Control and the Appearance of Control

By Charles Vander Kooi

Many companies are nothing but a memory, simply because they were so terribly ripped off by their own field people.

Blue collar theft is, by far, a greater dollar drain on the American economy than any other form of theft. Construction companies, with their many jobs, greater quantities of materials, and difficult security problems, become one of the largest victims of this kind of crime. Many companies are nothing but a memory, simply because they were so terribly ripped off by their own field people.

This is largely due to the fact that in construction we are sometimes forced to hire less-than-scrupulous people. But this is certainly not the only reason for theft. In fact, many times, theft is committed by some of our very good people. It often happens because they feel as though it is an accepted, or ever expected, practice by those in this industry. Sometimes they justify it because they feel that you owe it to them and, even thought you have not given it to them, you would not mind them taking or borrowing materials and equipment.

I think in order to keep this kind of thing to a minimum; you need to always work at letting your field know that you are in control. If you let them know you are on top of things, it will help keep them from being tempted to take, or to use things that are not theirs. In working out how to do this, I think you need to understand the difference between control and the appearance of control. You need to decide first how much time and effort will be given to control, and then second, to decide what can be done without spending a lot of money but still giving the appearance of control.

Control will happen in those areas in which you spend time, money, and effort to keep track of important items. Keep on top of those things and youll have control. Everyone in your company should know that you are aware of everything about those particular items and that no funny business can occur in those areas without you knowing about it immediately. That is the level of control we all need to keep from being ripped off.

But we all know that in this hectic, fast-moving business, it is virtually impossible to have that kind of control in every area of every job that is going on in your company. In some cases, it would actually cost more to keep people from stealing things than the things they would steal are worth. It is in those areas that I feel you need to come up with some inexpensive ways to give the appearance of control. Lets list some areas in which you can have problems, and then discuss some ways to put forth an appearance of control to keep these areas from being a problem.

  1. Ghosting: The practice of putting friends or relatives on the payroll when they are really not even working for your company. They then collect a paycheck and split it with your employee.
  2. Padding hourly contract people (truckers, backhoes, tractors, labor): The proactive practice of paying someone a few dollars more than they want or giving them more hours on their job that they actually worked, then splitting the difference with that contracted person.
  3. Tool and material pilferage: The practice of taking items from the job and either using them on their personal property or selling them to others.
  4. Equipment borrowing: The practice of taking your equipment home on the weekend and either doing work at their home, or doing work on jobs they have contracted for personally.
  5. Drug use before the job or while on the job.
  6. Floating: The practice of taking too much time for personal business away from the job site, or of letting the crew people take too long on their breaks, or of not producing a fair amount of work in one day.

Now that we have listed some of the potential problems, lets talk about ways to prevent them from happening. First, ghosting employees. I think that it is important that the owner not only sign the paychecks, but that on unannounced occasions, he goes out to the job site and actually pass out the paychecks and see these people face to face.

Second, padding hourly contract people and floating. I feel that all hourly prices should be negotiated by people in management positions and/or the owner, rather than allowing field people to negotiate those prices. Also, field visits should be made at unannounced times. These field visits will ensure that people are actually on the job. Also, these visits should include one well-placed question about how long someone (contract hourly person) has been on the job and is expected to be on the job. That information should be written down in the persons presence even if you never look at it again. Also, I think that the best source of information can be other people on the job other than your foreman or supervisor. Again, you do not want to appear that you dont trust your foreman or supervisor. You are merely seeking information that will give you what you must have; i.e., just the act of collecting it will help keep things under control.

Also, job costing both labor and equipment is one of the best ways to control these items. If these items overrun the original estimate, some sort of justification must be made by the field supervisor and/or the estimator. However, I must admit that job costing can cause you a problem in this area. If someone sees that more hours were estimated than were needed, they may use the extra hours needlessly, which is theft, really. In the next section, I will talk about rewarding those who do well and who do better that the estimates on a regular basis. If you do not do this type of thing, then you will set yourself up for the kind of problem I have just mentioned. Consequently, rewarding people for a job well done is another way to minimize theft in these areas and is a must if you do job costing.

Third, pilferage. This is probably the most difficult thing to control on your jobs. One of the best ways is to have job costing done in the area of material. However, this can be expensive to do if you are a smaller contractor. I believe every contractor can do job costing for labor and equipment, but only those who are bigger, and who can afford it should do material job costing.

But regardless of whether you do material job costing or not, every company should have someone (preferably the owner) look over the invoices and, again, ask certain questions of certain people which will always give the appearance you are in control of what material goes to what jobs. Also, this same person should make spot inventory checks (on the jobs) for the materials which were ordered and for what was actually installed.

One other system I recommend is a two-type purchase order system. I recommend a large-type purchase order be used for the original purchases of material the estimator had taken off and felt was needed (right from the estimate sheet). Then, all field people should be given another, smaller purchase order with different numbering system. These are to be used by field people whenever they need to order or pickup something in a hurry. Anytime one of the purchase orders is used, a red flay should go up in your mind. It means that the estimator missed the quantity on his estimate, or that something has been stolen, or possibly, a change order needs to be issued.

Though it can be a hassle, all your suppliers and employees need to know that nothing can be purchased over $25 in value by anyone in your company without a purchase order. Your attention to such details will help you eliminate pilferage.

Fourth, borrowing equipment. Many times, this type of thing can be acceptable practice within your company. But if you do not have some policy as to how and when an employee can borrow a piece of equipment, it can get away from you very quickly. And, even with a policy, some equipment can be borrowed without permission. Again, job costing as to the hours certain pieces of equipment are used on jobs can help reduce this problem. When you go on jobs, it may be wide not only to look over equipment to make sure it is not being abused, and it is being properly maintained, but also to write down the hours on the hour meter, or the mileage on the speedometer. Remember, this information may or may not be used by you, but the appearance of your checking and monitoring these things can help reduce any problem in this area.

Finally, drug and alcohol use before or while on the job. In talking about this problem with companies around the country, I find more and more firms are taking a very tough stance concerning this problem. Some are not allowing any kind of drinking on the job, even after the day is over. They are worried about potential law suits if one of their employees is in an accident after what could appear to be a company-sponsored (or condoned) time of drinking. Also, they feel they want to make it quite clear, from an easily understood policy, there is to be no drinking on any job at any time.

Also, many companies are instituting mandatory drug testing prior to any person being hired. This does not completely insure you of having a drug-free work force, but it does send a message that is heard loud and clear by everyone. Be sure to consult with your attorney about establishing and carrying out this policy.

Remember, good field performance, and honesty in what is going on out there on all your jobs, depends on how in control you are. Make every effort to control those things which you can, feasibly and economically. For those things which you cannot control as you would like to, find ways to at least give the appearance of control to your people.

Seminars offered by Charles Vander Kooi
Estimating & Bidding Balancing Estimating, Job Costing, and Accounting People Management

Charles Vander Kooi Biography:

Charles Vander Kooi has been involved in the construction industry for over 30 years, thirteen as an upper-management employee of companies and seventeen as a consultant. He has bed over a billion dollars in work over his career. As a private consultant, he has helped over 1,200 companies in their estimating/bidding systems and has lectured to over 70,000 contracting people nationally and internationally.

Constantly in demand, Mr. Vander Kooi speaks at an average of 100 Trade Shows and Conventions annually, teaching his philosophy across the U.S., Canada and Australia. His company consults with an average of 100 clients annually to assist in improving their performance.

He has authored eight books to the industry and his seminars are available on audiocassettes as well as videos.

Vander Kooi and Associates, Inc.
Phone: 303.697.6467, Fax: 303.697.6815

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