Losses From Employee Theft example essay topic

OUTLINE I. Overview II. Myths & Misconceptions. Facts & Reality IV. Why Employees Steal V. Signs of Theft VI.

Preventing Losses VII. Loss Prevention Programs V. Summary Overview Employee theft is clearly one of the most costly, misunderstood and underestimated business problems facing today's management. Studies conducted by the Department of Commerce, American Management Association, Joint Economic Committee of Congress, Universities and trade associations all decided that losses from employee theft have a dramatic effect on the financial stability, profit level and survival of most businesses. Several studies estimate employee theft and dishonesty costs US businesses between $60 and $120 billion per year, not including the billions spent on protecting against theft.

Most studies and security experts agree that nearly every type and size of business is likely to experience some form (s) of employee theft and not realize the existence or extent of it. In fact, small and medium businesses are often more vulnerable to employee theft due to less supervision; lack of controls, procedures, audits; and blind loyalty. What do employees steal Whether a business is retail, distribution, manufacturing, health care, hospitality, communications, energy, scrap metal, printing, bakery products or cardboard boxes, it has assets someone feels is worth stealing. Employee theft may include stealing product, inventory, supplies or cash. The fact is employee theft is present in every type of business. Myths and Misconceptions A primary reason employee theft continues to thrive is because management has yet to achieve an understanding of the importance and nature of employee theft.

Most managers have a tendency to disregard many of the indicators of theft and convince themselves that inventory shortages, loss of business, declining profits rumors of dishonesty and other potential warning signs are not theft related and unworthy of inquiry. After all, employee theft often consists of extremely unpleasant situations involving executives, trusted employees, customers, vendors, even family members and friends. While some theories and explanations of employee theft have been accepted by experts but many remain unproven and create more confusion than not of the problem. Some of the more obvious misconceptions regarding employee theft include: Management doesn't need to tell employees where it stands on employee theft because they already know.

Well-paid or adequately paid employees are less likely to steal. Honest and loyal employees will report other employees who steal. Losses from shoplifting are higher than losses from employee theft. Newer employees commit employee theft while more senior employees can be trusted. Employee theft is detected in its early stages. As long as management believe incorrect information about employee theft and fail to become educated to the facts, employee theft will remain a major drain of profits and employee morale.

Facts and Reality Getting rid of myths and misconceptions about employee theft is only half the answer to dealing with the problem of management's inability to understand and effectively deal with employee theft. Once management becomes more educated to the misconceptions, it must become aware of the valid facts and accepted theories regarding employee theft. Only then will it be able to develop loss prevention programs and strategies that will reduce risks to theft and prevent losses. Some accepted theories regarding employee theft are: Opportunity, not need, to steal is the primary cause of employee theft. A majority of employee theft goes undetected by management.

Less than 10% of the employee population causes over 95% of the total losses from employee theft. Nearly every business experiences some degree of employee theft. Employee theft is often committed in reaction to favoritism, unreasonable discipline, inconsistency and other acts of poor or abusive supervision. A majority of honest employees look the other way regarding employee theft and fail to report it. A majority of the time, employees know or suspect employee theft is present, but will not report. There is a direct correlation between drug abuse and employee theft.

Why Employees Steal The primary reason employees steal is more as a result of opportunity than need. At the same time, an employee in need of money generally weighs the risk / consequence of stealing prior to the act. Since the employee suspects or knows he / she may or will be fired or prosecuted if caught, he / she then assesses the chances of getting away with it. If the opportunity to steal is clearly present and risk of being caught is low, the employee may steal. If the opportunity is minimal and the risk of caught is high, the employee is more likely to keep from theft. Only when this environment is created can management claim it has achieved a true theft prevention program.

Below is a widely recognized set of reasoning employees often offer in response to being questioned why they stole from their employer: I was passed over for a raise or a promotion and the company owed it to me. Management doesn't care - they never said anything about it. Management steals I am worth a lot more than the company is paying me The company doesn't share the profits with us. They made it easy to steal. I got even. Signs of Theft Since there are as many signs of theft as there are ways to steal.

The problem is that management often assumes certain incidents or conditions in the workplace are the result of carelessness, incompetence or inexperience on the part of employees, they are signs of theft in progress. All difference in normal practices and procedures must be carefully reviewed with an open and perceptive mind. Inventory found near employee exits / loading docks / restrooms, items found concealed in dumpsters, refusal of key employees to take even minimal vacation time etc, are all signs which could indicate possible theft and be the only indication you will have to a theft situation. Many companies that dismiss such signs as employee carelessness, incompetence or inexperience often suffer significant. Preventing Losses Just having a loss prevention or security program does not guarantee it will prevent losses within your business. In fact, some of the biggest losses have occurred within companies with existing programs.

