A little story here about when I was managing a casino in Moscow, Russia, and we had the beginnings of an economic crisis in August 1998. The Ruble devalued over night and the management of different businesses started to peg the wages of their staff to the Ruble. Prior to this we would pay staff in Rubles based on a salary in US dollars, for example if their wage was US$500 and the Ruble rate was 6 to 1, then we would pay them 3,000 Rubles. Overnight the rate went to 9 to 1 so their wage then became 4,500 Rubles based on the initial wage of US$500.

Part of the Russian business ethics took a real hammering at about this stage when management and owners started to look at ways to cut costs. As wages are one of the highest costs to a casino, this was one of the first things that many casinos looked at. Casinos and many other businesses throughout Moscow started to pay wages based on what they paid their staff prior to the devaluation. This created real erosion in the spending power of the staff and started a back lash within many businesses. The buying power of each person was reduced by 50% in the first wave of the devaluation of the Ruble and it had only just begun its slide.

Within two months many businesses began laying off staff and those that remained were being paid less than half what they were getting previously. A growing trend became evident within many of these businesses where there were sharp declines in revenue and customer service took a real hammering. It wasn’t surprising when businesses started to go to the wall and more and more people were put out of work. Clearly there were worrying signs for all businesses, however there were also opportunities and lessons to be learnt from what was happening. Initially we looked at cutting staff as well, however we were also aware that by taking advantage of the staff through the exchange rate was only going to cause bigger problems in the long run.

Communication in these circumstances was critical and without that we would have gone down the road that many of the other businesses found themselves travelling. Keeping staff informed on the plans for the business and how we were going to get through this and reassuring them that we would be paying them as per normal helped alleviate a lot of the tensions at this stage.

One area that was carefully covered was theft. Stealing from the casino was not going to be tolerated and that we would be monitoring the tables for this and in return we vowed that we would pay staff as agreed. When faced with issues like this there becomes a need for creativity and it was decided that as the Ruble was devaluing at such a fast rate we would pay the staff in US dollars thus alleviating the erosion of buying power that they were experiencing.

This had a flow on effect to the moral of the staff and became the difference between closing the doors and thriving in uncertain times. Of course there are other factors besides this that I shall cover in the future, however the ever present threat of theft from within the business is relevant to all businesses.

One area that I haven’t touched upon again is systems and in particular, systems to deal with inventory. I can hear you now, how many other areas are there for theft in my business?

Great question.