There are two main lessons to be learned from this case. Firstly, improved employee oversight and incident response practices are required to prevent and better contain the damage of employee negligence/malpractice. Secondly, these oversight practices may not work for every business, and it thus may be better to move these responsibilities to an outside firm instead of hiring in-house.
As noted in the brief, lack of oversight of this employee can be cited as a central reason why this incident occurred. Meetings between Staunton and hands-on owner Patrick Dawleywere not effective at managing performance if this level of malpractice still happened. At closer intervals, it needed to be made absolutely certain that the regular functions of the business are occurring normally/best practices are being followed. Additionally, once deviance from best practices was observed, the owners of Carlton Chemical were prepared to give Staunton the benefit of the doubt and allow him to continue in his position with no repercussions, besides a ‘plan of resolution’ that essentially merely entailed giving him help with his responsibilities. It was only Staunton’s flight that brought to light for Carlton’s owners that he was doing something intentionally (i.e. covering up his mistakes at a massive cost to the company). This conclusion should have been reached anyway – given Staunton’s prior positive record as a bookkeeper, it is clear that he understands the basics of the position. Even if the owners were not comfortable concluding that Staunton had malicious intent, his mistake is large enough to warrant some sort of retribution, if not firing. For instance, Staunton covered up his accounting mishaps by stopping a company policy of mailing monthly statements to customers. Beyond a simple mistake, Staunton was making a decision about how the company interacts with its clientele that he did not have the authority to make. Regardless of intent, allowing the overstepping of authority without consequences causes management structures to crumble. Beyond management structures, for a company “religious about customer service and collections,” there should be zero tolerance for compromising on best practices – one can not expect to keep this reputation without the necessary legwork.
This nightmare scenario could work as great advertising for small businesses to hire outside accounting. If the owners of Carlton Chemical are not interested in being hands-on owners, or do not possess the skills to do so, it is difficult to prevent this sort of situation from occurring in-house. A small firm such as Carlton does not have many layers of management that can keep employees in check, which is why this responsibility fell to the single hands-on owner. Either this owner must be more diligent in evaluating performance, or it would be in the company’s interest to hire someone in a managerial role who could monitor the performance of several lower-level employees. If hiring more in-house management is not feasible financially, or a manager would not be helpful in many other ways, hiring an outside accounting firm may be the best way to ensure accountability. An outside firm would obviously never do something this harmful to their reputation. They would thus remove the need for oversight, and would allow management to focus more on growth. Down the line, outsourcing accounting services can also remove costs for training, supplies, etc. Some of Staunton’s responsibilities, such as responding to customer service inquiries, may not be able to be handled by an outside accounting firm, but can either be outsourced elsewhere or redistributed to another employee – unlike accounting, these are not responsibilities that present serious accountability issues.
For Carlton Chemical to survive, it must assess the weaknesses of its management structure and determine if the best path is to become more diligent or to remove as much responsibility/risk as possible.