There are 3 basic steps a business can take to effectively address its loss exposure. Conduct a security review or audit of your business operations. Identify and determine the risk factor to each security exposure your business has to potential theft. This technique will allow a company to establish a level of priority for each exposure and eliminate it in the most cost-effective manner.

Educate supervision and employees as to the negative impact theft related losses have on company stability, pay increases promotional opportunities, etc. By soliciting their support up front, subsequent loss prevention efforts will be met with acceptance, rather than resistance. Develop a formal loss prevention program to ensure an ongoing effort to prevent losses and detect existing theft. Such a program will include pre-employment screening, security awareness training, periodic audits, policies and procedures. Loss Prevention Programs Just having a loss prevention or security program does not guarantee it will prevent losses. Some of the most costly employee theft losses occur within companies that already have existing security programs.

Achieving effective loss prevention is not an impossible task. However, no loss prevention program can be effective without a serious commitment from top management in every phase and element of the program. Remember that the perceived image of loss prevention / security is often an inconvenience. Any personnel who administers a loss prevention program, including the owner, designated employee or a security professional, must ensure security measures, policies and procedures must meet the test of reasonableness, need, employee respect, and legality. Once top management has committed to directly and consistently supporting a loss prevention program, qualified security personnel are in place the business is now prepared to develop and start an effective loss prevention program.

Whether your program is designed to prevent losses in a small business or a major corporation, the following are basic elements generic to any security or loss prevention program: Mission Statement. The mission statement lays the groundwork for a loss prevention program by defining, clarifying and formalizing the overall purpose, direction and philosophy management will take in protecting the company's assets and preventing crime. The mission statement embodies the philosophy of the organization and is the source for uniformity and consistency between goals, procedures, policies and training. Goals and Objectives.

Setting realistic goals and objectives are important in developing a plan that focuses on achieving effective loss prevention for all areas needing protection in a timely and cost effective manner. Although goals must address all the asset protection needs of the business, they must be concise, reasonable and attainable. Security Policies and Procedures. Employee theft is costly, occurs within any part of the company and often results in major administrative or legal action against the company. Consequently, it is simply good business sense to follow definitive guidelines in dealing with the many aspects of employee theft such as prevention, investigation and action against those who commit such acts. Failure to have sound and comprehensive security policies and procedures often result ongoing and periodic loss situations, adverse employee morale, legal liability and other equally costly consequences.

Pre-employment Screening. In today's business environment, pre-employment screening is a standard in the hiring process. From a security standpoint, businesses that fail to screen or inadequately screen candidates for hire expose themselves to potential theft, violence, workers compensation fraud, liability and a litany of other problems. Compliance and Security Audits. Employee theft is unique in the fact that it will reoccur unless existing loss prevention measures are continually audited and new measures are developed / implemented to counter impending exposures that surface during an audit. If a program is not reviewed on an ongoing basis, policies / procedures will gradually deteriorate and dishonest employees will eventually use them to their advantage.

Security Awareness and Training. Keep in mind that all employees in a work environment have the same opportunity to recognize ways to steal. The problem is the dishonest employees are recognizing the openings for theft while honest employees exposed to the same security risks are not bringing them to the attention of management beforehand. When employees are trained to immediately report security risks or exposures, it gives management the chance to take preventive measures and eliminate the opportunity.

Effective security training and awareness programs educate the employee as to the impact theft has on job stability, raises, benefits etc. ; thus, giving them a personal reason to assist the company in preventing losses. Anonymous Tip Programs. In most employee theft situations, honest employees know about the thievery, but withhold the information from management until compelled to reveal it. The anonymous tip program provides the concerned employee with a means to report theft and maintain anonymity when he / she would not normally do so.

Summary It is often stated, "Employee theft exists to the degree to which management allows and budgets". Keep in mind employee theft occurs as a result of an opportunity, starts small and grows to the extent allowed by management. Normally, it does not stop until management stops it, guilty employees leave or the company goes out of business.

Bibliography

Works Sited Comer, Michael. Corporate Fraud. New York: McGraw-Hill, 1985.
Sackett, Paul R. et al. Integrity Testing for Personnel Selection: An Update. University of Minnesota, Industrial Relations Center, 1989.
Shepard, Ira and Robert Dust on. Thieves at Work: An Employer's Guide to Combating Workplace Dishonest. Washington, D.C. : Bureau of National Affairs, Inc., 1988.
Bliss, Edwin C. and Is amu S. Aoki. Are Your Employees Stealing You Blind San Diego: Pfeiffer & Company, 1993.