Failures and breakthroughs – exposed, reflected, considered

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The rise and demise of GM’s Saturn

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Not very long ago, on a cold, wintry day of January 1985 the top man at GM, Roger B. Smith, unveiled ‘Saturn’, the first new brand to come out of GM in almost seven decades. A stand-alone subsidiary of GM, Saturn had a promising birth and was touted as a ‘different’ type of a car. Having its own assembly plant, unique models and separate retailer network, Saturn operated independently from its parent company. It was a cut above the rest in using innovative technology and involving its employees in the decision making process. Conceived as a fighter brand to take on the Japanese brands, the small car of superior quality was the product of strong principles with a mission of being America’s panacea to Japan’s challenge. It reaffirmed the strength of American technology, ingenuity and productivity with the combination of advanced technology and latest approaches to management.

Though a revolutionary idea, Saturn wasn’t able to live up to the hype or the hopes of Roger Smith. The case of Saturn is definitely one for the books. Its marketing campaign fired up the public’s imagination and interest perfectly while the product was a miserable failure. Everything the company did was just another leaf out of the handbook of perfect PR. When the first lot of cars had a bad engine antifreeze, the company replaced the entire car instead of just the coolant much to the customer’s delight.

Besides clever marketing, Saturn’s biggest assets were its passionate employees and customer-centric approach which rewarded it with a quick victory. The victory was however short-lived as GM was reluctant to expand Saturn’s offerings for fear of cannibalization on the sales of its other divisions. For the existing models, Saturn’s engine had inferior motor mounts with the plastic dashboard panels giving it a cheap look and even the plastic-polymer doors, the so-called unique feature, failed to fit properly. Overall, the car neither had an identity nor a USP. To make things worse, Roger Smith was on a spending spree from throwing recall parties when vehicle problems were solved to hosting “homecoming” celebrations at plants. This saddled GM with high costs leading to increased doubts of Saturn’s survival among the leaders of GM.

Disaster struck further when Saturn’s sub-compact prices failed to cover the huge costs gobbled up by a dedicated plant with massive operating costs. The fact that the plant churned out cars that barely share any common parts with other GM brands did not seem to help at all. To top it all, at a time when buyers were snapping up minivans and SUVs, Saturn’s offerings were just limited to 3 small models for over a decade, thereby losing out on locking customers in. Just when GM was pondering over the decision of scrapping the car, the UAW visited one of Saturn’s production facility with its international contract, only to be rejected by the workers. As obvious as it seemed, the unique labor contract of the company was dissolved and GM had no choice but to part with the brand by dividing the production among other GM plants.

Automotive history has witnessed myriad failure stories of brands that were supposed to be world-class products but ended up biting the dust. One such underachiever brand was Vector which sprouted out of the aim of producing an American supercar but doomed due to cash flow issues, mismanagement and failing to keep up their insane promises. Sterling, Rover’s disguise into the American market, was another lost car of the 80s which most people haven’t even heard of. Their promise of delivering “Japanese reliability and refinement with traditional British luxury and class” couldn’t save them from continuous sales drop and combating competition from new Japan rivals. Few other epic automotive experimental failures which can be recalled in this scenario would include Chrysler’s TC by Maserati , Subaru SVX, Jaguar X-type, Lincoln blackwood, GMC Envoy XUV, Chevrolet SSR, Chrysler Crossfire and Dodge Durango Hybrid/Chrysler Aspen Hybrid. While some were design disasters, the others just couldn’t perform.

The automobile industry is governed by various factors which include the technology advancements of the time, economic conditions and fluctuations of consumer needs. The latest automotive chip on the block are the electric cars which are set to revolutionize the entire industry. LeEco, a Chinese electronics company is taking serious steps to target Tesla, what with it investing $1.08 billion on developing its debut electric car. Tesla was the name which paved the way for an electronic vehicle era. Whether LeSEE, LeEco’s concept sedan, can surpass Tesla’s performance and give them a run for their money is only something that time will tell. If successful, these electric cars could be the game changers of this century to usher in an electric future. If not, it will fade away and claim its place as a bittersweet memory on the list of flops that the industry has had.

Written by Hayk

April 8, 2017 at 4:18 am

Can technology fail humanity?

