How Smart Is It To Trust Your Employees?

EVM, a Wharton School associate dean and professor, used to lecture students about trust. “People are basically trustworthy, honest, and loyal,” he argued. “If you treat them as such, they will act accordingly.” He retired from academe in 1993 and six years later entered the business world — the real world — for the first time. He opened the eponymous Van M’s Music Bar & Grille in Philadelphia and then quickly discovered that, despite his love and trust, some of his employees were ripping him off. He calculates he lost more than 10 grand from pilferage and even outright theft.

“My basic stance has shifted from assuming all to be honest to assuming all to be dishonest until they prove otherwise,” he says. “All you need is to be burned a few times and you feel much more pessimistic.” This is just what I don’t like about academics. Unbridled by personal experience, they can use their considerable intellectual powers to promote bad ideas. And some of these bad ideas catch on. The world today is filled with such ideas — stupid, silly, or downright destructive notions that impede progress.

The great example of this, of course, is communism. But there are many others, and most of them are coming out of our colleges and universities. Employ any recently graduated student from an American university and you’ll see what I mean. The foolishness is almost palpable. If it weren’t counterproductive and sometimes dangerous, it would be funny. The good news is that these same bright and eager-to-learn young people can reprogram themselves rather quickly. They may quit you before that happens, but if they aim to be successful they will soon enough figure out the difference between what’s true in business and what their professors taught them to believe.

In the case of EVM, we have two bad results. First, the students who accepted his foolish notion about how to judge people. And then, the people who suffered from EVM’s newfound cynicism. EVM’s response to getting ripped off is like the overreaction of a former smoker to anyone still smoking. Having sensibly trashed his naive theory on the innate trustworthiness of all beings human, he now distrusts all those with whom he comes into contact until they somehow prove they merit his trust. Sounds like a very unpleasant situation to me. I learned about trust 30 years ago while managing a large nightclub in Ann Arbor, Michigan.

In the bar business, as in all cash businesses, cash is king and every employee is sooner or later tempted to take a little bit of the throne home with him. To counter that perennial threat, this business (Dooley’s, it was called) installed the first-of-its-time totally integrated, computer operated bartending system. We had all the liquor locked away in vaults and pumped to the bar stations through plastic tubes.

If you wanted a shot of rum, the bartender would hit the dispenser and get a measured shot. That would trigger an entry on the register. If there was ever a fail-safe way to prevent bartenders from serving free drinks and throwing receipts in the tip jar, this was it. And yet, they stole.

About six months after we began operations, an audit indicated we were not making the margins we should have been making. It took me weeks of detecting to find out what was going on: One very clever bartender had figured out a long sequence of inputs into the register that somehow froze it while allowing liquor to be poured. This little trick was passed on from one employee to another. They weren’t all stealing, but those who were included several would-be honest ones.

My rule about honesty is this: Set up an environment where stealing is very difficult. Treat your employees as if you trust them, but recognize that if you make it easy for them to steal a little, some of them won’t be able to resist the temptation.

[Ed. Note.  Mark Morgan Ford was the creator of Early To Rise. In 2011, Mark retired from ETR and now writes the Palm Beach Letter. His advice, in our opinion, continues to get better and better with every essay, particularly in the controversial ones we have shared today. We encourage you to read everything you can that has been written by Mark.]