The Problem of Employee Theft

Although it's not a pleasant topic to discuss, the fact is that theft by employees of small businesses totals nearly $40 billion in this country each year.

As hard as it is to believe that someone you hire to fill a trusted position in your company would actually take from you, it happens every day in all kinds of businesses and in a variety of ways. And it is estimated that up to 75 percent of all employee theft goes unnoticed.

Some security experts predict that up to 30 percent of the nation's workers will steal at some time in their career. Difficult economic times, lack of salary increases and the threats of downsizing and cutbacks make it even more tempting for employees to help themselves.

Employee theft can take many forms, from stealing office supplies or merchandise, to stealing time by improperly reporting sick leave and vacation to stealing intellectual property and confidential information. When employee theft is discovered, the employer/owner feels violated and often reacts out of emotion. Remembering that this is a business problem and addressing it as such will aid in quick resolution and prevention.

If you are the victim of employee theft, the first thing you should do is take a thorough look at your company processes. Theft usually occurs as a result of a breakdown in procedure. Do you lack a system for checks and balances? Are employees not following clearly defined procedures? Are you paying enough attention? Use the situation as a wake-up call to re-examine the way you do business. Here are some tips:

Do background checks on your employees. In a hurry to find workers, some employers will just go on a "gut" reaction or assume that because someone is a friend or relative of a current trusted employee, the same must be true of the new prospect. Sometimes that theory works; sometimes it doesn't. Check everyone out thoroughly. Nothing is foolproof, but doing some research should keep you from making an obvious mistake.

Don't assume that well-paid employees will resist the temptation to steal, or that trusted employees will report others who steal. Don't assume that new employees are more likely to steal than those with the most seniority. Remember that things change in our employees' lives just like they do in ours. Increased debt load from a child in college, strained personal relationships, an addiction or pressure from peers could all change a long-time, trusted employee's attitude.

Remove the opportunity to steal. Establish a system of checks and balances and oversight for key processes that ensures different people are performing tasks and can routinely check one another's work. Have an outside auditor perform an unscheduled inspection from time to time. Ensure that employees responsible for accounting and financial functions take time off routinely so irregularities in their work are more easily spotted.

Work with your employees to create a plan to discourage theft. Allow them to help design policy, checks and balances and consequences. Provide a confidential forum in which they can speak about their suspicions without fear of repercussion. Ensure that employees know that management and ownership are subject to the same rules and processes as anyone else in the company.

Realize that theft often occurs when employees are under personal financial stress. Create an environment in which they can come to you with such problems. Incentives such as bonuses for high productivity or sales can help deter theft as well.

Create policies that are clear, consistent and comprehensive in dealing with employee theft. Distribute the policies in written form. Avoid double standards and overly punitive reactions. Be mindful of morale among other employees. Keep discussions of problems confidential and low-key. Deal with issues on a case by case basis, but employ consistent policies across the board.

Finally, be a positive role model. The tone for integrity and trust starts at the top of any organization. Talk the talk and walk the walk. Set an example of ethical behavior and equitable management. Regardless of the level in the organization at which theft occurs, it must be dealt with quickly and fairly.

If you suspect theft and decide to investigate, do so thoroughly and factually. Making an accusation toward an employee can permanently damage relationships not only with that employee but also with those with whom the individual works closely. Be sure you are on solid ground before you make your suspicions known or state any accusations.

Authored by: Mary Paulsell, Missouri Small Business Development Centers
Date Reviewed: 10/10/02