Tweet

Reducing the Employee Theft Epidemic

Written by: Fred Tarasoff

Article Overview: The FBI calls employee theft “the fastest growing crime in America!” and the U.S. Chamber of Commerce estimates that 75% of employees steal from the workplace. But it possible to reduce the incidence of employee theft by following some simple tips.

Reducing the Employee Theft Epidemic

I know what you are thinking --- not my employees, they would never steal from me. Well I have some disturbing news for you. If you have employees there is a very good chance at least one of them is stealing from you. According to the U.S. Chamber of Commerce approximately 75% of employees steal from the workplace. The Association of Certified Fraud examiners, claim that the typical business will lose an average of 6% of revenue from employee theft. The frequency of internal theft as compared to external theft is slightly lower, but the loss per incident is much higher as it can often occur over a period of time.
How can you minimize internal theft? First it is important to recognize that employee theft occurs on a frequent basis. Here are a few tips on Reducing Internal Theft

Hire Smart.
Preventing internal theft has to begin with the hiring process. You must carefully screen the people you hire. Collectively retailers do a poor job of checking references and doing background checks. Therefore often retailers end up recycling dishonest employees and end up hiring each others thieves. It is recommended to check at least 3 or 4 past employee references. Make sure you speak with the right person or persons. Begin with the HR department and verify the applicants start and end of employment dates. Then if possible ask to speak to the supervisor in charge at the time of employment. Ask if the candidate left the position or was dismissed. Also ask about work habits, level of honesty, attitude and would the previous employee be rehired. It is important to carefully listen to the past employers comments and opinions. Sometimes what is not said should raise your level of suspicion. Some retailers have implemented the policy of conducting criminal background checks.


Strict Inventory Control.
It is important to know the status of your inventory. Strict inventory control will give you a good sense of both the level of shoplifting as well as internal theft. Retailers committed to tracking their inventory on a regular basis generally have a lower incidence of overall theft because they tend to deal with shrinkage before it gets out of control. It is suggested that you perform accurate physical inventory counts a minimum of four times annually and compare these figures with “book” values in order to determine lost dollars. You are also sending all employees the message that you are serious about preventing theft.


Clear Policies and Procedures.
If your organization is using an employee procedures manual this would be a good place to include theft policies. If you do not use a manual, it would be a good idea to draft an internal theft policy paper. Inform new employees that you have had previous problems with employee theft and you need to go over a few things. Explain the penalties for fraud and theft, this could be dismissal, suspension or prosecution, but it must be crystal clear. Make employees understand the consequences of theft and the long lasting impact of a criminal record. This is especially important with younger new employees. Consider mentioning that from time to time you employ the services of a security specialist who uses hidden cameras. Even if you have no intention of using hidden cameras, you have planted the seed that the premises may be under surveillance.


Reduce Temptation.
A major source of temptation comes when employees are alone in the store especially when cashing out. Studies indicate that theft in both product and cash occur more often when a staff member is left alone. When more than one employee is present, staff members tend to police themselves.
Have a policy where only the front door is used for all staff arrivals and departures. The back door exit is commonly used for internal theft. It may also be helpful to switch up day to day responsibilities. For example if the same employee always takes out the garbage at the end of the day after a period of time there maybe a temptation to drop in a few items into the garbage bag, put in the dumpster and then retrieve it after hours. Many years can go by with the same people doing the same daily task which can open up the doors for potential theft.


Positive Work Environment.
Happy employees rarely steal. One of the best methods keeping your employees happy is to provide a positive place to work. This is also good for improving overall business because customer service improves.

What can we do?

1. Create a workplace that provides a level of meaning and purpose. A place where employees feel they are making a difference in the lives of your customers/clients.

2. Lead by example and be a positive role model. Maintain a good positive attitude and do your best to discourage gossip and negative behaviour as this can undermine moral.

3. Encourage your employees and praise work well done often and do this on a regular basis publicly. But provide constructive criticism only in private.

4. Encourage and challenge your employees to grow. Give them something to work towards. Most people have specific strengths that when possible should be utilized.

5. Create a teamwork atmosphere where everyone is involved. When people get involved they feel important and appreciated. This is much more effective that the “Us against Them” attitude. Keep the lines of communication open and maintain an open door policy. Listen to others ideas and welcome all ideas.



Staff Perks.
Another good practice is to reward your staff with discounts and bonuses. A fair and generous staff discount can compensate for a low hourly wage or salary and can be very helpful in reducing employee theft. But the discount must be perceived as being generous by staff members in order to be effective. Some businesses have gone to a system of profit sharing with effective results.
It is recommended that you have clear policies in place regarding employee discounts and purchases. All staff checkouts should be documented and should be checked out by someone else.


Keep Track of Keys.
Change your locks where “non-duplicating” keys are used. Always keep a record of how many keys are in circulation and who has possession of them. When an employee leaves your employment, immediately retrieve all keys. If store keys are not retrieved it is wise to quickly change locks. It is a small price to pay that in the long run can save you thousands of dollars.


Run a Tight Ship.
Running a tight ship not only means having clear policies and procedures in place but also to enforce those policies. For example un-enforced employee discount policies lead to staff members passing the same saving to their friends and family, which will cost you in profits.
Make employees accountable and document any returns and voids that occur. Many stores have a policy where the supervisor must authorize product returns and voids.


