HR Grapevine - Employee targets scrutinised after scandal

An extract from another interesting article from the team at "HR Grapevine" and employee targets scrutinised after scandal.

Employee Targets and doctored important financial data

Common types of workplace misconduct include persistent tardiness, inappropriate or rude comments to colleagues or customers and misrepresentation on their initial job application. However, seldom do you hear that employees have doctored important financial data at work.  

On Monday Kraft Heinz announced that it will restate more than two years of financial statements for 2016 and 2017 after employee misconduct sparked an analysis of its procurement processes – CNN reports.

The fabricated financial statements, which date back to 2016, prompted a large-scale investigation that uncovered flaws in the firm’s accounting practises of its procurement contracts

The company said in a filing with the Securities and Exchange Commission – an independent government agency responsible for protecting investors and maintaining an orderly function of the securities markets – that an internal investigation revealed that employees had doctored numerous transactions to suppliers and procurement.

CNBC reports that the accounting debacle has raised a fresh set of questions into the firm’s internal controls as well as the company’s culture. 

Findings sparked a larger investigation

Like with any untoward findings at a business, a larger investigation was launched. This investigation uncovered flaws in its accounting practices specific to its procurement contracts.

According to sources who spoke to CNBC on the condition of anonymity, almost a dozen employees have been chastised as a result of the misconduct. Despite this, Kraft Heinz’s Spokesperson Michael Mullen said that the investigation has been “substantially resolved”.

The initial filing raises questions

David Sterling, former Chair of the Litigation Department at law firm Baker Botts, said: “Obviously, financial restatements are not supposed to happen, and while it is helpful from the company’s perspective that no senior managers were implicated, any financial restatement attributed to employee misconduct raises questions about financial incentives within the company.”

Kraft Heinz target highlight the company’s culture

According to the sources, who spoke to the publication on the condition of anonymity, the firm is responsible for meeting a target for earnings before interest, taxes, depreciation and amortisation in order for the vast majority of executives to qualify for their bonuses.

And according to former executives, almost no one received a bonus in 2017.

Earlier this year, the BBC reported that Kraft Heinz’s share price plunged to a record low, while the firm reported a $10.2billion loss for 2018. This is likely to have piled on more pressure to the firm’s employees.

And, CNBC reported that particular pressure fell on the procurement and operations team to cut costs as company sales continued to plummet. The pressures to meet targets were described as particularly intense.

Were the company targets too aggressive?

The publication reported that Kraft Heinz gave employees “management-based objectives” which helped determine their bonuses for the year after goals were derived from the objectives laid out by the company’s Board.

In a 2018 integration update, the firm’s CFO David Knopf wrote: “We are competing for talent with well-established, fast-moving consumer goods organizations with long histories of success. So we target a higher incentive pay than our peers and are consistently above the market.”

It is possible that when a company’s targets are aggressive and unmanageable that staff may feel inclined to cut corners and fabricate figures even though it is wrong. So, how can HR help employees to meet their goals?

HR Grapevine has collated five tips:

  • Make sure that the goals are challenging but attainable. This will make sure that employees stay motivated and on the right path but aren’t finding it so unachievable that they want to switch off.
  • While all departments will undoubtedly be working towards different company goals (that contribute to an overarching business goal) it is important for teams to work together. No single team should be lumbered with all of the responsibility.
  • Monitor progress and regularly check in with staff to make sure that they aren’t struggling. If they are, then come up with a mind map to illustrate the different ways of achieving the end goal. Alternatively, advise them to seek help from their superiors if they are unclear of the end goal.
  • Far too often, managers are focussed on setting employee goals that align with the company’s wider goals. While this is important, they should focus on setting personal goals for the employee too. This ensures that they are able to learn and stretch themselves whilst working towards set goals.
  • Like with anything, creating a plan is crucial. If the project is complex and long-standing, set achievable mini-goals within that progress can be matched to.

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