a turnaround authority. And fortunately, I don’t work for peanuts any more.

 

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A Thieving Pizza Girl and a Lesson on Fraud

The story started with a pizza delivery.

It ended with an important lesson about fraud that I always relay to CEOs and business owners I work with. Always prosecute employees who commit fraud.

pizza-delivery-guy-01-afIn my business as a turnaround authority I often deal with the consequences of fraud. I’ve spoken at seminars and on radio shows about fraud. There is a section on fraud in my upcoming book, “How Not to Hire a Guy Like Me: Lessons Learned from CEOs’ Mistakes.”

Last year fraud cost companies in the US more than a trillion dollars. It’s a topic worth discussing.

While this story told by a young man about a pizza delivery gone wrong deals with the theft of a small amount of money, it illustrates an important point about fraud that this young man recognized. If you don’t prosecute people who steal from you, they will steal from someone else.

The story was on a podcast from The Moth, a site dedicated to storytelling and was told by Tristan Jemerson, who at the time was a student also working a minimum wage job. He had his identity stolen and all the money drained from his bank account.

He thoroughly investigated the crime himself and discovered that a woman who took his credit card number when he ordered a pizza at Domino’s was the one who made all the charges on his account. Working with the police, he had her arrested and the bank reimbursed all his money.

Then he got a call from the CEO of Domino’s. He thanked Tristan for his help on the investigation, conveyed his apologies and asked Tristan what he could do for him. After considering the offer and rejecting the idea of a lifetime of free pizzas or a pizza named after him, Tristan said, “I don’t want this to happen to anyone else. I want you to pursue it to the furthest extent of the law. And I want every new Domino’s Pizza employee to hear this story and be told that if they mess with credit card numbers, they will go to jail.”

The CEO said he could do that. And Tristan received a personal thank-you letter from the CEO that included a check for all the money that was stolen, although Tristan had said the bank was reimbursing him, and $500 in Domino’s bucks.

What Tristan recognized that many business owners don’t, or choose to overlook, is that once someone commits fraud and is not prosecuted, they most certainly will do it again.

I have dozens of examples of controllers, CFOs, warehouse managers and payroll clerks who were never prosecuted when they were originally caught stealing, and nearly every one of them stole again, eventually.

I know, because I’m the one who caught them and then finally had them prosecuted.

In one case a bookkeeper at a church stole millions of dollars from the church. She had done the same thing at a previous church in another state, but because that church chose not to prosecute, she just relocated and started stealing again.

If you experience fraud at your company and are tempted to let it slide, I hope you’ll remember the lesson of Tristan and the pizza delivery. Prosecute anyone who steals from you.