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Technology, a combination of two Greek words signifying ‘systematic treatment of art/craft/technique,’ is:

the collection of techniques, skills, methods and processes used in the production of goods or services or in the accomplishment of objectives..

Whether it was discovery of fire, building a shelter, invention of weapons – and in modern times – invention of Internet, microchips, etc., it has always been about inventing, discovering and using information, techniques and tools to induce or cause economic, scientific and social progress or improvement.

However, the progress that technology caused has neither been linear or impending or ubiquitous or even obvious. All Four Great Inventions of China happened before 12th century AD. But, on the other side, despite Hippocrates’ treatise (dating from 400 BC) that, contrary to the common ancient Greek belief that epilepsy was caused by offending moon goddess Selene, it had a cure in form of medicine and diet, 12th-14th century Christendom perceived epilepsy as the work of demons and evil spirits, and its cure was to pray to St. Valentine and other saints. And in many cases, progress of technology itself or its consequences have been a matter of pure chance or serendipity, whether it is penicillin, X-rays or 3M’s post-its.

So, ironic as it is, until recently, technology hasn’t been very systematic in its own progress, let alone its impact on society, economy and culture of nations. But it’s become a lot more systematic since the dawn of Information Age, last 60 or so years. Since microchips, computer networks and digital communication were invented (all in the US), the technology became more systematic in its own progress and it’s becoming more miniature, cheaperfaster and more ubiquitous than ever before in human history. Ubiquitous technology makes the world hyper-connected and digital. Whether it is our phones, thermostats, cars, washing machines, everything is becoming connected to everything.  It is thus no coincidence that California (Silicon Valley + Hollywood) has recently become the 6th largest economy in the world, thanks to its beaconing technological and creative progress embodied in last 60 or so years.

Trump era has begun in January 2017, and he already did more to damage any potential technological and scientific progress coming from the US than any of his predecessors. From trying to unreasonably curb immigration from Muslim countries to terminating TPP to undoing progress in transitioning to clean energy and again focusing on coal to disempowering OSTP, Trump wraps his decisions with firebrand rhetoric and well-thought out psychological biases (anchoring bias is his favourite) around one message: MAGA.  Hopes are turning to China as the next flag-bearer of technological progress.

Nowadays, even coffee-shops are hyper-connected, aiming to personalize our coffee-drinking experience. And thanks to its omnipresence and pervasiveness of Internet, wireless connections, telecommunications, etc., technology (smartphones, games, virtual worlds, 3D headsets, etc.) is becoming and end in itself. In countries and cities like Singapore, Hong Kong, New York, digital and smartphone addiction is already a societal problem causing unintended deaths, lack of maturity, loss of educational productivity, marriage breakups, to cite but a few. In Singapore, where according to recent research, Millennials spend an average of 3.4h/day on their smartphones, government is now putting in place policies and organizations to tackle this psychological addiction.

However, even Bernie Sanders knows that technology cannot and should not be an end in itself or an addiction. Could Internet and technologies fail? Could Internet and thinking linked to it spell the end of capitalism? Could it cause societies, cultures and nations to fail?

Technology has proven to fail itself and us when it became an end in itself.

Only when it stays true to its nature and acts as an enabler, a platform for human endeavors is when technology will succeed. It can even end poverty or other problems and issues human race is facing..

 

How HR departments fail companies from inside and outside

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Let’s start by analysing how HR departments sometimes “wrack havoc” on human resources of a company.

The infamous Fast Company article of 2005  “Why We Hate HR”  is as discussed and relevant as before. It trashes HR people as dull-witted pen pushers, “The human-resources trade long ago proved itself, at best, a necessary evil — and at worst, a dark bureaucratic force that blindly enforces nonsensical rules, resists creativity, and impedes constructive change. HR is the corporate function with the greatest potential — the key driver, in theory, of business performance — and also the one that most consistently underdelivers.

Opsss.

According to the same article, “a 2005 survey by consultancy Hay Group, just 40% of employees commended their companies for retaining high-quality workers. 41% agreed that performance evaluations were fair. 58% rated their job training as favorable…. Most telling, only about half of workers below the manager level believed their companies took a genuine interest in their well-being.” Only half of employees think HR cares about them?

