How Should We Handle the Loss of Company Material Due to Employee Error?

In my company, we have lost company material worth Rs. 1 lakh because of an employee who is working in the production department as a technician. I am mentioning the entire scenario that happened exactly so that it will be easier for you to understand properly.

Scenario Description

The chief marketing officer of our company is leading a project, and they need to go to Jammu for demo purposes. He asked the assistant manager of the technical team to collect the material from the store department for the demo trial. The assistant manager delegated this work to one of the team members of the production team, who had to accompany both of them for the demo tour. Now, the production employee put the bag in the auto and left for home. He realized it later on, but it was of no use. He was unable to find the auto-rickshaw puller.

Question: How to Recover the Loss?

Now, the question comes here is - how should I recover the loss of our material? Because if I think to recover it entirely from the production employee, his salary will take many months to recover, and there is no surety that he will repay or not. Nobody is taking responsibility for it.

Kindly let me know what can be done in this situation.

Hi, it shows that there is a lack of process flow in your organization.

While there is nothing wrong with delegating work to subordinates, seniors should take ultimate responsibility for the same. Especially when handling valuable items, utmost care should have been exercised. Was the missed article covered under insurance? Now, the Chief Marketing Officer and Assistant Manager should take responsibility for this lapse.

Dear member,

This is in addition to what Mr. Lakshminarayan has said. Please order the domestic enquiry. The focus of the enquiry should be on what happened rather than who did it.

A penalty will be raised against someone. However, my point is limited to the quantum of penalty. There are numerous rulings by various courts on the imposition of the penalty. It should be a very small percentage of the material lost or damaged. Cent per cent recovery of the cost of materials is against Indian jurisprudence.

While running a business, some amount of loss is inevitable. Many times, the authorities concerned order an excess amount of raw material. Sometimes the material does not get consumed and it degrades on its own. Otherwise, the material does not degrade but becomes obsolete. In both cases, the authorities are forced to write off the material. But then, is this not causing a loss to the company? Who is held responsible for the losses?

Many times, because of the non-availability of the material, the production line stops. For the loss of production, who should be held responsible, the Purchase Manager or the supplier?

Many times, the maintenance team takes an unreasonable time to repair the machines. Because of the non-availability of the machines, the production lines stop. For the loss of production, will the maintenance head be held responsible?

You wish to assign the blame to the Production Assistant who lost the material. However, the question arises whether the people involved in the movements of the material were sensitized enough to carry the costly goods of the company. Secondly, whether the material was packed in the box and the box was affixed with the complete company address, the phone number, etc., also matters.

As Mr. Lakshminarayan has said, probably your company does not have a proper SOP for the movement of the material. Such problems happen when a proper SOP is not in place. Please address the root cause and not the symptoms.

Thanks,

Dinesh Divekar

In such a situation, it's crucial to handle the matter professionally and fairly, ensuring that the loss is addressed without causing undue hardship to any individual. Here's a suggested course of action:

Document the Incident

Start by documenting the incident thoroughly. Gather all relevant details, including the value of the lost material, the circumstances leading to its loss, and any actions taken immediately after the incident was discovered.

Investigation

Conduct an investigation to understand the sequence of events leading to the loss. Interview all involved parties, including the assistant manager, the production employee, and anyone else who might have relevant information.

Assess Responsibility

Determine the degree of responsibility each party bears for the loss. While the production employee was directly responsible for transporting the material, it's essential to consider whether there were any systemic issues or failures in procedures that contributed to the incident.

Consider Mitigating Factors

Take into account any mitigating factors that might have influenced the employee's actions, such as inadequate training, lack of supervision, or unforeseen circumstances. Consider whether the employee has a history of negligence or if this is an isolated incident.

Explore Insurance Coverage

Check whether the lost material is covered by insurance. If so, file a claim to recover the value of the lost items.

Implement Corrective Measures

Identify and implement corrective measures to prevent similar incidents in the future. This may include revising procedures for handling and transporting company materials, providing additional training to employees, or implementing stricter oversight protocols.

Recovery Plan

Develop a reasonable plan for recovering the loss. While it may not be feasible or fair to recover the entire amount from the production employee's salary, consider other options such as spreading the cost across multiple departments or amortizing the loss over time.

Employee Counseling

If the production employee is found to have acted negligently, provide appropriate counseling and guidance to help prevent similar incidents in the future. Emphasize the importance of accountability and responsible behavior in handling company assets.

Legal Consultation

If necessary, seek legal advice to understand the company's rights and obligations in recovering the loss. A legal expert can provide guidance on the best course of action based on the specific circumstances of the incident.

Communication and Transparency

Communicate openly and transparently with all involved parties throughout the process. Ensure that everyone understands the actions being taken and the rationale behind them, maintaining professionalism and fairness at all times.

By following these steps, you can address the loss of company material in a responsible and effective manner, minimizing the impact on both the company and the individuals involved.

Thanks,