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The One Thing More Damaging than Internal Theft

Posted on 6/17/15 10:00 AM

bigstock-Portrait-of-confident-salespeo-69748240I’ve spent a couple of decades observing attitudes on employee theft. Obviously it is not a question of whether or not employers believe it to be right or wrong. Unanimously, people agree that stealing is a bad thing, that it is illegal, and that such behavior hurts both the company and its employees. In fact, most managers accept that internal theft is a considerably sized problem. Where the conversation gets a bit dicey is when we move from a general “they” steal to the more specific “your people steal.”

In seminars I’ll often share the statistics the one in ten employee engage in dishonesty and that these actions are estimated to account for nearly half of all company losses. At this point I ask the audience to answer a few questions based on their own perceptions of the problem. I ask them to write down what percentage of theft causes loss in the following categories:

1. Nationwide

2. In their company

3. In their Region or District

4. In their store

The results almost always divide the group into two sub-groups—the cynics and the warm hearts. The cynics usually list high percentages across every category. They may believe as much as 90% of nationwide retail losses are the result of employee theft and continue with that belief right down to their own store. But the cynics always reflect just a fraction of the group.

The vast majority have no compunction believing half of all nationwide losses are caused by employees but….But…. As the question gets closer to home, the percentage quickly drops. In most cases, by the time we get to “their store” we see responses ranging from zero to ten percent. In other words, they are certain employees steal, just not “their” employees.

The results don’t surprise me. I can tell a lot about a company’s loss prevention attitude by how they answer that series of questions. And it’s not just naive store managers who feel this way. I have spoken to Vice Presidents and C-level executives who tell me, “we may have some internal theft, but it’s mostly nickel and dime stuff.”

The “we trust” business creed is a popular talking point. No one wants to be a part of an operation that “doesn’t” trust its employees. No one wants a day at work to be filled with suspicion, surveillance, and random searches…unless of course you work for the TSA and then its sort of your job. It makes sense to trust first since the majority of employees are, in fact, honest. But it also makes sense to accept that the majority is not “all” and even a small number of bad players can turn a business upside down.

In the Loss Prevention profession, we have long used the “one and ten” model for defining the internal theft probability. We estimate that about ten percent of all employees steal or engage in a damaging act of dishonesty against their employer. That means that 10% of the work force is responsible for nearly half the losses. These figures may support an attitude of trust, since clearly 90% honesty suggests we want policies and practices that don’t punish the majority for the acts of the minority. On the other hand, however, they also demonstrate that regardless of company culture, benefits, or treatment…one out of ten employees are still going to make a bad decision.

In a recent Hayes study of large retailers, the apprehension numbers revealed that one in thirty-eight employees were apprehended for dishonesty. That’s about 3% of the sample’s workforce. Although it is not the 10% we quote, consider that we don’t catch everyone and often an employee steals several times before apprehension. Nationally, police only “clear” or solve, on average, about 15% of cases involving property theft and burglary. All things considered a 3% apprehension rate suggests that the percentage of employees that steal may be much higher than 10%.

Denial and cognitive minimization of the problem is the one thing more damaging than the actual theft. To ignore the requirement to “trust but verify,” leaves a company open to increased acts of dishonesty, to the creation of a “no one cares” attitude among the honest employees, and ultimately an erosion of profits that impact all employees.

I believe in a positive work environment. I also believe that the creation of a positive workspace requires we hold everyone to standards of integrity. There are many methods to first deter employees from making bad-decisions and many processes for monitoring behavior without draconian methods, and for conducting investigations without insulting honest staff members.

What doesn’t work, however, is the denial that employees steal or the belief that “culture” or even “friendship” alone will prevent bad behavior. It’s just in the nature of some to engage in such dishonest actions. And if you think about it…even the child who loves mommy and daddy will sneak that forbidden cookie if no one is looking. A part of our job is to educate, a part of our job is to warn and deter, and yes, a part of our job is to keep watch.

Authored by: Ray Esposito    

Ray Esposito  Ray Esposito Linkedin 

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Topics: employee theft, Internal Dishonesty, Internal Theft, Honest Employees

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