Employee theft

Whether your business is manufacturing, retail, wholesale, service, hospitality or high tech, it is probably experiencing some degree of employee theft. The list of items employee steal from their employers is endless and includes such items as inventory, money, parts, components, supplies, information and customers. In fact, it is estimated that 95% of all businesses experience employee theft and management is seldom aware of the actual extent of losses or even the existence of theft.

Studies by the Department of Commerce, American Management Association and other credible organizations estimate that employees steal over a billion dollars a week from their unknowing employers. Furthermore, they estimate that nearly 1/3 of all bankruptcies are caused by employee theft and it takes approximately $20 in sales to offset every $1 lost to theft. Often management has indications of the problem through declining profits, unexplained inventory shortages, rumors and many other signs. However, it seldom considers the fact that employee theft could be a major factor for the losses.

Management Misconceptions

More often than not, it is very difficult for a manger to accept the possibility that employees he/she hired, trusts and works beside are capable of engaging in such disloyal and dishonest activity. Consequently, it is easy to understand how management clings to misconceptions about the problem. Some of these misconceptions about employee theft include:

  • Most theft is caused by non-employees.
  • Well-paid and/or senior employees are trustworthy/loyal and don't steal.
  • Honest employees can be counted on to report employee theft.
  • Employee theft is conspicuous and can be detected in its early stages.
  • You don't need to formally inform employees that theft will not be tolerated.

Signs of Theft

Since there are as many signs of theft as there are ways to steal the list of warning signs is endless. The key is for management to realize that certain conditions or incidents may not be the result of carelessness or incompetence, but indications that theft is in progress. All irregularities or deviations must be evaluated with an open mind and creative mind. Inventory or product found near employee exits or dumpsters, sensitive documents discovered in copy machines, employees in key positions who refuse to take time off, "xeroxed documents used in lieu of originals have been signs of past theft and may be indications of existing dishonesty. The booklet, "How to Identify Dishonesty Within Your Business," discusses the 97 major warning signs of employee theft and can be found at www.employeetheft.com.

Why Employees Steal

Amazingly, employees questioned as to why they stole often justify or rationalize their actions. Often, they state the opportunity of theft presented itself through lax policies, controls and management indifference. Moreover, many employees cite opportunities created by management, not their financial need, as their primary motivation to steal. Another significant reason employees give for stealing is their perceived belief management was stealing so it was OK for them to also do so. This condition proves the point that, if management wants a theft free work environment, it must set the example of honesty and adherence to policies.

Some other common examples of employee rationale for theft include:

  • I am underpaid and I'm taking what I deserve.
  • Everybody does it, besides, they can write it off.
  • The company makes a large profit and I deserve some of it.
  • The company angered me and I this is how I get revenge.

How to Interview an Employee Suspect

There are many crucial issues to consider in dealing with an employee suspected of theft. On one hand, the employer wants to know the truth regarding possible guilt of an employee suspected of theft even though the employee is reluctant to cooperate. On the other hand, there are serious legal and employee relation problems that can arise from not handling the situation in an appropriate manner. Although the issues are many and complex, the following are just a few of the basic steps to be followed in determining the facts of a theft incident leading to the interview of suspects;

  • Carefully evaluate the source and validity of any information that alerts management to a potential theft problem.
  • Gather as much information or evidence regarding the alleged theft as possible prior to taking any action.
  • If necessary, review facts and findings with an attorney, auditor in areas of legal and accounting concerns.
  • Stick to and discuss issues at hand. Don't deviate or allow deviation from obtaining the truth and facts surrounding the situation.

Dealing with employees suspected of theft tests the emotions, restraint, legal knowledge and objectivity of every manger and supervisor. Since the consequences of mishandling the investigation of employee theft is so great, the key is to learn the procedure now and not learn during the course of an incident.

How to Prevent Losses

Until management gains an accurate understanding about employee theft and initiates sound loss prevention measures, it will remain a major drain of profits productivity and employee morale. Minimally, the following steps should be taken:

  • Conduct a survey or audit of your business. Identify possible existing theft and potential opportunities or risks to potential theft. Immediately develop a plan to eliminate or reduce your exposure to these risks.
  • Educate supervision and the general employee population as to the impact employee theft has on them and how they, not just management, are the key to solving the problem.
  • Develop a Loss Prevention Program that ensures an ongoing effort to prevent and detect dishonest activity.

To read Employee Theft-The Profit Killer in its entirety, visit www.employeetheft.com

Here is a list of ways employees can cheat you out of profits. These came from www.etheft.com.

VENDOR THEFT: A vendor/supplier of the organization offers an employee an inappropriate gift or money in exchange for personal gain.

COLLUSION: A manager or executive colludes with employees to falsify organization data, such as monthly reports, or other illegal activities, such as price fixing.

PILFERING: An employee who repeatedly steals small quantities of cash, postage, office supplies, products, organization services, and other organization assets for personal gain.

MILKING THE CLOCK: An employee falsifies his/her time card, or otherwise misrepresents hours worked, thus milking organization profits from others.

SWINDLING: Members of management including sales representatives who cheat or defraud customers, suppliers, investors, or others for personal gain.

EMBEZZLEMENT: Misappropriation of entrusted money or goods with the intent to defraud the legal owner. Padding expense accounts is a form of embezzlement.

SKIMMING: Management tries to conceal income to avoid the payment of taxes, or secretly diverts unreported profits for personal gain.

TILL TAPPING: Stealing money from the cash register or organization till.

BRIBERY: The giving or accepting of money or other things of value in return for promises to grant favors to the party giving the bribe.

CORRUPTION: Dishonest practices, especially when committed by public or corporate officials.

SABOTAGE: The word "sabotage" originated in the Netherlands, where workers would throw their sabots (wooden shoes) into the wooden gears of the textile looms to break the gears. Some employees today even managers may commit sabotage to conceal their errors, to gain "comp" time, or to express their anger at their work, employer, or co-worker.

THEFT OF IDEAS: Theft of ideas, designs, formulas and other trade secrets is a growing problem for many American businesses. Theft of an idea or a design affects all employees, because potential expansion is stymied. America as a nation can also be adversely affected whenever a stolen design is sold to foreign competition. PMQ

About the Author John Case CPP, is a security management consultant based in Del Mar, California and is President of John Case & Associates, a security management consulting firm that provides management with proven and cost effective strategies to prevent theft, drug abuse and violence in the workplace. He holds a BS degree in Security Administration from Michigan State University. Prior to forming his consulting firm, he was employed by 3 Fortune 100 companies. Mr. Case is a founding member, past President and board member of the International Association of Professional Security Consultants. He is a speaker for the American Management Association, trade associations and similar organizations.

For your full version of Employee Theft – The Profit Killer, visit us at, www.employeetheft.com: