Employee Theft Essay, Research Paper

INTRODUCTION The reduction of employee theft can be achieved by understanding the causes and implementing theft deterrent programs. Employee theft and pilfering have existed since the beginning of business. The exact amount it costs businesses is unknown, but estimates suggest it costs billions. Whether the theft amounts to small items such as paper clips and pencils or large items like a television or fur coat, it all comes out of the bottom line. Lost profits can lead a business to bankruptcy and its employees to the unemployment line. Employers are fighting back with loss-prevention plans, pre-employment assessments, and high-tech solutions to reduce their losses. WHAT IT COSTS Employee theft and pilfering cost businesses from 10 billion to 100 billion dollars a year and is on the rise. Internal theft accounts for 67 to 80 percent of business losses (Henry 49). To illustrate the magnitude of the problem consider the following: A business sells $100 worth of merchandise. The net profit for the sale is $4. To make up a loss of $100 requires the business to make twenty-five $100 transactions at a $4 net profit. This means $2,500 of merchandise must be sold to cover a $100 loss or theft.Taking time out from business to appear at several court hearings and trials can cost owners even more money. With more and more companies struggling to stay in business, employee theft can cost them their existence, forcing them into bankruptcy. HOW WIDE SPREAD IS THE PROBLEM Employee theft impacts almost every industry. It appears that the problem has expanded to the point where nearly all employees have committed theft or have pilfered something from their employer. The frequency with which politicians, business, and religious leaders are involved in high-level corruption is breeding an immunity to crime in general. The idea of taking what you can is beginning to acquire an aura of acceptability. For example, Macey s Incorporated of Salt Lake City, Utah decided to add another store to its chain. They needed to hire 280 full-time and part-time employees. Well in advance of the opening more than 2,000 applicants were called in for interviews and pre-employment testing. But just two weeks before the store was due to open, not even 200 of the positions had been filled. This was due to that fact that of the 2,000 applicants, 1,800 openly admitted to have stolen from their employers over the past six months. In addition, many admitted to being drug and alcohol abusers. President Ken Macey recalls, The really scary thing was how many of these people didn t see anything wrong with what they were doing (qtd. In Ingram 33). WHAT CAUSES EMPLOYEE THEFT Many studies have been conducted to determine why employees steal from their employers. Many factors contribute to the problem. It appears that no one factor is more significant than the other and a combination of factors is usually present. Stealing is sometimes considered to be unofficial compensation and a justifiable pay back for what is viewed as employer greed (Ingram 33). Almost any employee can be a thief, regardless of status, length of employment, age or gender. Management s attitude toward stealing, and participation in it, can influence what a worker thinks is acceptable behavior. For example, a trainer of managers was caught stealing and six of the seven managers trained by that person were also found to be stealing (Campbell 33). Business owners unwillingness to admit that employee theft exists in the work place, causes complacency toward loss-prevention. In the same way, management s lack of knowledge about theft leads to more losses. Companies without a well-defined ethics policy or that informally bend the rules are sending a message to their employees they cannot afford. Employees steal because they are dissatisfied with or have a lack of commitment to their job. They must also have the opportunity, attitude, and need to steal. Research indicates that the desire to steal may be connected to how employees view pay inequities and how they are treated by management. Likewise, the perception of unfairness, disrespect or lack of compassion contributes to the employees attitude toward stealing. Employer loyalty is down due to the reduction of full-time positions and the hiring of either part-time or temporary help. This trend is leading to an increase in employee theft. High levels of stress coupled with job dissatisfaction lead to higher levels of employee theft. Layoffs and bad news about the economy as a whole can intensify feelings that employees must look out for themselves because the company does not have their best interest in mind. If bad news is delivered without rationale or in an unfeeling way employees tend to seek retribution by turning to or increasing theft. For instance, a study was conducted using three plants owed by the same company. The first plant had no pay cuts and the theft rate remained the same. The second plant received a temporary pay cut that was thoroughly and thoughtfully explained. The theft rate went from 3 percent to 4.5 percent. The third plant also receives a temporary pay cut, but with a vague and insensitive explanation. The theft rate more than doubled. Once the pay rates were reinstated, the theft rates returned to 3 percent (Campbell 33). Higher rates of theft have been associated with those employees intending to quit their jobs. Those intending to quit steal as much as seven times more than those intending to stay (Ingram 36). If co-workers view stealing as acceptable or their fear of being caught is non-existent or low, employees are more likely to steal. Some employees who appear to be honest are often deceiving their employers through theft. In order for an employee to steal over a long period of time they must be viewed as an honest, hard working person. Financial and personal hardships that result from drugs, alcohol, gambling, or living above personal incomes can lead an employee to steal. Declining morals and ethical standards of the younger generation, as well as, a reduced commitment to conformity and a reduced fear of social consequences for their behavior have also influenced employee theft (Holt 16). SAMPLE CASES Case 1 A bank teller pilfers $22 from her cash drawer. When confronted, she claims missing money represents shortages,” but later confesses. Case 2 A federal employee uses a government credit card for personal purchases in an emergency. When no one detects the action, the employee charges another $4,500 in personal items. Case 3 A manager suggests that a consultant, in addition to his regular billings, submit occasional fictitious bills to the company. The manager then approves them for payment. The pair split $300,000 of the company s money (Campbell 33).

