When a Good Manager Goes Bad: Protecting Your Self-Storage Investment From Employee Theft
Copyright 2014 by Virgo Publishing.
By: Linnea Appleby
Posted on: 09/22/2013



 

Trust plays a crucial role in the self-storage business. Tenants choose a facility they feel they can trust over one that may be closer or even cheaper. They trust you, the facility owner, to maintain a safe place to lock away their valuables, usually while their life is in some transition. They trust you to honor your part of the bargain in this exchange of money for service.

You in turn hire staff, conducting a background check, drug test and reference check, and investigating and evaluating each candidate as thoroughly as possible. There’s a lot of time and money that goes into finding the right manager. Once you find someone who seems to be a good fit, you train the new employee, evaluate and coach his performance, and ultimately trust him to operate the business.

As time passes, you become more confident in your manager’s abilities and the owner/manager relationship develops. As you get to know him, and often his family, your level of trust deepens. With this you start delegating tasks, trusting him with additional responsibilities and maybe checking on him a little less, confident he has your best interest at work.

Then something happens that puts a blip on your radar. You suddenly feel something is not quite right. You might overhear a random comment from another employee or tenant, see something on a playback of the security cameras, or suddenly spot a questionable cash-handling trend. As you dig a little deeper, you discover it’s true. Your trust has been betrayed. This manager is stealing from you.

Watch for Red Flags

When a good manager goes bad, it often happens quickly. Usually some occurrence or circumstance has suddenly created a problem in his life. Any assortment of events—divorce, marriage, birth, death or illness in the family, addiction—can cause financial turmoil in the life of a good manager. The thought “just this once” has taken many otherwise good managers to a place they never thought they would be—caught stealing from their employer.

Sometimes a manager develops a sense of entitlement. He feels he deserves more, so he starts to take a little here, a little there. No one is looking over his shoulder and the thought “they’ll never know” usually starts this snowball. Soon he has a little side business. He’s almost convinced that if you found out you wouldn’t believe it and he could just talk his way out of it.

Either way, self-storage always has always been one in which it's relatively easy for manager to creatively (or not) steal. Software and technology do their part to lock down the loopholes and decrease opportunity, but where there’s a will, there’s a way. Once it starts, it rarely ends and can spiral quickly.

Most of the time, theft starts in these common areas. The sooner you catch it the better.

Petty cash or deposits. One of the first places to identify potential theft is through an audit of petty cash and deposits. Money missing from petty cash with or without an IOU is a big red flag. Frequent and unscheduled audits will uncover this quickly. For deposits, verify the amount of cash taken in is the same amount deposited in the bank. Creative managers will pocket the cash and replace it with a bogus check they found in an abandoned unit.

Fee schedule. When you find out the manager is charging for things such as dumpster use, electric charge, after-hours assistance or other fees that are not part of your usual fee schedule, you’ve got theft. Be clear about what your fees are and are not. Establish a policy for taking cash outside the set fees.

Delinquent units. Managers forge relationships with their tenants. They sometimes get caught in the trap of dual alliances, where taking $40 to open a delinquent unit and letting the tenant take out some stuff seems fair and humanitarian. It’s neither for the business owner. It’s theft. If left unchecked, it will grow to a whole new business on the side that you know nothing about. Let your staff know the consequences of this up front.

Short-term or “off-the-books” rentals. If you’re not regularly conducting a full unit audit, your manager knows how long he can get away with letting someone use a unit for cash on the side. If you discover items in vacant units or locks on what should be vacant units, a closer look is needed. Every unit needs to be accounted for at all times. If something seems fishy, investigate until you’re satisfied. If there's nothing going on, there should be a reasonable explanation. Don’t let the manager pull you off track. If there is something going on, he’ll try to divert your attention.

Referral programs, discounts and credits. Ours is a discount-friendly industry with lucrative referral programs. To be effective, managers need to have some autonomy with discount decisions to close the sale. However, if you discover the admin or late fee is waived on cash transactions way more frequently than checks or credit cards, you may have spotted theft. The tenant may be paying it, but you’re not getting it. Also, if you see the same tenant getting a high number of referrals, do some checking. Manager-tenant collusion on referrals is an easy way to quick cash. The tenant gets a $20 rent credit and kicks back $10 to the manager.

Theft of time. Taking an extra hour here and there to get a haircut, tires rotated, doctor appointments or other personal errands is theft of time. So is solitaire, reading, Facebook, Internet surfing, watching TV, excessive cell-phone use and taking tips for helping tenants unload their truck on your time. Double-dipping is not allowed.

Firing an Employee

So, here you are. You’ve discovered a long-term trusted employee is stealing. It might be the first time; he’ll swear it is. Most likely it isn't, and you both know it.

The trust is broken. He knew it was wrong and did it anyway. He promises to never do it again, but it’s too late; there are no second chances with theft. He knew the consequences. Your only option is to terminate his employment.

When you uncover theft, it must be dealt with swiftly. Once you know, any waffling or delay on your part sends the wrong message to the rest of the staff. Terminating a good manager for theft is difficult for both parties. It’s a position in which neither of you expected to be. There are feelings of betrayal, denial, embarrassment, shock and guilt. It can be particularly difficult when the manager lives on site and now needs to vacate the premises quickly. In some cases, there may be legal action involved.

Schedule the termination and get it done at the soonest opportunity. Rearrange your schedule if needed and, most important, prepare. Plan what you’re going to say, then keep it short and get to the point. If you need to, write it down so you don’t get pulled off your message. Have a witness, if possible. Explain the circumstances or events that led to your decision. There’s no need to review every infraction one by one or even have much of a dialog. Keep your emotions out of it and beware of being drawn into his. It’s not personal; this is business. It should take less than five minutes.

Change the locks immediately, collect any keys and company items. Remove his access from the software and gate systems, call-center and alarm-contact lists. Set a date by which he will vacate the apartment and storage unit, and make arrangements for him to retrieve his personal items from the office. Conduct a complete audit. What else don’t you know? If you’ve been a little lax in audits, now’s a good time to catch up, review and re-evaluate your business.

Whether it’s a good manager gone bad from the events of life or one just looking for a buck on the side, there’s no middle ground when theft is discovered. The trust is now gone and it cannot be repaired. Be aware of what’s happening in your manager’s life and keep an eye out for early signs of theft. Audit with random regularity. If something seems suspicious, question and investigate until you’re satisfied with the answers. If there is theft, there’s no going back. Make it quick, then move on.

Linnea Appleby is the owner of Lime Tree Management, a self-storage management and consulting firm in Sarasota, Fla. For more information, call 941.350.7859; e-mail lappleby@limetreemanagement.com .