Employee Theft a Major Concern

Preventative steps can improve management-worker relations

From sun-herald.com

Posted July 24, 2005

Many people consider accounting a tedious job, but not John Lewis. Throughout his three-year tenure with Unified Trucking, he had ostensibly been a model employee, missing only a few days of work and conquering the Herculean task of bookkeeping single-handedly.

The company's continued growth and profitability were the only indications management had ever needed to determine that John performed his job well. His professionalism and dedication made supervision unnecessary.

John insisted on handling any problems or discrepancies personally, and made it clear that the buck stopped with him.

In fact, many bucks did stop with him, followed him home and neatly deposited themselves into his bank account. In three short years, John managed to use his authority and exclusive bookkeeping access to bilk the company out of nearly $100,000.

As often happens, John's illicit activities were only revealed by accident. If janitorial workers had not discovered a suspicious amount of discarded receipts, the theft would have continued undetected.

The cost of employee theft and embezzlement adds up to billions of dollars annually. For most companies, employee theft is a much more serious concern than burglars or shoplifters. In the retail industry, where theft of all types is a recurring problem, businesses recover an average of $1,350 from each employee apprehended for stealing, compared to $196 recovered from shoplifters.

With dramatic figures like these, taking steps to eliminate theft and graft within a firm are sure to yield returns.

Security experts estimate as many as 30 percent of all employees steal and another 60 percent will steal if given sufficient motive and opportunity. The current economic hard times only add to the temptation of personnel to take what does not belong to them.

Yet protecting businesses from pilfering may be easier than you think. A comprehensive program to eliminate employee theft can be simple and inexpensive, while at the same time increasing productivity and providing avenues for improved management-worker relations.

Frequently used schemes

Having an elementary understanding of the more common forms of employee theft can help business owners formulate a strategy for subverting them. Here are just a few:

• Forging receipts. Salespersons can charge a customer one sum, ring up a receipt for less, and pocket the difference.
• Hiding receipts. When bookkeeping is sloppy and little supervision exists, employees can keep cash and receipts without raising an eyebrow.
• Pocketing loose change. Small sums of money, such as fees or petty cash, may not be missed at all.
• Pilfering merchandise. Goods your firm purchases may never even make it to the shelves.
• Fictitious payroll. Personnel managers authorize salary for fictitious workers, then keep it for themselves.
• Overbilling expenses. Managers with expense accounts may submit receipts twice and be reimbursed twice, or inflate actual expenses incurred.
• Purchasing fraud. Employees sometimes declare themselves suppliers of nonexistent goods, and subsequently reimburse themselves handsomely.

Other steps employers can take to reduce workplace crime include the following:

Keep a close eye. Watch for the tell-tale signs of internal theft. One subtle but noticeable indication of dishonest employees may be an unexplained rise in their living standards. Be careful, however, as newfound wealth or sudden success may occur for a number of reasons of which you might not be aware.

Pay close attention to management-level personnel who insist on handling routine clerical tasks themselves. And be on guard for clients complaining about overcharging or inconsistencies in shipping and billing practices.

Background checks. Performing thorough background checks on all new-hire prospects, particularly for sensitive positions involving the flow of money. Call previous employers to verify resume and application information.

Make it hard to steal. While the majority of workers will not go out of their way to steal, the best defense is careful supervision that removes any easy opportunities.

Even though delegation of tasks is unavoidable, try to have a management-level supervisor oversee inventory and bookkeeping. If this is not possible, consider dividing these tasks among several staff members so no single employee has too much authority.

Most successful embezzlement schemes would have failed if inventory and accounting records were organized and up to date. If records are always behind and the work is sloppy, theft will be much harder to detect.

Work with employees. Workers will be less likely to steal if bosses create an environment in which they think there is a good chance of being caught. Training and "employee awareness" programs can inform workers about stealing problems and keep them on the lookout for theft of any kind.

To make a security program such as this effective, it is crucial employees know they can turn over incriminating information on anyone in the firm without fearing job loss or other repercussions. Stress that management and supervisors are not above suspicion and that employee complaints will be taken seriously.

Provide alternatives to stealing. The most troubling cases of employee theft occur when workers are in desperate financial straits. Common problems, such as heavy medical expenses, can temporarily put people into situations where stealing seems necessary for survival.

Let employees know in advance that they can come to management for assistance rather than resorting to theft. Although no company is a charitable organization, consider helping distressed staff members find financial counseling.

Determine clear policies. To reinforce these other measures, a company should distribute clear, written policies on ethical behavior to be signed by each employee, including the owner. It should be emphasized that there is no such thing as an "acceptable amount" of employee crime, and that, in fact, none at all will be tolerated.

Set an example. Employees need to know that one uniform ethical standard applies to everyone in the firm. Executives and managers should be positive role models for workers. If management is found dipping into petty cash, fudging on expense accounts or taking home equipment, personnel will feel justified in doing the same.

Some notes of caution for business owners and employers: Be absolutely certain about a staff member's misconduct before making accusations that can strain worker relations, or even elicit a lawsuit.

Don't be overly zealous when doing background checks. Some good workers have made mistakes they genuinely regret and have never repeated them.

Many businesses conduct honesty testing in their hiring procedures and evaluations of current staff members. Honesty tests are standardized, commercially available written examinations that provide psychological evaluations of a candidate's ethical dispositions and attitudes toward work.

Honesty testing has been hailed by some for helping to eliminate pilfering, reduce employee turnover and increase productivity. However, it has also been criticized and challenged by those who feel the tests are either inaccurate or aviolation of rights to privacy and other civil rights.

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