HR staff are either perceived as harbingers of bad news or in “best case scenario” of doing a ‘useful’ activity, they are still a bureaucratic and legal bottleneck, usually slowing down operations and generating much negativity and pessimism among employees. Then I guess it shouldn’t surprise us that more and more companies observe more direct and stronger connections between employees and their managers as a result of eliminating the HR function. And one company – perhaps jaded from its previous HR department’s debilitating effect, hired one HR staff, but agreed on not calling her that – she goes without a title. Business is moving the other way, to reduce HR departments by outsourcing its paper-pushing functions; PriceWaterhouseCoopers estimates it can shave 15 to 25 percent off your HR costs. These humans are simply not resourceful enough.

Wow. Can it get any worse for the HR staff?

In one very public scandal, BBC’s HR manager Lucy Adams “was accused of presiding over ‘corporate fraud and cronyism’ over huge pay-offs to former executives” add a further insult to injury. Some of most notorious HR strategies such as PTOs, PIPs and performance reviews may even destroy a company.

It thus seems that existence of many HR departments defeats their very raison d’être as far ‘internal’ (i.e. inside a company) activities and corporate goals are concerned.

What about an HR department’s ‘external’ role, that of scouting for the best and the brightest? Company’s strategy is its culture (created by its employees), and its culture is its strategy, which is of course true and goes to say how essential it is to find the right people who would not only have skills-experience match but more importantly have a cultural fit for the company. Zappos, Pixar, Cirque du Soleil and others successful companies attribute their success primarily to their people.

Yet, despite the known and accepted fact that many applicants forge and offer polished cover letters and CVs, HR departments – the bigger/more famous the company, the bigger number of applicants apply for the company – continue to commit two essential mistakes:

  1. overly rely on data on CV/cover letter;
  2. look for as close a “literal” (as opposed to “big picture“) match to the job vacancy as possible.

In most cases, the first mistake yields much redundant work (for and by HR departments), disappointment (when, once accepted, it turns out the candidate didn’t have either good enough/pre-requisite skills or experience or was not a cultural fit), or lose (employee being fired or resigning shortly after joining the company).

The second mistake, equally or even more widespread, not only causes all the same problems, but, more importantly, discards candidates with profiles that are wider or somewhat different from the vacancy scope. In the modern age in which present and future belong to generalists, HR departments’ tunnel vision – the same tunnel vision that discredits HR as a department unable to see the big picture (company’s vision) nor assess or understand well enough business vision as to deserve a decision-making power inside the company – turns off many a qualified generalists (i.e. multidisciplinary people) or candidates with a wide cross-section of skills and experiences, who would have otherwise been (significantly) useful and thrived within the company.

Thus the conjunction of the two above-mentioned mistakes and standard HR internal practices end up costing the HR not only their reputation, but in a longer run, dissuade companies from the idea of having a dedicated HR department. Or, as my generalist friend Arnold suggested, given how standard matching algorithms work in general, it ain’t no big stretch to imagine that if HR continues on its current path, it will inevitably lead to HR function being automated via a software program with one of standard programs specially designed for that purpose.

Lastly, erroneous hire usually ends up being a waste of monetary, time and emotional investment both for a company and an (erroneously hired) employee, all the while as HR department is being paid to ‘recruit’ talent.

Modern saga “The Fox and the Hedgehog”: generalists vs. specialists

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About 2,700 years ago, Archilochus wrote that “The fox knows many things, but the hedgehog knows one big thing.” Taking that as a starting point, Isaiah Berlin’s 1953 essay “The Fox and the Hedgehog” contrasts hedgehogs that “relate everything to a single, central vision” with foxes who “pursue many ends connected … if at all, only in some de facto way.”

And so we have become a society of specialists with much heralded “learn more about your function, acquire ‘expert’ status, and you’ll go further in your career”  considered the corporate Holy Grail. But is it?

The modern corporation has grown out of the Industrial Revolution (IR). The IR started in 1712 when an Englishman named Thomas Newcomen invented a steam-driven pump, to pump water out of a mine, so the English miners could get more coal to mine, rather than hauling buckets of water out of the mine. That was the dawn of the IR. It was all about productivity, more coal per man-hour; and then it became more steel per man-hour, more textiles per man-hour, etc.

