How to Reduce the Risk Of Employee Theft By Getting to the Root of the Problem
“Why would they steal from us? We were so good to them!” That’s one of the first things I hear out of a business owner’s mouth when they discover employee theft. Just about anyone who’s been a victim of theft from an employee asks the question out of feelings of betrayal and shock. It’s almost always rhetorical, in that they don’t really want an answer. While that reaction is entirely reasonable, it’s also not one that’s going to help you prevent theft in the future.
When an employee commits theft, you need to take a more pragmatic approach to the issue. There could be an issue in your business culture, practices, or overall structure that is creating a breeding ground for this type of problem. Instead of taking employee theft personally, look at what your company could do to improve your risk assessment practices to help circumvent this issue from arising again.
The Psychology Behind Employee Theft
Most want to write off employee theft as an isolated incident, but the numbers don’t indicate that it is. In fact, employee theft accounts for about $60 billion in annual losses to businesses in the US. That’s a concerning number that’s consistently increased over the years, despite better security and loss prevention technology.
Why might this be? It could stem from not being a technology-based issue, but a human-based one. Procedures and processes won’t stop shrinkage if your company is ignoring the cause behind the issue. In a nutshell, employee theft usually involves one of the following:
Desperation – We are probably all familiar with the romanticized version of the guy who only stole to feed his starving family, and wouldn’t have done it if there was another option. Unfortunately, this story is more often true in novels than it is in reality. While financial necessity is a component of theft, it’s rarely the sole reason.
Justification – You’re far more likely to see an employee make excuses for theft based on their own justifications of how they’re treated. The excuses might include they’re not being paid enough, or they’re being asked to take on more responsibility without more pay. In the case of larger corporations, they may justify it as they don’t consider it stealing from a person, but instead a big, faceless entity. In short, this justification is usually revenge-based, in that the employee thinks they’re “just taking what’s owed to them” and that it’s “not really hurting anyone.”
Risk versus reward – Here’s a statistic that concerns me. In one study, it was estimated that only 16% of employers who discovered theft from an employee reported that theft to police. If an employee believes there’s virtually nothing to lose in stealing from their employer, then there’s no real deterrent. This is probably why we see more theft at the lower end of the wage spectrum, as these individuals have, at most, a minimum wage job to lose. If they can just walk away from it with no consequences, then they’re eventually going to do the same thing to another employer.
Group mentality – I remember working with a municipality that had a widespread theft problem in their city hall. The clerks at this office handled citizen’s tax payments, often in cash. It became commonplace for employees to take “interest-free loans” from that cash and pay it back later. The theft wasn’t noticed until it stopped getting paid back. By the time it did come out, most employees didn’t feel they’d done anything wrong, as it had become common practice.
Now, it’s important to remember that someone who wouldn’t commit theft usually isn’t going to be driven to it by one of these factors. These factors instead act as triggers for someone already predisposed to theft. While knowing why employees steal isn’t going to stop all employee theft, it will tell you what areas of your business to focus on to control it.
Ending Employee Theft By Improving Company Culture
Employers facing employee theft issues generally focus directly on the employees involved, rather than areas of risk assessment that their business may be lacking. While it’s important to focus on the matter at hand and not paint all employees with the same brush, there are some basics you need to implement to ensure this doesn’t happen again.
- Have a no tolerance theft policy – Your business should have a policy on both hard theft, where employees intentionally steal, and soft theft, where they fudge their hours or bloat their expense reports. The policy should state, in some form or another, that it’s grounds for immediate dismissal. While this seems obvious, it’s not. You simply have to look at the scenario with the municipality to see that. At least one person should have thought that it was a bit fishy to take interest-free personal loans from taxpayer money. But one of the first things stated when called out on the behavior was “no one told us we couldn’t.” Learn from that and tell your employees they can’t, up front.
- Follow through on that policy – There are a lot of reasons a business owner may choose not to report the theft. They may have a personal relationship with the employee, or they may not believe anything will come of reporting the theft. But something does come of it when you report theft to the police, though you can’t measure it. It’s a deterrent. It’s clear evidence to any employee considering doing the same that the risk is not worth it.
- Improve your vetting processes – Most business owners opt for the quiet and quick approach to terminating an employee for theft. They may even allow the employee to voluntarily resign from the position, in essence, covering up that theft. That means anyone who might want to hire this employee in the future isn’t going to know about their history of theft. You need to go deeper than police reports when considering a candidate’s background, as we can already see that most employee thefts don’t result in any criminal charges.
One way to improve your vetting process is to implement a Remote Risk Assessment for all candidates. RRA allows you to ask straightforward questions about an employee’s work history, via a brief, automated telephone interview. The technology then measures their responses for risk indicators, giving you the ability to make a heat map of the risk in your candidate pool. After all, the best way to avoid employee theft is not to hire a thief in the first place.
AC Global Risk currently offers this technology for use in private and public sector enterprises. Our technology helps bridge the gap between human assessment and objective results so you can gauge someone’s risk before your company becomes a target. For more information on this technology, contact us today.