Although we know it’s wrong, statistics show that there are some people who can’t seem to resist the urge to steal. It’s easy to assume that those who commit crimes like these couldn’t possibly be people you know, but the truth is that they could be individuals you’ve personally hired — or even ones you implicitly trust. That can have huge implications for your business, from inventory and revenue loss to bankruptcy filings.
Think this couldn’t possibly happen to your organization? Think again. Data shows that it’s far more common than you’d think, and virtually every business is at risk for employee theft. Even your definition of what employee theft is might be skewed; it’s possible that you may have once committed employee theft without even knowing it! In order to adequately protect your business, you need to first understand the massive scope of the problem, what’s actually involved, and what pushes an employee to commit theft.
Let’s Start With Some Startling Employee Theft Facts:
- 75% of all employees have stolen from their employer at least once and half of those workers steal repeatedly
- Every year, employees steal $50 billion from U.S. businesses
- Businesses lose approximately 7% of their total revenue to theft or fraud
- One-third of business failures and bankruptcies are caused by employee theft
- An employee is 15 times more likely to steal from a business than an outsider is
- Three-quarters of employee crimes go undetected, and many are never reported — even when employees are caught
- According to the American Society of Employers, 20% of workers are aware of fraud that’s taken place at their companies and 44% say their employers could do more to reduce fraud
What Does Employee Theft Entail?
You can probably guess that employee theft involves stealing something from a business in some shape or form. But this crime actually covers more than you might have thought. In addition to outright stealing, an employee can also be guilty of theft if they use or misuse assets without permission. The “assets” component is key, as this implies an employee theft can take place even if there isn’t any missing money or product involved.
Yes, employee theft can cover missing intake from the cash drawer or purloined inventory. Money is the most common asset that employees steal, of course, but there are other possibilities too. It might seem rather innocuous to take office supplies or food from your place of employment, but that counts as employee theft. Taking merchandise or company property that could be sold also counts for obvious reasons.
There are two examples of employee theft that may really surprise you. Information theft — stealing product designs, formulas, trade secrets, confidential data, and other proprietary information — can be a huge problem for many businesses, especially in the digital age. Employees don’t have to figure out a way to steal a physical document anymore; they simply need to access a computer file or network with a few clicks of a mouse. And time theft can also be a substantial issue. If an employee has falsified their timekeeping records or simply doesn’t do their work while clocked in, this also falls under the category of employee theft. While this last example can be difficult to prove, especially if your business operates under any kind of honor system, the bottom line is that it still costs a company money in some way.
Why Do Employees Steal In The First Place?
We’ve covered the fact that employees do steal, as well as the assets they can potentially take. But what would cause an employee to do this at all? While some circumstances — like a compulsion, revenge for a perceived slight, or dire financial straits — could push an employee over the edge, the simplest answer to this question is because they can.
Whether an employee feels they aren’t being compensated fairly for their efforts, they have debts to pay, or they simply want to see what they can get away with, the specific reasons don’t necessarily matter. Here’s what does matter: if you have vulnerabilities within your organization, you’ll likely have employees who will try to take advantage. This may sound pessimistic, but that harsh dose of reality should motivate you to protect your business from employee fraud.
How Businesses Can Prevent Employee Theft
Regardless of industry or size, all businesses need to take precautions to prevent employee theft. But knowing where to start can be difficult. It’s also important to note that your prevention efforts must be ongoing. Not only do you need to establish these practices, but you’ll need to remain vigilant in your evaluation and enforcement. To dissuade employees from theft, consider the following tips:
Restrict Access To Assets
A common mistake made by countless business owners is a failure to safeguard information and property. Forgetting to ask for that extra set of office keys back or neglecting regular password changes can have astronomical consequences for your business. Of course, it’s important to restrict access to inventory or an on-site safe, but don’t forget about digital crime. Limiting your employees’ access to your network and/or specific files based on the time of day or their job position can be helpful. Don’t forget to remove their permissions if their employment status changes in any way. Passwords should be changed on a frequent basis to ensure compliance. (As an added bonus, this will thwart outside hackers, too!)
Invest in Surveillance and Security
Let’s face it: you can’t have eyes on your employees all the time. That’s why it’s important to use surveillance cameras and alarm systems. These tools can offer you peace of mind in spots you can’t normally monitor or during times that don’t require your physical presence. Whether you run a retail store, a restaurant, a healthcare facility, or a corporate office, even the threat of security footage can be enough to convince employees to not commit a crime. Plus, if and when employee theft ever occurs, you’ll be able to know exactly what occurred and when. It should go without saying that you’ll need to restrict access to your security systems to prevent possible tampering.
Conduct Risk Assessments and Train Employees
In many cases, businesses may not even be aware of the vulnerabilities within their own organization. After all, if you don’t know where the weaknesses are, it can be tough to address them. That’s why conducting risk assessments can be extremely beneficial. By hiring an expert to perform an assessment of the areas in which your business is lacking — be it in your network infrastructure or your physical inventory warehouses — you’ll get a much clearer idea of what you need to fix. You can then review recommendations made by those conducting the risk assessment and train your employees accordingly. Increased training opportunities have been shown to decrease an individual’s motive to commit fraud. Not only will you show employees that you’re serious about your policies, but you’ll also make them part of the solution and foster a better culture.
