How the wrong pub culture can put you at high risk of fraud

By Arun Chauhan

- Last updated on GMT

Fraud avoidance: Arun Chauhan, founder of Tenet Compliance & Litigation, addresses delegates at the MA500 meeting in Bath
Fraud avoidance: Arun Chauhan, founder of Tenet Compliance & Litigation, addresses delegates at the MA500 meeting in Bath

Related tags: Pubs, Fraud

Pub landlords and owners (from large groups to single sites) need to engage differently with their teams to ensure they’re highly engaged and motivated, leading to a positive working culture.
Arun Chauhan, founder of Tenet Compliance & Litigation and speaker at this year’s MA500 event, explores how getting your pub culture wrong can leave you at high risk of fraud.

Protecting your business against the challenges posed by dishonesty is about looking beyond policies and procedures. It’s about motivating your team through trust to build the right culture.

The risk of employee fraud is well known, and publicans are vulnerable in numerous ways, including stock pilferage, cash fraud, or misrepresentation of hours worked. To effectively reduce the risks, it’s time to take a different approach.

The influence of culture

Your pub’s culture is the atmosphere you create for both your employees and your customers. It underpins everything you do and everything others say about you and determines the long-term success of your business.

Getting the right culture is important to any business but in hospitality it is more important than ever. A poor culture will project from your frontline team to the customer experience of your pub. The quality of customer experience determines your turnover and profit. Customers won’t want to spend money or time being served by an unhappy team in a frosty environment where it is clear an employee cares little for their job. As a result, if the culture you believe your organisation has is disconnected from the true culture of your operations on the shop floor, your revenue and profits are likely to suffer.

The culture in your pub is heavily influenced by its leaders. This culture then determines engagement or disenchantment. If leaders create the wrong culture, employees are likely to become dissatisfied – causing an increased fraud risk.

The recipe for an engaged team

Effective fraud prevention through leadership and culture is about ensuring your leaders understand their team.

Your team are your front line: it’s who your customers engage with first, and give the initial and lasting impression of your business. They determine the experience your customers have – if they’re not happy, your customers won’t be happy.

If your team feel trusted, you will see a reduced risk of fraud. They will look out for one another and will feel entrusted, engaged with counter-fraud policies and listened to when they offer up solutions. With this approach, a positive culture is created – one of trust which serves as a natural deterrent to fraud.

Leaders, at any level, can reduce or increase their team’s pressures, motivation and engagement through their actions. As a result, it’s important to think beyond policies to control bad behaviour. Your policies should support your team in implementing good behaviour – they should not be relied upon to drive it. If you don’t focus on getting your culture right and your team engaged, you increase your risk of employee fraud.

As a leader, ask yourself:

  • Are you aware of the pressures on your team?​ Do you do everything you can to reduce these pressures, for example helping out when the pub is busy or handling complaints if your team needs to escalate them? If your team feels supported by you, they’ll work harder to support your business.
  • Are your reward systems fair?​ Team members will work harder to deliver higher quality service if they’re rewarded for it – for example, through tips. It’s important not to reduce this incentive. Ensure you divide tips fairly between frontline team members so they truly reflect who’s earned them.
  • Do you regularly thank your team?​ When busy, a pub can be stressful and tempers can get frayed. It’s important, at the end of every shift or busy period, that you thank your team for the efforts they put in. A little appreciation will go a long way to show your team how you value their efforts.

Due to the nature of pubs, many are prone to high staff turnover with part-time/temporary workers, student employees, etc. That means you need a culture where people protect one another – a culture which is resilient to any team changes. Short-term staff often have the same access to transactions, tills, tips so the risk of fraud is still, if not more, present.  

Do you know the risks you face?

A key part of reducing your risks is understanding where your vulnerabilities lie and actively seeking to mitigate these. Some of the risks you face might include:

  • Pilferage​ – for example, team members treating themselves to a well-deserved pint at the end of every shift, a fizzy drink to keep their sugars up on a busy night, or even a bag of crisps to keep themselves from getting hungry before they clock out.
  • Transaction fraud​ – taking £20 and giving change for £10 when someone’s had a few drinks and probably won’t notice. It’s important to understand that a poor culture not only puts you at risk, it puts your customers at risk too.
  • Float theft​ – taking from the daily float. The occasional small sum might often go unnoticed but, over time, this can lead to large losses.
  • Tips​ – taking more than their ‘fair share’ from the team’s tips. Fraud of this type can further damage the morale of your entire team.
  • Credit card fraud​ – as society is becoming increasingly cashless, the risks change rather than go away. Credit card fraud is an increasing risk to your customers.

It’s time to engage differently

Regularly engage with your team and ask them “how’s it going?” or “what could we do better?”. Getting their feedback on your culture is invaluable to improving it.

Reducing your risk isn’t about monitoring your team 24/7 through CCTV.  It’s about showing your team trust, projecting trust over mistrust. If you trust your team and frequently engage with them, they’ll trust you and report to you when they see something’s not right.

The best protection is finding the right balance between having the systems in place to identify fraud and demonstrating trust in your team.

You will inevitably have the odd outlier but if your culture is right, the customer loyalty it will bring will pay back for these outliers in spades.

Related topics: Legislation

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