A Visit from the Ghost of Ghost Payrolls Past

Pardon the Dickensonian reference in the title but the holidays are just around the corner! You can bet that there will be plenty of Scrooge stories coming down the pike. Right now I’m hearing the clanking of chains. An apparition appears and the nightmare begins.

If you’ve ever worked in manufacturing or maybe even in service industries, I’m sure you’ve have heard about “Ghost Payrolls” at least once. I’ve seen this ghost conjured up four times during my career and each time at a different company; twice by high ranking vice presidents and twice by the presidents or CEO’s themselves. The subject must be taught as a special course at the VP or the CEO academy, because it is always they who raise the issue and make it sound as though THEY are delivering a revelation from on high. Even though WE are the one’s that suggest, install and audit the controls that prevent ghost employees from getting on the payroll as well as other acts of fraud and corruption, WE are really quite stupid when it comes to the subject. Only those in high office can point out this hole in the dike where the profits are gushing out of the company and into the hands of miscreants.

It’s interesting that the subject is always broached during periods of low profits, losses on the P&L or when efficiency or productivity begins to suffer. These must be the bullet point triggers taught at the academy. It matters not that you can recite the litany of controls in place or even the results of the last payroll audit. Ghost workers on the payroll MUST be the cause of the problem. So just get out there and find them. Perhaps place a call to the Ghost Busters.

I am now being transported back in time by the apparition and allowed to view an event that took place during the time I worked for a mid-sized manufacturing concern. Here’s how I remember it all.

The plant manager and I were attending a quarterly operations meeting chaired by the CEO. The consultant representing the non-managing owners was present to oversee the proceedings. Our plant had just taken on some new business and things were not going well with new product line. The CEO had been involved with its sourcing as well as determining the expected gross margin and the anticipated production throughput. How that data had been determined was a mystery to us. No one below the top echelon had been consulted. It seemed like some “secret formula” known only to the CEO had been utilized. I say that because from the outset, the plant manager warned about the inefficiency of the equipment due to neglect and disrepair as well as the lack of training and talent in the production worker pool. Being an old-timer in the business, the plant manager suspected that the CEO was using assumptions that were at least ten years old. Of course he was ignored and overruled. CEO’s always know best.

When the subject of the losses sustained on the new product line hit the agenda, the CEO immediately jumped on the old “Ghost Payroll” as the cause. It couldn’t be anything else! The consultant raised an eyebrow and nodded in agreement. In fact, the entire discussion was redirected to the subject. The consultant lectured us on the grave consequences of such hauntings. He must have attended the academy as well. Neither the plant manager nor I were able to get in a word edgewise during the histrionics that ensued. The CEO demanded to know the plant’s monthly payroll expense and then ticked off the leakage in terms of, “If only A, B or C percent of the payroll was fraudulent, then our losses would be X, Y or Z.” Of course, the other plant managers and staffs jumped on the bandwagon. It was a real “pile on.” The sharks sure smelled blood that day! The plant manager and I were commanded by the CEO and consultant to complete a total payroll audit post-haste. The CEO ended his performance by stating, “We had a ghost payroll issue here at the plant a number of years ago. A supervisor even lost his job over it. I want controls in place. I don’t ever want that to happen again!” The meeting was adjourned and the plant manager and I skulked away.

The nightmare continues but the apparition reminds me of few more facts.

The CEO was correct about one thing; there had indeed been a ghost payroll incident at the plant a number of years prior to my arrival. It had occurred when the now CEO was then running the plant himself. I found out about it shortly after I had hired on.

The third shift supervisor had just gotten fired for being intoxicated on the job and had put on quite a display while he was being given the axe. Our HR specialist had mentioned to me that she was glad he was finally leaving. Apparently, he had been creating problems for some time. She related that he had gotten caught up in the aforementioned ghost payroll affair and a lot more to boot. She reported that the scheme had been uncovered when one of the third shift employees had complained to the then HR manager that they were tired of paying kickbacks to the supervisor. He must have had quite an enterprise going on back then. Her story continued that besides demanding payoffs from the employees, he was also working a ghost payroll scam. Apparently several employees would clock each other in and out at his direction. The absent workers would be working at other jobs. The supervisor, of course, was getting his cut of the unearned paychecks.

But hold on a minute! If this had occurred several years prior my hire, why was the supervisor still with the company? The HR specialist then related that the supervisor had indeed been fired as soon as his scam came to light. I seem to remember her saying that criminal charges had even been contemplated. But you see, he had held such a tight rein on the third shift (a totally unruly mob) that no one else seemed to be able to get any decent production out of the group. The company couldn’t even find a replacement willing to work the third shift. The solution? Why the then plant manager and now CEO hired him back!

Now I’m awake and the specter has disappeared.

You now know that I was aware of that story well before that quarterly meeting. Over time it had slipped my mind and been forgotten about until I was being lectured by the CEO on the lack of diligence and control. Not wanting to publicly embarrass this arrogant hypocrite at the meeting, I kept my mouth shut and took the beating.

Perhaps the purpose of the apparition was to convince me to not sit idly by and let things like that happen again.

This post sure stirred some ghosts from one of my past lives!

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