When it comes to salespeople making up their own compensation (i.e., commission fraud) I think that by now I’ve pretty much seen it all.
Most of those efforts are petty and easily ferreted out. Some, like I’m about to mention were more cunning.
What they all have in common is that they occur in companies whose management don’t have strong oversight. Just like shoplifting, internal theft only happens if there’s an opportunity because no one is watching.
The department store I used to work at had such poor internal controls that it was breathtaking: The controls weren’t there, and the management was almost comically oblivious.
To further set the stage for my story, in the furniture business, stores carry very little inventory beyond the display models. If a customer wants a
specific color of sofa and chair they select the fabric or leather swatch they like, the salesman rings up the order and the order is manufactured by the vendor, shipped to the warehouse and delivered to the customer.
The built-on-demand process takes six to eight weeks.
At the same time, the store’s Point Of Sale system was programmed so that returns after 60 days didn’t go against the commission of the original
salesman. The theory behind that was that returns and exchanges that old were customer service decisions by a manager, and shouldn’t penalize the
salesman, so the system would automatically not ding the commission on 60-day-plus returns.
This would be fine in an environment where the department store’s management were actually on the ball, and took a keen interest in the business.
What actually happened was that prior to me the store’s department managers all acted like being on 100 percent commission was contagious and, by and large, left the sales people to their own devices.
One clever salesman noticed the lack of oversight, and would deliberately order the wrong color furniture for his customers. When it arrived six weeks later, he would sincerely apologize, re-ring the transaction and “allow” the customer to keep using the wrong colored furniture until their new ones could be delivered.
Two things were happening here. First, he was getting paid TWICE for each customer. And second, the regional warehouse and our showroom was filling up with his USED returns, which needed to be sold on clearance at a steep discount.
When I came on board and uncovered it by digging through the old-school paper invoice registry, I found that he had being doing it FOR YEARS.