Being Clever Is Not Being Smart
A guest blog post from M.T. Welden, SPHR
Reprinted with permission – From The Davenport
Being clever is a top notch attribute for a comedian or a novelist, but it is a bona fide disaster for a business manager. Clever ideas and good intentions pave the road to corporate hell. The kind of clever I am speaking of is the type employed to avoid, to any degree, compliance with government rules. Be they taxes or regulations. Every day someone thinks they are smarter than the government, and every day the government proves someone wrong on this point.
This last week the subject of “clever” businesses came up when a colleague and I were discussing (lambasting) a local business which unnecessarily fell afoul of federal employment laws. Here is the headline and details:
Herb farm in Washington state fined $1 million for firing, then rehiring illegal immigrants“HerbCo fired nearly 90 illegal immigrants because of a U.S. Immigration and Customs Enforcement audit. But they say it rehired some of those workers, paid them cash and asked them to work at night”, “General Manager Debra Howard then came up with the plan of rehiring the “most productive” of the laid-off workers, paying them cash and having them work at night — out of sight of the workers hired through the labor firm” , “Howard withdrew about $40,000 from a company bank account to pay the workers in cash put in envelopes”
Clever idea. In retrospect they could afford to hire a lot more workers for the $1 million they will be giving the government as a fine for their clever plan. Not only will they be out $1 million, with new reciprocity agreements between gov’t agencies this company might as well set up a permanent office for auditors. Once a business runs afoul of one agency the rest will be along soon – and often – to see in what other ways clever methods have been applied.
If you are going to be clever might I suggest it be limited to your marketing department. The following are always bad ideas. Period.
- Paying employees under the table (even worse if you then try to deduct this money on your taxes as childcare expenses – two trips to the clever well is bad)
- Spending the sales tax you collected(oops)
- Creating additional entities with the sole purpose of moving money around to avoid the tax man (you are not that smart)
- Running a business without a business license, and without paying self-employment taxes. (This one adds up quick.)
- Thinking there is any reason in the world you shouldn’t have to pay taxes (see WesleySnipes – he is in jail).
|Jeff Skilling was a clever man.|
I don’t mean to tell anyone they should not employee a professional to engage in a tax strategy. That is a smart plan to identify areas where you might be overpaying. Instead I am warning against overthinking how you might find competitive advantage outside of the law. It is a short walk from “I can’t afford to pay the taxes required” to “I can’t afford to pay legal workers a legal wage” to “ please step forward inmate number 265467”
Keep cleverness with the creative teams and let the business be run by smart people. A smart person know there are no shortcuts. Give me a smart CEO, a smart CFO, and a clever CMO and I will show you a winning combination. For a Clever CEO, and a Clever CFO please see any article written on Enron.
This has been my view from the davenport.
Until next time, have a good night.
ABOUT THE AUTHOR, M.T. WELDEN
- M.T. This blog provides a venue for me to share my perspectives on the core business machinations behind every industry. I believe business leadership is not necessarily industry specific, but it is specifically necessary in all industry. I have managed over one-thousand employees in my career, and regardless of what their job description was, they all were made better by effective leadership. As a business leader, I know that every business can be better through effective management. This means maximizing employee performance, identifying business efficiencies, and clearly communicating the overall goals of the organization to all stakeholders.
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