The cost of poor financial accountability across your business​

Back to the NHS for a moment … the BBC reported on a case involving NHS body Norfolk and Waveney Integrated Care Board who have, it was reported, spent just shy of £100K on legal fees defending a case at Tribunal described as a ‘car crash’. One notable aspect of this was the failure to disclose a draft investigation report to the Tribunal until five days into the proceedings, after initially denying its existence. This was despite the HR Manager who had written the investigation report actually sitting in court at the time. Just for clarity, I count this as a ‘whopper’ rather than a ‘little white lie’.

My best advice is that if you’re going to throw money at lawyers to defend a case in the employment tribunal, check and double check that that will be a good use of your money and time. I get that we have to defend what we need to defend in order to maintain standards and integrity, but just be very careful your desire to fight in court isn’t about internal politics, egos, protecting idiots who have messed up or decision making by people who have no real grasp of commercial priorities and needs etc.

We all pay enough attention in the workplace to preventing cyber-crime and fraud so how about we ensure an equal focus on internal behaviours that can at times cause us to haemorrhage money simply because we don’t appreciate the value of money.

Pass go and collect £200 …

Despite managing our money quite successfully at home (for the most part), my observation across several decades is that far too many people in organisations simply don’t value organisational ‘money’. It’s often treated as though its ‘monopoly’ money with no thought as to where it comes from or what will happen when the ‘bank’ is empty. Even in small teams, I often see this disconnect between what we spend and understanding what it takes to generate the money.

“It’s only an extra £2K, so just give him what he wants.”

And…

“It’s okay to use our lawyers as legal fees don’t come out of the HR budget.”

Are both things I’ve heard recently. If you listen out, you too will hear signs that people don’t really understand the value of money which is essential in any successful organisation.

5 top tips to promote financial accountability across your business

1. Do a job properly, the first time

This requires managers or investigators who understand the importance of process, who know what the policy is, who know how to conduct a professional investigation or hold a professional disciplinary meeting. All of this means that if you need to go to the employment tribunal, you can do so knowing your house is in order and you’re not going to lose on a technicality, which used to be the case for about 80% of all unfair dismissal claims won by the employee!

This will save a shed load of money when it comes to legal fees that just keep on ramping up when the process and paperwork has been a mess and decision making potentially flawed.

However, balance this with …

2. Avoid unnecessary gold plating which costs time and money

I often come across HR professionals who dress ‘gold plating’ up as ‘best practise’.

The reason why people gold plate (i.e. do more than is required), is generally because they are fearful of some come-back on them, fearful of their professionalism being challenged, or because they believe what they are doing is best practise.

If anyone says ‘let’s follow best practise’, ask them:

• can you show me what the SI (statutory instrument) sets out as the law
• then show me exactly what Acas set out as best practise on this
• then show me any case law you have seen that gives you this view on what best practise is
• then talk me through how all of that relates to what we have in our policy/procedure on this

ALWAYS call out those who have a tendency to laziness, so zip straight to someone else’s analysis on page 1 of Google assuming that Google must have put it to the top because it’s factually correct. Sorry for how harsh this sounds, but only idiots make assumptions like that.

NEVER accept someone quoting ‘best practise’ simply because they have read it in a legal briefing, or been told it once by someone they knew or, worse still, saw it on Tiktok.

We should only do more than is required by best practise (usually as set out by Acas) when there is a clear commercial reason to do some ‘gold plating’. Any unnecessary gold plating (with no clear commercial benefit) is quite simply a waste of time and organisational money.

3. Continually talk money within the HR and management teams

I’m not talking about budgets or pie in the sky money stuff, but real money understanding.

Imagine you’re looking to organise a one-off training session for a struggling team on Adaptability. If someone says “the trainer will cost x”, you say:

“So is that the net amount as we can claim VAT back, and what is the net cost of the venue, and what have we budgeted for delegate travel and accommodation (or time away from work if it’s an online course) and what are any other likely costs we will incur so we have a proper understanding of actual cost. And, from that, what is our per head cost for this training and how does that compare to other training sessions we have organised this year. And when we have that information, what return do we want on our investment (i.e. what behaviours will need to change or what actions taken following the training for us to know that we have invested wisely).

Or someone says: “we’ll just suspend her pending the police investigation outcome”.

To challenge their understanding of money you say, “if that takes 6 or even 12 months what will the total cost to us be, including salary, bonus, holidays, pension, NI and benefits? What other options do we have so we can manage our money rather than be at the mercy of the length of time required for a police investigation? And if there’s nothing we can do and it’s expected to cost us say £30K, then what do we have to sell to cover that amount, which budget will it come out of and how do we explain to shareholders that we incurred costs simply because we chose to wait for the outcome of a police investigation rather than initiate urgent steps based on the evidence we had?”

DON’T EVER let anyone talk about money as though it grows on trees and managing it is someone else’s responsibility.

4. When recruiting, always discuss the role in terms of its true cost to the business, not just the salary

Too often we hear people saying “it’s just someone on £30K (or £80K)” or “it’s only another £2K a month if we get them in part time.”

No! As a starter for ten, the cost of employing anyone in the UK is far more than their basic salary and this money has to come from somewhere.

If you factor in employers’ NI (national insurance) contributions at 13.5% over and above salary, pension costs ranging typically from 3-25% depending on the role/sector they are in, software licenses (CRM, Microsoft, etc), provision of hardware (e.g. laptops and phones), uniforms where applicable and of course the cost of any employee benefits, then the actual cost is usually 18-25% over and above gross salary costs – someone on £50K is therefore likely to cost you £60K. In the public sector, with high employer pension contributions (often 20%+) it can even be in the region of 30-40%.

5. Don’t lose your nerve or give second (or third!) chances when managing performance

When managing performance, know that every time you step back from dismissal or a formal warning simply because you lose your nerve or otherwise you want to give the employee another chance (or perhaps because you live with some vain hope that things usually work themselves out), then know that you are essentially throwing organisational money down the drain.

If you think a situation is serious enough to threaten disciplinary action, then have the courage to go through with it. If someone needs performance managing then see that through to the end rather than adopt a CAHO (cajole and hope) strategy.

Not managing those who misbehave or underperform is probably, for most businesses, the key reason why mind-boggling amounts of money drift straight out of the door.

Interested in more?

• Ethical leadership – join our 3 hour session on this on November 13th
• Conducting great investigations – join our open session on October 1st

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