The largest impact of the IR was the “socialization” of labor. Prior to the IR, people were largely self-sufficient, but the IR brought increased division of labor, and this division of labor brought specialisation, which brought increased productivity. This specialisation, though, decreased self-sufficiency and people became increasingly inter-dependent on one another, thus socialised more. Also, with the division of labor the individual needed only to know how to do a specific task and nothing more. Specialization also caused compartmentalization of responsibility and awareness. On a national level, it has allowed nations to become increasingly successful while the citizens become increasingly ignorant. Think an average American. You can be totally wrong about almost everything in life, but as long as you know how to do one thing good you can be a success, and in fact in a society such as this increased specialization becomes advantageous due to the extreme competition of our society. Environments with more competition breed more specialists.

But is the formula that ushered humanity in 20th century of rapid technological industrialisation and economic development still valid or as impactful in 21st century as it was for last 300 years? In our modern VUCA world, who (specialist OR generalists) have a better chance of not only surviving but thriving?

According to a number of independent research papers, employees most likely to come out on top of companies and becoming successful in long term are generalists—but not just because of their innate ability to adapt to new workplaces, job descriptions or cultural shifts. For example, according Carter Phipps (author of Evolutionaries) generalists (will) thrive in a culture where it’s becoming increasingly valuable to know “a little bit about a lot.” More than half of employees with specialist skills now consider their job to be mostly generalist despite the fact that they were employed for their niche skills, according to another survey. Among the survey respondents, 60% thought their boss was a good generalist, and transferable skills – such as people skills and leadership – are often associated with more senior roles.

We’ve become a society that’s data (from all various specialisation, industries and technologies) rich and meaning poor. A rise in specialists in all areas — science, math, history, psychology — has left us with huge amount of data/info/knowledge but how valuable is it without context? Context in a data-rich world can only be provided by generalists whose breadth of knowledge can serve as the link between various disciplines/contexts/frameworks.

A good generalist, David Christian gave his 2011 TED talk called “Big History” of the entire universe from the big bang to present in 18 mins, using principals of physics, chemistry, biology, information architecture and human psychology.

To conclude, it seems that specialisation is becoming less and less relevant due to 1) increasing, interconnected and overlapping data and information that permeates all aspects of our lives, 2) increasing VUCA-ness of social, political and economic situations of individuals and nations, 3) need to envision and derive from a bigger context or connect few contexts/disciplines/frameworks. All points seem to be better addressed by generalists.

Top 10 ways to manipulate people (Chomsky)

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Noam Chomsky wrote the article entitled “top 10 ways to manipulate people.” Below is the reprint of this article.

1. The strategy of distraction

The primary element of social control is the strategy of distraction which is to divert public attention from important issues and changes determined by the political and economic elites, by the technique of flood or flooding continuous distractions and insignificant information.

Distraction strategy is also essential to prevent the public interest in the essential knowledge in the area of the science, economics, psychology, neurobiology and cybernetics.

“Maintaining public attention diverted away from the real social problems, captivated by matters of no real importance. Keep the public busy, busy, busy, no time to think, back to farm and other animals” (quote from text Silent Weapons for Quiet Wars).

2. Create problems, then offer solutions

This method is also called “problem -reaction- solution.”

It creates a problem, a “situation” referred to cause some reaction in the audience, so this is the principal of the steps that you want to accept.

For example: let it unfold and intensify urban violence, or arrange for bloody attacks in order that the public is the applicant’s security laws and policies to the detriment of freedom.

Or create an economic crisis to accept as a necessary evil retreat of social rights and the dismantling of public services.

3. The gradual strategy

Acceptance to an unacceptable degree, just apply it gradually, dropper, for consecutive years.

That is how they radically new socioeconomic conditions (neoliberalism) were imposed during the 1980s and 1990s:

• the minimal state
• privatization
• precariousness
• flexibility
• massive unemployment
• wages
• do not guarantee a decent income,

…so many changes that have brought about a revolution if they had been applied once.

4. The strategy of deferring

Another way to accept an unpopular decision is to present it as “painful and necessary”, gaining public acceptance, at the time for future application.

