Month: April 2017

In 1943, psychologist Abraham Maslow set out his “hierarchy of needs.” This theory suggested that human behavior is a response to a variety of needs ranging from physical survival to self-actualization.

At this point, you may be wondering, “What does any of this have to do with my business?” The answer is that truly engaged employees are motivated by needs other than just financial compensation.

5 tiers of needs

As mentioned, Maslow theorized that humans have various needs to live a fulfilling life. The hierarchy, beginning with the most basic needs, comprises the following five tiers:

1. Physiological needs, such as air, food, drink and shelter,
2. Safety needs, such as security, order and protection from the elements,
3. Social needs, such as relationships, family and affection,
4. Esteem needs, such as healthy self-esteem, achievement, independence and managerial responsibility, and
5. Self-actualization needs, such as realizing personal potential, self-fulfillment and personal growth.

Generally, compensation covers the first tier. Money allows people to nourish themselves and obtain a place to live. (Air is usually free.) Job security and stability, as well as benefits, contribute to the second tier, meeting a person’s safety needs and need for order. And many people are able to meet at least some of their belongingness and other social needs at work (Tier 3).

The last two

It’s the last two tiers that are often trickiest for employers. To empower employees to meet Tiers 4 and 5 at work, you’ll need to learn the specific motivations to which each person seems to respond.

For example, esteem needs could be satisfied by offering various forms of praise to strong performers and those who help others. Meanwhile, self-actualization needs can be met by establishing clear career paths that include promotions.

Critical component

Your employees have needs and motivations in common with most of the people on the planet. The key is creating a workplace that helps meet these needs and, in turn, produces that critical component of any successful organization — the engaged employee.

© 2016

The Securities and Exchange Commission (SEC) requires public companies to evaluate and report on internal controls over financial reporting using a recognized control framework. Private companies generally aren’t required to use a framework for the oversight of internal controls, unless they’re audited, but a strong system of checks and balances is essential for them as well.

A critical process

Reporting on internal controls is an ongoing process, not a one-time assessment, that’s affected by an entity’s board of directors or owners, management, and other personnel. It’s designed to provide reasonable assurance regarding the effectiveness and efficiency of operations, the reliability of financial reporting, compliance with applicable laws and regulations, and safeguarding of assets.

A strong system of internal controls helps a company achieve its strategic and financial goals, in addition to minimizing the risk of fraud. At the most basic level, auditors routinely monitor the following three control features. These serve as a system of checks and balances that help ensure management directives are carried out:

1. Physical restrictions. Employees should have access to only those assets necessary to perform their jobs. Locks and alarms are examples of ways to protect valuable tangible assets, including petty cash, inventory and equipment. But intangible assets — such as customer lists, lease agreements, patents and financial data — also require protection using passwords, access logs and appropriate legal paperwork.

2. Account reconciliation. Management should confirm and analyze account balances on a regular basis. For example, management should reconcile bank statements and count inventory regularly.

Interim financial reports, such as weekly operating scorecards and quarterly financial statements, also keep management informed. But reports are useful only if management finds time to analyze them and investigate anomalies. Supervisory review takes on many forms, including observation, test counts, inquiry and task replication.

3. Job descriptions. Another basic control is detailed job descriptions. Company policies also should call for job segregation, job duplication and mandatory vacations. For example, the person who receives customer payments should not also approve write-offs (job segregation). And two signatures should be required for checks above a prescribed dollar amount (job duplication).

Controls assessment

Is your company’s internal control system strong enough? Even if you’re not required to follow the SEC’s rules on assessing internal controls, a thorough system of checks and balances will help your company achieve its goals. Company insiders sometimes lack the experience or objectivity to assess internal controls. But our auditors have seen the best — and worst — internal control systems and can help evaluate whether your controls are effective.

© 2017