Scoot Richmond
Assessment:
Symptoms –
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Mail order business: “It was nearly impossible to make a profit in mail order. All my
money went into inventory.”
Repair shop mostly maintains new scooters
Uses vintage inventory to restore engines and bodies on old scooters – very time
consuming
2007 – sold 50 scooters at average price of $3400
2008 – Sold 378 scooters
2008 sales: $1.1 million; increased $279,000 in 1st 6 mos. of business in 2007.
Employee embezzled $50,000
Criminal investigation still pending, money still left unrecovered and no arrest made
Stressed
Uncertainty in how to restructure financial operations to prevent fraud
Worried about hiring the wrong employee – may commit fraud/ trouble down the road
Does not know how to establish reliable interview and evaluation process
Funky urban clientele
Wants to expand target market- sub urbanities
Does not know the people of sub urbanities and does not know how to reach them
Backroom covered with spared inventory
Spent past year trying to fix embezzlement issue but still has not fixed it
Lack of confidence
Close relationships with employees – Friends rather than Boss
No knowledge on profitability of different segments within the business
Does not keep track of employees productivity – hours spent on tasks
Uncertainty about restoration projects being profitable or a marketing expense
No knowledge on the cost of the supplies as well as how much is used relating to specific
tasks (ex: Oil)
Employees do not keep track of how many hours they spend on a project/task
Lahmer not marketing to her fullest potentiation
More serious about disciplining new hire
Causes of Symptoms –
 Raise in gas prices
 Embezzlement
 Does not keep track of inventory levels/costs
 Lack of knowledge on different components of the business
 Does not properly monitor employees and financial records
 No employee evaluation system
 No inventory management system
 Decrease in morale and confidence due to embezzlement
Analysis:
Common Causes –
 Lack of focus and confidence
 Lack of priorities
 Lack of business knowledge
 Misdirection/uncertainty
 No business structure
 Ego/personality
 Ineffective hiring process
Primary Problem –
 Lack of a business structure in place to gain control of her company
Supporting Facts –
Chelsea Lahmers, the owner of Scoot Richmond, has been struggling to recover her business after
catching her former employee embezzling $50,000. Due to her lack of a business structure, it
made her business vulnerable to her employees. Without setting specific guidelines, policies, and
systems to monitor the employees as well as the business, it makes it hard for Lahmers to gain
control of her business. As a result, she has no knowledge on the profitability and financials of
her business, as well as no system in place to measure the performance level of each of her
employees in regards to efficiency and effectiveness. With the hope to expand her customer base
to increase sales and recover from the embezzlement, Chelsea must gain control of her business.
Alternative Solutions –
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Create employee manuals/policies
Hire an operations manager
Set up cameras in the store to better keep track of the employees
Be more assertive and aggressive
Hire a marketing manager
Implement QuickBooks to maintain financials
Implement ERP system to maintain financials and inventory levels/costs
Do Nothing
Implement a more rigorous hiring process
Conclusion:
Best Solution –
In order for Chelsea to create a business structure to gain control of her business, she must implement a
more rigorous hiring process, as well as create employee manuals and policies. The employees are the
people who make up 50% of the business and bring in the sales and revenues; they are the ones who are
catering to the customers and bringing in the clientele. The fact that the employees play a crucial role in
the success of Chelsea’s business, it becomes urgent to hire the best fitted employees and to create
employee manuals and polices to make sure that they know exactly what is expected of them as well as
their roles and duties.
When writing the handbook, topics that Chelsea should include are listed below.
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Management
Non-Disclosure Agreements
Conflict of Interest Statements
Anti-discrimination Policies
Standard of Conduct
Work Schedules
General Employment Information (Roles, duties, disciplinary actions, termination, resignation
procedures, etc.)
8. Technology
9. Media Relations
10. Employee Benefits
Please refer to this link referenced by The United States Small Business Administration for a template of
a successful employee handbook: http://www.entrepreneur.com/formnet/form/612.
By including these topics within the handbook, employees have a better idea of what they need to do in
order to successfully achieve their goals and objectives. This will also include general information about
the company, who to report to, code of conducts, etc. In Chelsea’s situation, Chelsea should include in her
handbook that every employee will log all their tasks and be evaluated based on their performance.
Quarterly evaluation should also be implemented where employees are able to receive feedback whether
or not they are below expectations, meet expectations, or exceed expectations. By monitoring the
employees, Chelsea would also be able to depict if there was fraud occurring within the business and if
people are performing their jobs efficiently and effectively.
To seek further assistance, Chelsea could contact the following SBA offices located in Virginia that offer
free counseling:
Virginia District Office
The Federal Building 400 North 8th Street, Suite 1150
Richmond, VA 23219
Phone: 804-771-2400
2.37 mi Directions
Greater Richmond SBDC
600 East Main Street Suite 700
Richmond, VA 23219
Phone: 804-783-9314
2.7 mi Directions
To implement a more rigorous hiring process, Chelsea must complete the following steps.
1. State what is expected of the employee.
Instead of just simply reciting the job description to the interviewee, Chelsea must clearly define
what is expected of the employee relating to objectives and goals, the time they should complete
these objectives and goals by, and also the end result that notifies that the employee that they
achieved them. By doing so, each employee will know exactly what is expected of them from
Day 1 and what they must do to remain employed.
2. Probation Period
Instead of hiring the employee as a permanent employee, Chelsea should have the employees go
through a probation period for 90 days of employment. At the end of the 90 days, the employee
will be evaluated based on their performance. If they achieved their goals and objectives in a
timely and efficient manner, they’ll be hired as a permanent employee. If not, than Chelsea would
have to reconsider their employment.
3. Create a list of “5 core” interview questions.
These questions are to be based on the interviewees past experiences and accomplishments.
Instead putting too much emphasis on their future success, focus on what they already had
accomplished and what specifics skills that they have. Finally, Chelsea should have each
interviewee relate their past experiences and knowledge with the job requirements at Scoots
Richmond.
4. Re-evaluate the interview.
After the interview, Chelsea should think about if the potential candidate for the job can excel in
the job requirements as well as perform according to the values and policies of the company. She
should not use generic evaluations of interviewed employees, using comments such as “nice,
bright, and very enthusiastic”, and should focus more on what they will or will not contribute to
the company.
5. Double check everything.
The most important part of the hiring process is to double check everything. This consists of
verifying all references, filing criminal and sexual background checks with CJIS (The Criminal
Justice Information Services Division of The FBI), and administer personality and skills tests.
This is something that Chelsea had failed to complete when she hired her accountant Tourtelot.
Tourtelot turned out to have an online gambling problem, a possible reason why she embezzled
the company’s money; something that could have been prevented is she implemented these
vitally important protocols.
After hiring an employee with a gambling background and a new employee who showed up late on the
first day, it is clear that Chelsea’s hiring process is ineffective and is not clearly defining what is to be
expected of each employee. By having a systematic hiring method and creating an employee handbook to
better communicate to the employees, it’ll soon help to create a more organized business structure at
Scoots Richmond.