It is easier to accept that a future sacrifice of immediate slaughter.

• First, because the effort is not used immediately
• Then, because the public, masses, is always the tendency to expect naively that “everything will be better tomorrow” and that the sacrifice required may be avoided

This gives the public more time to get used to the idea of change and accept it with resignation when the time comes.

5. Go to the public as a little child

Most of the advertising to the general public uses speech, argument, people and particularly children’s intonation, often close to the weakness, as if the viewer were a little child or a mentally deficient.

The harder one tries to deceive the viewer look, the more it tends to adopt a tone infantilizing.

Why?

“If one goes to a person as if she had the age of 12 years or less, then, because of suggestion, she tends with a certain probability that a response or reaction also devoid of a critical sense as a person 12 years or younger.” (see Silent Weapons for Quiet Wars)

6. Use the emotional side more than the reflection

Making use of the emotional aspect is a classic technique for causing a short circuit on rational analysis, and finally to the critical sense of the individual.

Furthermore, the use of emotional register to open the door to the unconscious for implantation or grafting ideas , desires, fears and anxieties , compulsions, or induce behaviors …

7. Keep the public in ignorance and mediocrity

Making the public incapable of understanding the technologies and methods used to control and enslavement.

“The quality of education given to the lower social classes must be the poor and mediocre as possible so that the gap of ignorance it plans among the lower classes and upper classes is and remains impossible to attain for the lower classes.” (See Silent Weapons for Quiet Wars).

8. To encourage the public to be complacent with mediocrity

Promote the public to believe that the fact is fashionable to be stupid, vulgar and uneducated…

9. Self-blame Strengthen

To let individual blame for their misfortune, because of the failure of their intelligence, their abilities, or their efforts.

So, instead of rebelling against the economic system, the individual auto-devaluate and guilt himself, which creates a depression, one of whose effects is to inhibit its action.

And, without action, there is no revolution!

10. Getting to know the individuals better than they know themselves

Over the past 50 years, advances of accelerated science has generated a growing gap between public knowledge and those owned and operated by dominant elites.

Thanks to biology, neurobiology and applied psychology, the “system” has enjoyed a sophisticated understanding of human beings, both physically and psychologically.

The system has gotten better acquainted with the common man more than he knows himself.

This means that, in most cases, the system exerts greater control and great power over individuals, greater than that of individuals about themselves.

Written by Hayk

November 10, 2012 at 12:38 pm

Stark Lessons From The Costa Concordia Disaster

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This is a guest blog by Eve Baxton.

Nowadays, cruise ships are widely regarded to be one of the safest forms of travel, more so than both airplanes and automobiles. Like with all forms of travel however, when an unfortunate disaster does strike, it usually provides stark lessons for the future – prompting new safety procedures, policies and changes in law to avoid the same ever happening again.

Perhaps the most profound maritime example of this was in 1912 with the sinking of the RMS Titanic. Since the disaster, which claimed the lives of over 1,500 people, swift changes were made within Maritime law in regards to passenger safety; namely, providing enough lifeboats for all on-board. An obvious safety precaution it would seem, but human error can still find a way – as the sinking of the Costa Concordia earlier this year also demonstrated.

Around 9:45, on the evening of the 13th of January, the Costa Concordia struck a rock just off the eastern shore of Islo Del Giglio, on the western coast of Italy, tearing a 50 metre gash on the left side of the hull. Parts of the engine room immediately began to flood and having lost power, the ship drifted back towards the shore of Giglio, where it grounded and began to sink on its starboard (right) side (otherwise known as ‘listing’) – eventually rendering the lifeboats on that side unusable. Instead of being evacuated within 30 minutes of the abandon ship announcement (as Maritime Law dictates) it took over six hours for all surviving passengers to make it off the ship, despite the close proximity to shore and calm sea. The disaster resulted in the deaths of thirty people, with another two missing and presumed dead.

Both the captain, Francesco Schettino, and Costa Cruises received heavy criticism for the disaster and loss of life which could’ve been avoided had multiple safety violations not been made and protocol been better adhered to. Like the Titanic, and other more recent maritime disasters (such as the MV Le Joola in 2002 and the MS al-Salam Boccaccio 98 in 2006, killing over 4000 and 900 people respectively) the sinking of the Concordia has prompted multiple changes in maritime law.

