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Why Retailers are Giving Employees the Opportunity to Steal

Posted on 6/7/12 9:30 AM

Every year we learn the staggering statistics related to employee theft, with the majority of retail categories or verticals reporting at least 40% of annual loss attributed to internal theft. The expectation, as history has shown, is that these statistics will continue to increase. The question is...who is responsible for the losses incurred by employee theft? Surely dishonest employees are responsible for their actions; however are they alone in the blame?

For a theft to occur three conditions must be present; motive, opportunity and rationalization.  If any one of these conditions does not exist, a theft will not happen.

According to several researchers the condition that a retailer has most control over is “the opportunity".

These same researchers found that eliminating or hindering the opportunity is where many retailers fall down, thus ‘tempting’ associates to steal, even those who would not normally consider it.

How are retailers giving employees more opportunities?Fraud Triangle resized 600

  • Lack of internal controls existing in a retail environment 

  • Management’s failure in following proper policies and procedures 

  • Failing to prosecute dishonest associates or providing a strong consequence for their actions 

  • Not performing adequate audits, visits and/or training in order to maintain a compliant environment

  • Lack of a hotline program or poor communication/training on an existing hotline program

Past research has shown correlations in employee dishonesty and certain actions taken by the retailer. Some of these results include:

  • A decrease in shrink percentages and theft when more store audits or visits are conducted 

  • An increase in theft when audits decreased yet the penalties for stealing increased 

  • An increase in theft when management fails to follow correct policy and procedures

The failure of management to adhere to policies and procedures seems to open the door for not only those looking to steal from a company but may also open the thought process to those on the fence regarding theft. Providing a window of opportunity, knowing that management will not validate or enforce policies or procedures will often cause more dishonesty from those you may not have expected to steal.

Closing the windows of opportunity

Understanding this research, how can a retailer close the window of providing their associates with the opportunities to steal?

  • Implement and enforce written policies and procedures that focus on the prevention of loss and guard against theft. 

  • Conduct operational compliance audits on a regular basis to ensure adherence to policies and procedures. Inspect what you expect from associates as well as store management to prevent opportunities for loss. 

  • Ensure all levels of associates are educated regularly on how to prevent loss, identify potential loss and report suspected theft. This requires an effective training and awareness program for associates and management positions. 

  • Communicate resolved issues of theft so associates understand the position of the company towards dishonest activity. This communication does not have to be detailed, but should illustrate the process of detection and the consequences in order to deter others who may be thinking about the same opportunities.

  • Have a complete loss prevention initiative that includes the necessary pieces of a structured program and is executed by those focused on detecting, investigating, resolving and preventing loss. Relying too much on other departments or personnel can diminish the initiative or result.

Factors involved in deterring employee theft are: the actions of the retailer, the elements of their loss prevention program and the frequency of interaction with associates.  True, not all employee theft can be prevented, but as retailers, you have the greatest ability to prevent the opportunity through a well developed and properly executed loss prevention program.

Written by David Johnston, Director of Business Development

Topics: policies and procedures, Loss Prevention program and development, Audits and Investigations