Shoplift Prevention Training.
All members of your staff, including part time employees should be getting regular training in external theft reduction. Most Loss Prevention experts now agree that this maybe the most effective way of reducing employee theft. Of course the added bonus is this training will also help to minimize shoplifting. Essentially this will shoplift proof your business as most shoplifters both pro and amateur avoid stores with a well trained staff. It is recommended that employees participate in a minimum of 3 shoplift reduction training programs. Ideally one training session should be a month or two before Christmas as statistically December is the costliest month in retail losses. Shoplift prevention training is effective because it builds awareness and reminds employees that theft is not taken lightly at your store which makes internal theft less appealing and is a highly effective deterrent. Loss prevention is about creating a mindset and creating awareness which does not have to cost you a great deal of money. Even if you employ the services of a Loss Prevention company to control your losses, you still will benefit in a reduction of internal theft by providing good external loss training. In the past external theft training required a fairly large investment; today there are some good online programs that are both effective and relatively inexpensive.

Related Articles
  Car Insurance - Fire and Theft Coverage
  Quick Tips To Prosecuting an Employee for Theft
  Retail Loss Growing Problem
  Have You Got The Symptoms?
  Grocery industry at high risk of theft

Article Tags: association of certified fraud examiners, certified fraud examiners, checking references, criminal background checks, dishonest employees, disturbing news, employee references, employee theft, employment dates, frequent basis, good chance, good sense, hiring process, hr department, inventory control, poor job, shoplifting, thieves, typical business, work habits



Related Forum Posts
Post subject: It's Not Personal, just business - I so agree! Actually, the business world as we know it IS in trouble. I heard some stats last week that they expect by the time 2050 that 70% of workers will be freelancers. Employee/Executive Bullying won't be able to stand it when it could be easier for someone to simply contract with the nicer guy (or gal). I, for one, will be choosing the nicer ones!
Re: How do you refocus on work after vacation? - I got back from vacation about a month ago. Boy, it really interfered with my work in the first week especially, because I had less of a tolerance for setbacks. But the silver lining was that it taught me quickly where I needed to set more boundaries around my work, so that my time wasn't being wasted (vacation made me really aware of how I was spending my time). Reducing time spent writing and responding to emails was one new habit that my vacation helped me develop. I think that you can use almost any negative side-effect of returning back from vacation and turn it into something positive, if you think creatively about the situation.
2 Forums Updates - Many of you have been writing in suggesting that on my website and in my newsletter we include the link to the actual forum post and not just the name of the post and a link to the Forums home page. Well, after looking into it I'm pleased to announce that this feature is now available. Thank you everyone for the suggestions! We've also added names for members based on how much they post. Level one is Newbie, Level 2 is Intern, Level 3 is Employee and so on... There are 10 levels in total. I'm looking forward to seeing how everyone does! Keep the suggestions coming - they are great!
Re: Finding AND Keeping Good People - Employee retention or as you mention “Keeping the Good People” is one of the biggest challenges for any growing business. It takes a huge effort from the entrepreneur’s end. I can come up with the following when it comes to KEEPing the good people- 1. Motivation of the employees 2. Recognition of the needs of the employees 3. Activities to make the employees feel valuable towards the organization 4. Make benefits more accessible 5. Offer profit sharing incentives 6. Create clear career paths at the company 7. Consider telecommuting, job sharing and other flexible working arrangements 8. Incentives are essential and they don't have to be huge 9. Have other managers praise an employee's work 10. Be sensitive to the balance between work and private life
Re: 40 cents per dollar is spent in a franchised business - Hey Ringo, You quoted this information: "The average initial franchise investment is $250,000" Here is your statement/question: "While I understand that you are paying for someone else's success in development, marketing and business model, with such a big upfront investment, why not make something of your own?" The part I would like to comment on is where you say "with such a big upfront investment". On an average initial franchise investment of $250k, the buyer is only fronting 20-30% of that. So their initial cash investment is actually only $50k to $75k. Although that is nothing to sneeze at, if you have a good system that you are buying into and you have the drive and ability to be a good business owner, statistically speaking you stand a higher chance of success with a proven franchise than an independent business. Of course we have all heard the numbers that are thrown around by various folks about what the increased success rates are, I don't know what they are exactly, only what I have been told by "others". I always always recommend performing the proper due diligence when reviewing franchises. From what I understand the increased expenses of owning a franchise are more than offset by the increased revenues & increased profit dollars at the end of the day. There might be a few businesses though that are not conducive to franchising, for example a web based business is hard to franchise because of competition and low cost of entry. I review independent businesses and franchises every day. The thing that stands out more often than not is that the independent businesses are not doing as well as the franchises overall. Remember though, I might be a bit biased because I am a franchise consultant, so for full disclosure, I make money when people buy franchises. I think with the proper due diligence most people will make the right decision. Reducing risk, increased profits and financing options continue to make franchises popular to the average Joe. .


Share this article with your friends. Fund someone's dream.

Leave a comment below or share on the left and you'll help support entrepreneurs in Africa through our partnership with Kiva. Over $50,000 raised and counting - Please keep sharing! Learn more.

Tweet

Newsletter

Get advice & tips from famous business
owners, new articles by entrepreneur
experts, my latest website updates, &
special sneak peaks at what's to come!

Name:
Email:

Popular Articles

What is the bottom line to you?

The Right Job - Part Five 'Compensation'

Angel Investors Where Are You?

Suggestions

Email us your ideas on how to make our
website more valuable! Thank you Sharon
from Toronto Salsa Lessons / Classes for
your suggestions to make the newsletter
look like the website and profile younger
entrepreneurs like Jennifer Lopez.