Consider Inventory Tracking Software
If you’re still keeping track of your business’s inventory with a spreadsheet, you’re already in trouble. No doubt, that information is outdated at best and dangerously inaccurate at worst. Fortunately, we live in the age of tech — so there are now much better alternatives than a written account or an Excel spreadsheet. Inventory tracking software is used for everything from retail stores to government organizations. Because these programs track products in real time, everything will be accounted for. Whether your inventory is damaged due to unavoidable conditions or pure accidents or it’s stolen in an employee scheme, you’ll always know exactly what’s missing. Remember to keep track of both your supply inventory and your product inventory, if applicable, since both are prone to employee theft.
Reassess Your Hiring Practices
It’s important to remember that virtually any employee has the capability to steal. That said, your hiring practices could make the potential for employee theft more likely than it needs to be. A failure to conduct thorough background checks for job candidates can lead to costly mistakes later on. You’ll want to search for an employee’s criminal history and may want to consider conducting a drug test before extending an offer. Many employers will even check a candidate’s social media profiles to get a more complete idea of their personality and regular activities. While you should never let stereotypes cloud your judgment, you should be cautious about who you hire. One rash decision could result in thousands of dollars in losses for your business.
Set Up an Anonymous Tip Line
Remember that statistic about employees who know there’s something shady going on at work? You can make it safe and easy for these employees to speak up by setting up a confidential tip line to report possible instances of crime. Although you don’t want to encourage employees to turn on each other without merit, a phone tip line, an email address, or even a special suggestion box can encourage workers to do right by your company and report suspicious activity. Some businesses incentivize people to speak out against employee theft, but that may not be appropriate in every case. Keep in mind that even if you don’t receive many tips at all, the existence of the tip line itself can convince would-be thieves not to go through with their plan; if they know their coworkers are on the lookout, they might realize it’s too big a risk to take.
Monitor Employee Breaks and Tasks
Micromanaging your employees can definitely backfire. After all, no one wants to feel like they’re being treated like a child while at work. But that doesn’t mean you should trust your employees to follow the rules. While one person might think it’s harmless to clock back in while they’re still eating their lunch or take more smoke breaks than they’re allowed, that time theft ultimately harms your business. All employees should have a clear idea of what is and isn’t allowed in terms of their work breaks. That way, ignorance is absolutely no excuse.
In addition, you might not think it’s a big deal for an employee to take a private phone call in the back of your store or take out the garbage. But there are some workers who will take advantage of your trust and use these opportunities to commit crimes. For example, a retail employee may disguise merchandise as trash, hide it in the garbage dumpster, and retrieve it later unnoticed. In this situation, businesses should utilize clear garbage bags, lock all dumpsters, and restrict access for employees. The “buddy system” can also be of help here, particularly where inventory and financial transactions are involved. Two employees should work opening and closing shifts to limit opportunities for theft, and all refunds should be witnessed by a manager. This may not be enough stop higher-level employees from committing theft — they may think they’re above these procedures — but these policies can make a huge difference, especially when they’re used in conjunction with the other tips outlined here.
A Few Important Points To Remember:
- Trust no one.
This isn’t to say you won’t have dependable, trustworthy employees. But it does mean that you shouldn’t make assumptions about human behavior. Just because an individual has been in your employ for years doesn’t mean they’re devoid of the temptation to steal. In many cases, an employee who steals is someone who’s also highly trusted. And often, these individuals are first-time offenders. Don’t assume that prior good behavior or company loyalty will discourage someone with unrestricted access to “do the right thing.”
- You’ve gotta walk the walk.
It’s not enough to just put protective measures in place; you need to follow them to the letter in every single instance. If procedures are not followed 100% of the time, that leaves your business vulnerable to those who might take advantage. In the same vein, it’s important to follow a strict no-tolerance policy, regardless of who commits an infraction. Whether they’re an entry level employee or a top executive, they should be treated exactly the same if they are caught. In other words, set clear policies and always follow through.
- If you’re a small business owner, beware.
While big corporations might seem like a more likely target for employee theft (more employees means more anonymity and perhaps more opportunities to steal), data suggests that small businesses are actually more vulnerable to it. Because small businesses have fewer workers, these workers often have higher autonomy levels within the company itself. That, coupled with the fact that most small businesses have increased financial constraints for combating theft and conducting audits, gives these employees more opportunities to commit a crime. In addition, employee fraud costs small businesses more than it does for larger businesses, according to the Association of Certified Fraud Examiners — and because those costs matter more to small businesses than big corporations, they ultimately do more harm.
Remember the 10-10-80 rule.
It’s believed that 10% of employees will never steal and 10% always will. That remaining 80% may be on the fence but will steal given the opportunity. That means it’s vital that you not give any employee — regardless of their standing within your company or what their behavior suggests — the chance to steal time, product, revenue, or information.
Employee Theft Is Common, But It Doesn’t Have To Happen
For businesses of all kinds, employee theft is a constant threat. But you can mitigate your risk by educating yourself and taking these important preventative steps. If your employees don’t have the chance to steal, most won’t even try to get away with it. Make sure that your business is protected with the proper tools, like security cameras and software, and that you do everything in your power to limit access — and therefore, opportunity to commit theft.