BUSINESS ATTITUDE Surprisingly, business owners accept employee theft as a part of doing business. Some managers believe that no matter what they do to prevent, discourage, or punish employee theft, employees will continue to steal. Others turn a blind eye to employee theft or implicitly condone it because they have limited abilities to reward people or persuade people. This type of approach has been used to get employees to work undesirable night shifts or perform duties no one else is willing to do. Other business owners deny employee theft and are unable to confront the possibility that employees are stealing. Finally, some owners believe that the cost of installing effective anti-theft controls would out weigh those of employee theft (Juneja 31). Nonetheless, the majority of business owners have installed controls to cut their losses by employee theft. These business owners believe that without theft controls and deterrents, their businesses would not have survived. One business owner believes that employee theft can literally eat you out of house and home. THEFT DETERRENCE Theft deterrence can come in the form of loss-prevention programs, pre-employment screening, and electronic devices. One of the most inexpensive deterrents is having a well-explained ethics policy that specifically addresses theft and the consequences of stealing. The policy should be read and signed by all employees. Along with the policy, a high standard of ethics and conduct should be displayed and supported by management. This sets an example that the employee can follow. Management needs to make it clear that stealing is unacceptable behavior and is against the employees best interest. Another inexpensive means of reducing theft is to set up a company hot line for employees to anonymously report suspicious activities or stealing. One of the best ways to reduce employee theft may be to treat workers fairly and compassionately (Juneja 31). Important factors when announcing bad news or layoffs are to thoroughly explain what is happening, to be supportive, and compassionate to employee concerns. Equality in pay and benefits for the same position and reward for a job well done promotes the idea of fairness and reinforces honest employee behavior. When employees believe they are a part of the company, theft is reduced because people do not usually steal from themselves. Employment pre-screening and education have also proven to minimize theft. Pre-screening allows the employer to examine the integrity of the person being hired and to thoroughly check their background (Adler 31). Some companies have been known to hire outside firms who specialize in applicant background checking and testing. Employers should avoid panic hiring. Bring the problem to the employees attention through theft prevention education and discuss its overall effects on the company. Businesses should show how theft affects the individual’s job in particular. The education process encourages company loyalty and as a result reduces theft. Keeping track of cash and inventory can be achieved through procedural controls. Inventory and control procedures should be audited on a regular basis. Audits are a great way to identify losses before they get out of hand (Cook). Using an outside source for the audit will greatly reduce the chances of figure tampering and will provide an objective viewpoint regarding procedures. One of the best ways to control cash is to have more than one person involved in its handling (Cook). For example, the person applying payments to accounts should not be the person who makes the bank deposit. In the case of cash registers, only the manager should take the readings and only one person should be assigned to the cash drawer. This reduces the possible suspects, if theft or shortages occur. When dealing with employee theft it is important to be consistent in the punishment (Holt 19). No matter the form of punishment, whether immediate dismissal, prosecution, restitution, or any combination thereof, it must be the same for everyone, every time. By consistently taking the same action for all employees a message is sent from management about its position regarding theft. Although prosecution appears to be the biggest deterrent to theft, many employers usually prefer to fire the offender and seek restitution in court. A final deterrent to employee theft is the high-tech solution. The installation of security systems for viewing and recording employee actions will help to some degree, but those committed to stealing will work around the cameras. For cameras to be completely effective, coverage must be 100 percent during working hours and access all locations. This is very rarely the case. Employees become aware of the camera viewing area and find ways of circumventing it. Also, if the system is not monitored 24 hours a day, reviewing video tape can be a time consuming job. RECOMMENDATION While the idea of eliminating employee theft entirely remains a virtual impossibility, there are ways to impede it. High-tech solutions treat the cause not the symptom. It is better to concentrate on prevention than apprehension. Through employee education and awareness programs, along with strong moral and ethical examples and polices, theft will be reduced. Getting off on the right foot is important. Using a pre-screening process and thoroughly checking the background of any prospective employee helps increase the chances of hiring an honest, hard working person while weeding out the less desirable. Furthermore, employee theft reduction requires good control procedures as well as periodic audits.

Adler, Steven. Selling employees in loss prevention. Security Management Dec 1993: 30-34.Campbell, Kim. Workers Sticky Fingers Are Costly. Christian Science Monitor Nov 1996: 33.Cook, Stephanie. Customer Service Manager. Personal Interview. 8 Nov 1996.Henry, Jack. What you don t know about employee theft will hurt you. National Petroleum News Apr 1994: 49.Holt, Andrew. Controlling employee theft. CMA – the Management and Accounting Magazine Sep 1993: 16-20.Ingram, Bob. Honesty: just a policy?. Supermarket Business Apr 1994: 33-37.Juneja, Ravi. Employee Relationships: fraud, trust, can control. CMA – the Management and Accounting Magazine May 1993: 31. APPENDIX Employee Theft ProfileLow Risk* Works the day shift* Female* 31 years of age or older* Less than 1 or more than 5 years experience* Believes companies treat self and others fairly * Thinks he/she will be caught if trying to steal * Believes co-workers condemn employee theft * No plans to quit job High Risk * Works the evening and/ or night shift * Male * 16 – 30 years of age * 2 – 5 years experience * Believes companies are unfair to self and others * Thinks it s easy to steal from the company * Believes co-workers accept employee theft * Intends to quit job