The Cause

The sinking was a direct result of the Concordia moving off its designated route, to within 150 metres close of the shore, in a manoeuver known as a ‘salute’ or ‘showboating’, a sail-by for promotional purposes. Most if not all cruise liners perform these manoeuvers, which by their nature have the potential to be dangerous, but are safe if they’re properly navigated. This one however was instead scheduled to take place a few days previous, but was cancelled due to bad weather. It was claimed by crew members that Schettino, deviated from a GPS navigated route past the shore in order to make this salute; which ultimately led to the Concordia’s collision.

Abandoning Ship

With too many of the hull compartments breached with water to keep the ship afloat (in such a way that mirrored the fate of the Titanic) and its sinking inevitable, fatalities still could’ve been avoided. After the initial impact and power had been lost, frightened passengers were told that there had been a power failure and not to worry. Once the extent of the situation was established, passengers were eventually told to get put on their life jackets and to go to their muster stations. However, illustrating the lack of direction and communication amongst the Concordia’s crew, a crew member was filmed telling passengers that all was well and to go back to their cabins, just 30 minutes before the abandon ship announcement was made. When it eventually was, the crew were reluctant to lower lifeboats, almost an hour before the ship began to list making them impossible to deploy thereafter. Consequently many passengers were left stranded on the ship, whilst some made it to shore on lifeboats, others being helped by locals, and others attempting to swim to shore. The captain broke protocol by leaving the ship whilst his passengers were still on-board. The evacuation efforts went on until 4:46 am.

The Changes in Law

Perhaps the most prominent change in maritime law prompted by the Costa Concordia is that all cruise liners must now hold safety drills for passengers before the ship even leaves the dock. Previously, it had to be held within the first 24 hours of setting sail. In the Costa Concordia’s case, this drill was held within the first 24 hours for new passengers, but of the 4,252 passengers, 696 people who boarded the ship at Civitavecchia had not been briefed on safety procedures, with the drill scheduled for the next day. This naturally caused a lot of confusion and panic when passengers were called to the muster stations.

Other procedures under review include the way in which crew take the muster. Amidst panic during an actual disaster, or during a routine drill which holidaying passengers may not take seriously (or pay attention to) the accuracy of calling out names and ticking off lists comes into question – especially on large cruise liners with thousands of passengers. Royal Caribbean Cruises have adopted a more effective method on two of their cruise ships. Both Oasis and Allure of the Seas (two of the largest cruise liners in the world) have a far more accurate method in which the crew scan passenger’s key cards, allowing them to determine who is present in a much swifter, less chaotic fashion. Another possible change is the addition of more life jackets in public areas. With the power cut on the Costa Concordia, dark conditions made it difficult for passengers to go back to their cabins to retrieve their life jackets, more so for recently boarded passengers unfamiliar with the ships layout. Royal Caribbean Cruises again have been quite innovative with their solutions, handing out lifejackets at the muster stations instead.

Countless other regulations, precautions and procedures are also being reviewed, with staff training also being reassessed. The nature of disasters such as the sinking of the Costa Concordia, or even the Titanic, are so often made up of one initial incident, mistake or otherwise, which doesn’t necessarily have to pose a threat to human life. What does pose a threat however is when the correct procedures are not adhered to, or are ineffective, causing more mistakes to be made and turning something preventable into a disaster. Maritime law has continued to push for the highest standards to protect everyone who goes on a cruise, with each (albeit statistically rare) disaster over the years shedding light on areas that need improvement; having a large impact on the safety regulations, precautions and procedures of today. These all serve to protect passengers, whatever the situation. And perhaps it’s because we learn so much from the past that a cruise ship still remains one of the safest ways to travel.

Written by Hayk

November 10, 2012 at 10:22 am

Don’t Fail Your Business – Avoid the Most Obvious Traps

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This is a guest blog by Eve Baxton.

Owning a professional business is a huge responsibility. It involves all the potential risks and traps that are imaginable. According to a survey in 2009 by PrinceWaterHouseCoopers more than half of the enterprises suffered from the economical crimes. In most of the cases, small sized enterprises are the best prey to fall for potential traps around.

