More Dishonest Employees

In our Fall 2009 newsletter (Vol. 24, No. 4) we provided statistics on our 21st Annual Retail Theft Survey which reported on over 900,000 apprehensions taking place in just 22 large U.S. retail companies representing 19,151 stores with combined 2008 annual sales in excess of $571 billion.  These 22 retail companies lost over $6 billion to shoplifting and employee theft in 2008.

Both the number of dishonest employees apprehended and the dollars recovered from those employee apprehensions increased in 2006 for the 5th straight year, indicating employee theft continues to plague many retailers.  Survey results were as follows:

  • Survey participants apprehended 72,120 dishonest employees in 2008, which was a 3.0% increase over their 2007 employee apprehensions.
  • Dollars recovered from those apprehended employees totaled $69,894,691 in 2008, a substantial increase of over 9.9% from their 2007 recovery dollars.
  • The average dishonest employee case was valued at $969.14 in 2008, up 6.7% from 2007’s case average.
  • On a per-company basis, one in every 30.0 employees was apprehended for theft from their employer in 2008.  (Based on over 2.1 million employees.)

What was the cause(s) behind the increase in employee theft apprehensions and recovery dollars in 2008?
We posed this question to our survey participants and they responded with the following five (5) main points.

  • Enhancements in POS Exception reporting systems. (This enhanced software allowed the  surveyed retailers to more quickly identify and pinpoint suspicious trends/patterns at the point-of-sale.)
  • Less management supervision over employees. (With reductions in management staff, dishonest employees have greater opportunities to steal.)
  • More employees are stealing in a poor economy. (More employees are turning to theft as a way to supplement their income in the down economy.)
  • Quality of investigations and interview process (better LP training). (LP personnel are better trained at identifying dishonest employees, and obtaining admissions during the interview process.)
  • More focus on internal theft incidents by management and loss prevention personnel. (Management and Loss Prevention personnel spent a greater portion of their time identifying and apprehending dishonest employees.)

Why does employee theft continue to plague the retail industry?
Some of our thoughts:

Ineffective Pre-Employment Screening Process:  The 1st step to controlling employee theft starts at the point-of-hire; do not hire the “bad apple”. Some retailers, in an effort to reduce their costs, have lowered their pre-screening requirements and are no hiring more ‘questionable’ employees. When statistics show one employee out of every 30.0 employees is actually  caught stealing, there has to be some type of breakdown in the pre-employment screening process.

Less Employee Supervision: With lower management levels, there is less supervision of employee activities which results in more opportunities for dishonest employees to commit theft.

Ease in Selling Stolen Merchandise:  Merchandise stolen by employees can be more quickly and easily sold, and for a much higher price using internet auction sites. This easy access to a much larger audience for stolen goods has resulted in more theft by dishonest employees looking for quick cash.

Decline in Honesty: There are more dishonest people in the workforce today, and this decline in personal honesty is taking its toll. Almost daily we hear of business, government, law enforcement, celebrities, sports figures and even church leaders being caught up in questionable activities.  Such events make it easier for “borderline” employees to rationalize their theft acts. In addition, the part-times  workforce is growing, and it is not uncommon to find that many such workers have less loyalty to their employer, and are more apt to take advantage of opportune circumstances.

Quicker Identification of Internal Theft Incidents via Technology: Sophisticated data mining/point-of-sale  ‘exception’ reporting systems are providing prompt identification of employees whose activities create suspicious trends/ patterns.  CCTV systems have also proven to be highly valuable in identifying internal theft acts, especially when interacting with the company’s POS system.

Greater Focus on Internal Theft by Loss Prevention/Management Personnel: Our survey shows that dishonest employees steal $7.14 to every $1.00 stolen by shoplifters, on a per case average. Retailers know this and they recognize that employees they have more ‘opportunities’ to steal as they are generally at work 20-40 hours a week, while a shoplifter spends much less time in any given location. Therefore, from a cost-effective viewpoint, the primary theft-prevention focus in many companies is towards internal theft.

More Effective Use of ‘Hotlines’ and Confidential Awards Programs: Companies are spending more time today publicizing the problems associated with employee dishonesty than in the past.  These companies are emphasizing their  “hotlines” and an incentive award programs more often in an effort to obtain information from co-workers  that leads to the detection and apprehension of dishonest employees.  These ‘hotlines’ and award programs are having a positive effect in getting more employees involved in their company’s loss prevention effort.

Unfortunately, all indications are that employee theft will not weaken in the near future, and will continue to take its toll on retailers’ bottom-line profits. In reducing employee theft, the goal is prevention – and that starts with a thorough pre-employment screening process; do not hire the undesirable employee. After that, consistent compliance to company policies and control procedures is most important; by  reducing the opportunity, you can prevent the theft.  $

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