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Back Office TO CATCH A THIEF Solving the worst kind of shrink by James W. Bassett According to a U.S. Chamber of Commerce research study conducted in 1975, one-third of all small business failures are caused by employee theft. Despite improvements in alarms, surveillance cameras and other security hardware, employee theft still takes the same toll on small business today. But you’re primary interest is in your store and the employee theft problem you may have now or may confront in the future. Some people wonder why employees steal. Is it always “need” or “greed” as many textbooks claim? In reality, it’s not that simple. Employees steal because they see themselves as victims enabling them to blame their stealing on someone or something else. Employees who steal believe “I am owed, but I haven’t received. So I will make things even by taking what is owed to me.” The thief can blame society, prejudice, low pay, under appreciation, overwork, poverty, bad luck, parental neglect, parental overindulgence, etc., etc. Once employee theft occurs in a location, it can quickly spread like a disease among employees. The antidote is to confront thievery quickly and decisively. If other employees observe a co-worker fired or prosecuted for stealing, they are far less likely to steal. Conversely, ignoring employee theft sends the message that management is either indifferent to employee theft or powerless to stop it. The busy holiday season and the chaos it often brings to retailers is a perfect storm for employee theft. It is nearly impossible for outdoor retailers to continually conduct inventories during this hectic period. Most employee theft committed during November and December is not discovered until January. Additionally, many small stores hire temporary workers who know their jobs will be gone by New Year’s Day. The shorter the employee’s tenure, the more likely she will steal from her employer. This year may be a banner year for employee theft. Recent events in our country have spawned millions of American workers who see themselves as victims. Some truly are victims who face financial disaster. Devastating hurricanes, rapidly increasing prices, home mortgage foreclosures, stock markets losses, rampant inflation, a general recession and expensive gasoline are just some of the factors threatening to make this holiday season an employee theft record breaker. Once an employee starts stealing, he continues stealing in progressively larger amounts until he is caught or strongly fears he is going to be caught. Stealing employees often quit when a theft investigation is announced. Others quit during the investigation. The thief believes that once he has left your company, he can’t be prosecuted. When you experience an employee theft, you want to report it to the police right away. A uniformed officer usually will come to your store and take a report. He will hand your case over to a detective who will then come out and interview you. But this may be the last you hear from the detective. Most police agencies don’t like employee theft cases because they are difficult to investigate. Most employee theft cases yield no eye witnesses and no physical evidence. Even when stealing employees are caught, most employers choose not to prosecute. This leaves the detective feeling like he’s wasted his time. Metropolitan police departments consider employee theft cases a low priority. Their first priority is crimes against persons rather than property. This means your employee theft case will probably be pushed to the back burner. How do you solve your employee theft case? The best way to find out which employee(s) are stealing from you is to ask the people who can probably tell you – your honest employees. We have found that better than 80 percent of the time, employees who were not involved in the theft strongly suspect which co-worker(s) committed the theft. Sometimes they know for sure which co-worker is the culprit. There are two ways of asking your employees what they know about a theft. First, you can individually interview each of your employees and ask them what they know about the theft, who they think stole what is missing, and why they think so. However, most store owners feel uncomfortable assuming the role of interrogator. They fear damaging rapport with their employees and fear company morale might be affected. Others simply don’t have the time or the inclination to investigate a theft in their stores. However, there is an alternative. The alternative is a theft investigation questionnaire administered to all employees who had access to what was stolen. The theft investigation questionnaire is a pen and paper investigative tool – a written theft interview you administer to your employees in a group like a written test in school. The theft investigation questionnaire can be ordered from the author’s Web 46 | InsideOutdoor | Fall 2008
Back Office Top Sources of Shrink Employee theft of merchandise in stores Customers stealing merchandise Employee theft of cash (voids, post-voids, etc) Paper shrink (missed markdowns, incorrect PO) Source: RSR Research site, www.TheftStopper.com. It will be sent to you promptly via email with complete instructions for Comparison administration. of Heat Once Transfer, the Gas theft vs. questionnaires Fiber Insulation are completed, you can overnight them to a professional investigator for analysis. A detailed report with results 6 for each employee is emailed back to you within Fiber Insulations two business days, depending upon the number of Ar 5 questionnaires to be analyzed. Kr Klymit gases The theft investigation report divides the Xe 4 suspects into two groups: employees * who might have committed the theft or employees who almost 3 certainly did not commit the theft. Next, the report determines which employees are qualified to take 2 polygraph examinations in compliance with federal * polygraph law – the Employee Polygraph Protection 1 Act of 1988 (EPPA). Finally, the report ranks the * employees qualified for polygraph * tests in order of The thicker the insulation, the less heat is lost * 0 the likelihood that each committed the theft. This enables you to ask your most likely suspect(s) to take 2.5 4.5 6.5 8.5 10.5 12.5 14.5 the polygraph test first. Thickness (mm) The investigator will also prepare the required Source: Klymit forms for you to submit to your polygraph-qualified employees for their signatures. The forms explain to the employees why they qualify as “reasonable suspects” to take polygraph examinations and their right to refuse polygraph examinations. The forms also explain your legal right as an employer to fire them if they refuse to take the polygraph test or they take the test and “flunk” it. Heat Transfer (W) Fraudelent returns Organized crime rings Register under-rings (sweethearting) Employee theft of merchandise in distribution Lost or stolen shipments Fraudulent credit card transactions Saleable merchandise used as supplies Fraudulent check transactions 0% 10% 20% 30% 40% 50% 60% 70% 80% Typically, innocent employees agree to take the polygraph examination, pass it, Information are thanked Sources: Outdoor ve for their cooperation Fitness and return Consumers to work. Guilty employees usually quit 57% their jobs on the spot 60after saying 50% Fitn something like, “Since you don’t 50 trust me, I quit!” Sometimes the Out perpetrator will confess, 40 hoping 33% you will give him a second 30 chance 25% or a neutral reference he can use to 16% obtain another job. 20 13 Employee theft 10 investigation questionnaires identify the guilty employee(s) more 0 than Web sites 80 TV shows Product review sites percent of the time. When used together with polygraph testing, Source: Hanson Dodge Creative the success rate in identifying employee theft perpetrators is better than 95 percent. Theft investigation questionnaires can provide you with other benefits, as well. Once the questionnaires are administered, employee theft usually stops cold. Innocent suspects are quickly exonerated and returned to work. The thief can be identified quickly and verified by polygraph testing, if necessary. You will often identify the thief without polygraph testing. And once you catch an employee thief and remove him from your payroll, you establish a deterrent for other employees who might be thinking about stealing from you. The theft questionnaire method Card gamesof investigation is quick, effective, non-confrontational Pen and paper puzzles 4 and relatively inexpensive. Dice games 25% Theft investigation questionnaires can help you solve almost every employee theft case you Checkers/chess experience 18% and help you prevent employee theft from recurring. Scrabble 16% For more information, visit www.TheftStopper.com Monopoly 14% or read Solving Employee Theft: New Insights, Backgammon New 8% Tactics, available on the Web site. 0% 10% 20% 30% 40% James W. Bassett has been a professional theft investigator Source: KOA and polygraph examiner for more than 30 years. His book, Solving Employee Theft: New Insights, New Tactics is available from Booksurge. com, Amazon.com or the author himself. You can contact the author through his Web Percent Playing Games While Ca Transactional Emails Are Opened site, www.TheftStopper.com, or by calling him at (352) 277-6222. 60% 54% Transactional email Fall 2008 | 50% InsideOutdoor Typical | 47opt-in mess
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