These dangers include employees or managers misrepresenting or manipulating the financial information, customers misusing the enterprise’s borrowing in criminal activities and contractors producing false bills. Along with that, other elements exist that perpetrate fraud against the enterprise by electronic means. This includes hacking, manipulating the telephone service and robbing customer’s confidential data, such as credit card numbers or usernames and passwords.

The ultimate quest that should be taken care of as soon as possible, to protect your business is identifying the sources of potential fails. That is not an easy task to take on, for a less experienced businessman. By just considering some basic and yet important things, the enterprise can be easily protected from potential frauds, however.

According to the statistics, the most common reasons for falling into these traps are the lack of experience, commitment, and, most significantly, management. Let’s take a look at the potential traps that most of the enterprises, no matter big or small, fall for.

 

  • The Innocent Employee Trap
    According to the facts, most of the time insiders; employees, managers, or company’s officials, are the main reason for an enterprise to fall and fail. These employees “innocently” steal the assets of the company, and commit accounting frauds. Detecting such actions is vital; it requires a lot of methodologies and commitment to be employed, however.
  • The Clever Customer Trap
    Another hazardous trap that most of the enterprises fall for is the clever customer trap. It has been found that many customers are using fake identities, stolen credit cards, or are filling out fake liability and injury claims to perpetrate the company. All these actions by “the sweet customers” only results in the enterprise’s money being taken away.
  • The Fake Return Scheme Trap
    The most common victims of this type of frauds are retailers. It is the best scam for the clever customer to perpetrate against any enterprise. Most of the times, the customer brings back used merchandise that has not been bought from the same place and tries to return it and get new merchandise under the shelter of the fake return schemes.
  • The Greedy Contractor Trap
    Most companies rely on outside service providers for its survival. Therefore, many of the enterprises fall for the greedy contractor trap. It is not uncommon for the contractor to bill more than the task he has done is worth, and more often even asks for the billing of a task that has not yet been completed. Strong policy, terms, and conditions should be presented to the contractors, before entrusting them with any task, to avoid these attempts, and leaving no room for the contractor to commit such frauds.

 

Protecting Your Professional Businesses

After viewing the potential traps, let’s take a look on the precautionary measures that an enterprise can take to avoid unnecessary fails; these important methodologies can fraudproof your business against its very own employees.

  1. The Method of Anonymous Employee Reporting

Utilizing this method is one of the best methods for detecting the potential dishonesties that can occur within your business; compared to scheduled employee reporting, the violators’ opportunities to destroys any vital fraud traces are severely limited.

  1.  The Method Of Surprise Auditing

Along with the regular, scheduled internal audits, surprise auditing should also be performed in the enterprise, as it significantly increases the chances of detecting potential irregularities, thus making your company more protected.

  1. The Method of External Auditing

Along with the above mentioned methods, this is also a significant tool to determine a potential fraud; it should be held at regular intervals.

 

Business Insurance – The Ultimate Protection

Along with all the above methodologies, the most important step in stabilizing an enterprise is business insurance. It plays an important role in the art of preventing the failures related to undetected frauds. Professional business insurance protects the business from many unexpected frauds, and it enables a recovery from what may seem as a catastrophic loss. Even when insuring your business, you should consider several key factors, however; for your business insurance to be viable for you, it needs to offer an equal protection for any business, regardless of its size, and to provide protection from all sources of frauds and failures. First thing that comes to mind is protection from theft. Theft is the most common and uncontrolled source of assets loss that occurs in most enterprises internally and externally, making insurance without theft protection almost useless. Protection from litigation is another important aspect; while unfounded law suits from wealthier competition are likely to turn out in your favor, the costs before you prove your innocence can cause your business to fail, so proper insurance has that covered. Protection from unwanted liabilities provides you with protection, when the assets, coming from your company, are used for any illegal activities, which is not a rare occasion with internal frauds and thefts.

It’s your responsibility to implement a fraud proof protection method, that suits best to your enterprise’s needs, properly. All it requires is some commitment and dedication towards the business; no matter how malicious the fraudster’s aims are, you can stop your company’s fail before it’s to late!

Written by Hayk

October 30, 2012 at 6:29 pm